How does car insurance work in Canada? The Ultimate 2024 guide
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Navigating car insurance in Canada doesn't have to be complicated. Whether you're a first-timer or looking to switch policies, this car insurance guide breaks down everything you need to know — mandatory coverage, provincial requirements, optional add-ons, and how to choose what's right for you.
We also share the best ways to save on car insurance and how to avail of the top discounts. You can also use our free tool below to compare car insurance quotes from Canada's best providers based on your unique needs.
Car Insurance in Canada: Key takeaways
- Car insurance is mandatory and driving without it is illegal.
- A car insurance policy combines mandatory and optional coverages.
- Mandatory coverage and requirements vary by province.
- Premiums depend on age, driving record, and vehicle type.
- Comprehensive or specified perils coverage is recommended for theft protection.
- Opt for more than minimum liability coverage for better financial security.
How does car insurance work?
Car insurance is a contract between you and an insurance company, providing financial protection against traffic accidents and theft. It's required by law, with both mandatory and optional coverages available. This ensures you're covered for liabilities, injuries, and potentially, vehicle damages.
Think of car insurance in Canada as your financial safety net on the road. For example, if you accidentally rear-end another car, your insurance helps cover the repairs and any medical costs. We'll dive deeper into the specifics of mandatory and optional coverages in the following sections of this car insurance guide, ensuring you're well-informed and protected.
If you want to take a quick look at the best options for car insurance in your province and compare quotes, you can use our free tool below.
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What are the types of car insurance in Canada?
In Canada, car insurance types include mandatory coverages like liability, accident benefits, and uninsured auto protection, alongside optional add-ons such as collision, comprehensive, and specified perils coverage. Each type addresses different aspects of protection, from injury liabilities to vehicle damage. We'll explore these in detail to help you understand how each can benefit you.
Mandatory car insurance coverage
| Mandatory car insurance coverage | What it covers |
|---|---|
| Liability insurance | This covers injury to others and property damage. |
| Accident benefits | This covers drivers, passengers and pedestrians. Medical expenses and income replacement for missed work stemming from an injury. |
| Uninsured auto insurance | It covers you if you are hit by an uninsured driver or in a hit-and-run. In those cases, the other driver’s insurance would usually be responsible. With this option, your insurance compensates you if there is no insurer to step in and make you whole. |
| DCPC insurance | Direct Compensation for Property Damage covers you if your vehicle is damaged in an accident. Your insurance pays for it regardless if you are deemed not at fault. This expedites repairs versus provinces without this system where drivers may have to claim damages from the insurer of the other driver. This system was new to Alberta in 2022 but already existed in many Canadian provinces. |
Optional car insurance coverage
| Optional car insurance coverage | What it covers |
|---|---|
| Collision and Upset | Coverage for when a vehicle hits an object or other vehicle. |
| Specified Perils | Insurance against risks, or perils, that are specifically bought. Examples include theft, vandalism and damage from flood, hail, wind and fire. |
| Comprehensive Car Insurance | Comprehensive car insurance covers all perils and collision insurance. |
| All Perils | Collision and comprehensive. |
Good to know
Insurance covers a principal driver or drivers. You may list occasional and additional people to your policy. If the person borrowing your car is in an accident, it is reported on your insurance record. Only let trusted drivers borrow your vehicle.
You can compare car insurance quotes for yourself and your family right here using our free tool. Get personalized quotes based on the coverage you need.
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How much does car insurance cost?
Here are the average car insurance annual costs by province. These are not exact estimates and they will change based on your unique needs, the extent of coverage, and other facts discussed in the next section.
| Province | Average Annual Premium |
|---|---|
| Quebec | $717 |
| Prince Edward Island | $861 |
| New Brunswick | $867 |
| Nova Scotia | $891 |
| Manitoba | $1,140 |
| Saskatchewan | $1,235 |
| Newfoundland & Labrador | $1,168 |
| Alberta | $1,316 |
| Ontario | $1,528 |
| British Columbia | $1,832 |
How is car insurance calculated?
Insurance companies calculate prices based on the potential risk of covering a driver and vehicle. Common factors include:
- Age and gender: Younger drivers and male drivers are statistically more likely to be involved in accidents, so they often pay higher premiums.
- Driving history: A driver's past driving record, including any accidents or traffic violations, affects insurance rates.
- Vehicle make and model: Certain vehicles are more expensive to insure due to the frequency with which they are involved in claims, their value or their increased risk of theft.
- Location: Where a driver lives and parks affect their rates.
- How much you drive: A long daily commute means a greater risk of a claim.
- Coverage level: The level of coverage a driver selects impacts their rates.
Ready to see what rates insurers calculate for you? Use our free tool below and get quick results on car insurance premiums tailormade for you.
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How does car insurance differ between provinces?
Each province operates auto insurance a little differently. Provinces in Canada regulate their system. While much of the country operates on a mandatory private insurance model, a few provinces offer public auto insurance through public Crown corporations. Even in places with public coverage, supplemental private insurance is often available.
Let’s look at how car insurance works in Canada’s most populous four provinces.
How does car insurance work in Alberta?
Alberta requires drivers to purchase auto insurance. The Alberta Automobile Insurance Rate Board (AIRB) regulates
insurance, which is sold on the private market. The AIRB regulates car insurance rates and enforces the All Comers Rule, which requires insurers to offer mandatory coverage to all drivers in Alberta.
Drivers need three types of coverage in Alberta:
- Liability
- Accident benefits
- Direct Compensation for Property Damage
Read our full guide on Car Insurance in Alberta.
How does car insurance work in BC?
British Columbia requires drivers to purchase a Basic Autoplan through the Public Insurance Corporation of British Columbia (ICBC). The ICBC holds a monopoly on this basic insurance and guarantees that all insured drivers have at least minimal coverage.
Plans provide injury-related medical and recovery expenses. If you are not responsible for the crash, policies also cover repairs or replacement costs for your vehicle. Coverage includes:
- Third-Party Liability
- Enhanced Accident Benefits
- Basic Vehicle Damage
- Underinsured Motorist Protection
- Inverse Liability Liability
Optional extended policies can increase the base $200,000 third-party liability amount and provide collision and comprehensive coverage, even if you are at fault for an accident. Both the ICBC and private insurers sell extended policies to enhance the base Basic Autoplan.
Unfortunately, BC has Canada’s most expensive car insurance under this system. Recently the ICBC has been taking steps to make coverage more affordable.
How does car insurance work in Ontario?
Ontario requires drivers to buy car insurance on the private market. Ontario mandates that drivers in the province have four types of coverage:
- Liability
- Accident benefits
- Uninsured auto insurance
- Direct Compensation for Property Damage
Direct Compensation for Property Damage coverage is required. DCPD means that your insurer is responsible for paying claims if you are in a no-fault accident. Most insurers offer policyholders the option of buying at least $2 million in liability coverage. Read our full guide on Car Insurance in Ontario and compare the best quotes.
How does Quebec car insurance work?
Quebec mandates that drivers have auto insurance. Quebec’s hybrid system, which splits responsibility between public and private players, stands out as unique. This shared responsibility helps to keep premiums much lower than elsewhere.
The two systems work together:
- Quebec’s Public Automobile Insurance Plan covers bodily injury from automobile accidents through the Société Automobile du Québec (SAAQ). Drivers pay for it through fees when they register a car or renew their license. This coverage extends beyond Quebec to other provinces and outside of Canada.
- Private car insurance: Private insurance policies cover a driver for property damage and liability to others in at-fault collisions. Because SAAQ covers the often sizeable medical expenses, Quebec has Canada's lowest third-party liability requirement at just $50,000. The province enjoys the country’s cheapest car insurance. Drivers often pay less than half of what drivers in Alberta, BC or Ontario do.
Car insurance in other provinces
For more information about other provinces and city guides, you may continue below to location-specific insurance guides.
Drivers in British Columbia, Manitoba and Saskatchewan are required to get policies through the Public Insurance Corporation of British Columbia (ICBC), Manitoba Public Insurance (MPI) and Saskatchewan Government Insurance (SGI).
How to save on car insurance and how to lower your premiums?
Saving on car insurance in Canada doesn’t mean cutting corners on coverage. With a few smart strategies, you can lower your premiums while staying well-protected on the road. Here’s how:
- Shop Around: Different insurers offer varying rates for the same coverage. Compare quotes from multiple providers to find the best deal. Use our free tool for the same.
- Bundle Policies: If you have multiple insurance policies, such as home and auto, bundling them with the same insurer can lead to discounts of up to 15%.
- Increase Your Deductible: Opting for a higher deductible can significantly lower your premium costs, but make sure it’s an amount you can afford if you need to make a claim.
- Drive Safely: A clean driving record without accidents or violations can qualify you for lower rates and good driver discounts.
- Use Winter Tires: In some provinces, insurers offer discounts for using winter tires, recognizing the reduced risk of accidents.
- Limit Coverage on Older Vehicles: For older cars, consider if comprehensive or collision coverage is cost-effective. Dropping unnecessary coverage can save money.
- Take Advantage of Discounts: Insurers offer various discounts (e.g., for good students, low mileage, or installing anti-theft devices). Always ask about available discounts.
- Review Your Policy Annually: Your insurance needs can change. Regularly reviewing your policy ensures you’re not paying for coverage you no longer need.
Check out the best discounts and savings on car insurance from multiple providers in Canada right here. Use our free tool and get results in no time.
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What happens if you don't have car insurance in Canada?
Are you tempted to drive without insurance? It isn't worth it. Getting caught without insurance exposes you to serious legal and financial trouble.
Watch out!
Under Ontario’s Compulsory Automobile Insurance Act, fines are $5,000 to $25,000 the first time you're caught. Fines for getting caught a second time are between $10,000 and $50,000, and you may lose your driver's license for a year. Other provinces have similarly strict penalties.
It is still a big risk, even if you aren't stopped by a police officer for a traffic violation or control. If you get in an accident without insurance, you may be personally liable for paying the substantial damages and resulting medical expenses. Even if car insurance is expensive, the cost of not having it can be even more.
How much car insurance do you need?
Canadian drivers may be required to have the following types of insurance depending on their province as mentioned earlier.
Drivers in almost all provinces must hold at least $200,000 in third-party liability insurance. The exceptions are Quebec and Nova Scotia, which require $50,000 and $500,000, respectively. Here is a brief overview of the necessary coverage you must typically have.
| Province | Public or Private | Mandatory min third-party liability | Mandatory Accident Benefits | DCPD required | Collision and comprehensive required |
|---|---|---|---|---|---|
| Alberta | Private | $200,000 | |||
| British Columbia | Public | $200,000 |
*Enhanced accident benefits | ||
| Manitoba | Public | $200,000 |
Requires Personal Injury Protection Plan | ||
| New Brunswick | Private | $200,000 | |||
| Newfoundland and Labrador | Private | $200,000 | |||
| Nova Scotia | Private | $500,000 | |||
| Ontario | Private | $200,000 | |||
| Prince Edward Island | Private | $200,000 | |||
| Quebec | Hybrid | $50,000 | |||
| Saskatchewan | Private | $200,000 |
Expert advice
While $200,000 sounds like a lot, it may not be. Vehicles and medical bills are expensive. We recommend purchasing more than the minimum. If you are at fault for an accident that causes $1 million in total damages and your insurance only covers the $200,000 minimum, you may be responsible for the rest out of your pocket!
How much car insurance should you buy?
That depends. Don’t hesitate to ask your car insurance agent or broker for help when purchasing car insurance.
Most experts recommend at least $1 to $2 million in third-party liability coverage. Beyond that, weigh your financial situation and how much you value endorsements. Ask yourself what would happen if your vehicle were unavailable.
Collision and comprehensive damage insurance usually make sense for new and expensive vehicles. In Canada in 2024, the average price of a new car is close to $50,000, while used car prices are at an all-time high. Replacing your ride after a collision isn’t an inexpensive proposition. A comprehensive policy and a depreciation waiver can help to make you whole so that you get a replacement vehicle sooner.
On the other hand, collision and comprehensive may not be worth it for an old beater. If a vehicle isn’t worth much, you may prefer to save on insurance and set that extra money aside for your next vehicle purchase.
FAQs on car insurance in Canada
How to cancel car insurance?
Auto insurance policies vary, so you’ll need to check your specific policy or contact your insurance agent to know for sure. Usually, you can cancel at any time, but doing so before the expiration date may mean a cancellation fee. It’s often best to cancel within the 30 days before a policy expires.
Good to know
Remember that you need auto insurance to operate a motor vehicle in Canada. If you are cancelling because you want to switch insurers, you should line up your new policy before you get rid of the old one. A gap without auto insurance may mean a higher price next time.
Does car insurance cover theft?
Unfortunately, auto insurance does not automatically cover theft in Canada. If you only have minimum coverage and your car goes missing one day your insurer won’t pay to replace it.
If you want coverage for theft, vandalism, weather damage and more, opt for comprehensive coverage. Alternatively, if you’re concerned about theft, but don’t want full comprehensive coverage you can opt for a specified perils policy and purchase theft insurance.
Watch out!
Be aware that theft insurance usually reimburses you for what the vehicle is worth today, not what you paid when you bought it. Theft insurance with a depreciation waiver plan can protect the original value of the vehicle.
How does a car insurance deductible work?
A deductible is an amount that a policyholder pays when making a claim, typically $500. The insurance covers the remainder. Here is an example of how car insurance deductibles work:
For example
Rachel lives in Calgary. She collides with a Toyota Prius while pulling her Ford F-150 out of a parking space. Nobody is hurt, but there is damage to the Toyota’s front passenger door and her bumper. She’s deemed at fault. Without insurance, she’d be out the $6,000 of bodywork the garage quotes to repair the vehicles. With insurance, she only needs to pay her $500 deductible. The insurance picks up the remaining $5,500.
Deductible amounts may be set lower or higher. The lower the deductible, the more your monthly rate will be. If you can afford a $1,000 deductible in the event of a claim, you can save money each month by opting for the higher deductible.
What is a car insurance premium?
A car insurance premium refers to what a policyholder pays their insurer for coverage. This may be paid monthly, every six months or annually.
How long does it take to get car insurance?
Applying for a car insurance quote and buying coverage online or over the phone is almost instant. Shoppers can go from requesting a quote to insuring their vehicle in as little as 15 or 20 minutes.
Because insurers work with many drivers, their models let them quickly calculate rates and generate quotes.
Ready to get car insurance quotes of your own? You can do it right here using our free tool.
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How much does car insurance go up after an accident?
Giving an exact figure is difficult because every driver is different and car insurance companies have proprietary formulas. Any claim signals to an insurer that a policyholder is more likely to make future claims. They aren’t all weighed the same way though
An at-fault claim will usually raise your premiums significantly. With that said, there are a few exceptions. For example, TD and others offer accident forgiveness coverage. If you have been free from at-fault or partially at-fault accidents for six years, an accident won’t impact your next renewal.
What car is cheap on insurance?
The cheapest car to insure for collision damage is the 2008 Saturn Solstice GXPSKY Redline Convertible. The most expensive is a 2018 BMW X6 4DR AWD.
Are you looking for the cheapest car to insure? It is easy to check which cars are the cheapest to insure. Insurance companies use the CLEAR (Canadian Loss Experience Automobile Rating) system ratings when setting car insurance premiums.
Historical data informs them which vehicles are most and least likely to generate an insurance claim. Consumers can view this data themselves through the Insurance Bureau of Canada. It isn’t exclusively a car’s price tag that affects insurance premiums.
Vehicles rated in green are statistically less likely to be involved in a claim and are less expensive to insure. Red-rated cars and trucks are more expensive to insure because their owners historically make more claims.
Expert advice
While sports cars and luxury vehicles are often expensive to insure, insuring expensive vehicles occasionally costs less than insuring their cheaper counterparts because safety features like side airbags or anti-theft systems mean fewer or smaller claims.
Does car insurance work differently on a leased vehicle?
Auto insurance is a requirement in Canada whether you lease or own your vehicle. It doesn’t make much difference if you lease, own outright or finance a car to an insurer. You’ll pay the same thing.
But there are some things to keep in mind. When you lease a car, the dealership technically owns the vehicle. Because of this, they might require you to buy greater car insurance coverage than you might otherwise choose for yourself.
You may be required to list the dealership as an additional interest on your policy. And should you make a claim, the insurance company will settle the claim with the car dealership, not you.
