Types of Car Insurance in Canada in 2024

Looking for a car or car insurance in Canada? It's important to know that car insurance is mandatory here. But what are the different types of car insurance available? Which one is right for you? Read on.

This guide will help you understand the different types of car insurance in each province, from the essential coverages like accident benefits and liability that you need to have, to the optional extras that can give you more protection.

We also share tips to get car insurance at affordable rates. You can use our free tool to compare the best car insurance suited to your unique needs. Get free quotes now, right here.

Is car insurance mandatory in Canada?

Yes, car insurance is mandatory in all provinces and territories across Canada. It's a requirement to legally operate a vehicle on the road. While there are two different systems — public and private — depending on the province or territory, having some form of car insurance is compulsory.

If you want to check out car insurance options in your province in a few quick steps, you can do it right here using our free tool below. Explore coverage and compare the best car insurance quotes based on your unique needs right now.

Take a closer look at the specifics for each province:

What are the main types of car insurance?

Car insurance in Canada can be broken down into two main categories: mandatory coverage and optional coverage.

Speaking of mandatory coverage, there are four main types of this insurance in Canada. There can be slight variations depending on the province or territory.

Here's a closer look at each:

• Third-party liability: This is the most essential and covers injuries or property damage you cause to others in an accident. It protects against lawsuits and covers medical expenses, lost wages, and repairs to other people's vehicles. The minimum amount of liability coverage required varies by province but typically starts at $200,000.
• Accident benefits coverage: This coverage applies regardless of who is at fault in an accident. It helps cover medical and rehabilitation expenses, lost wages if you're unable to work, and even funeral expenses in the case of a fatality. The specific benefits and amounts can vary, so be sure to understand your policy details.
• Uninsured motorist protection (UMP): This protects you financially if you're hit by a driver with no insurance or not enough coverage. It can cover medical expenses, lost wages, and even damage to your vehicle. UMP is crucial as it ensures you're not left financially responsible for an accident caused by an uninsured driver.
• Direct compensation for property damage (DCPD) (except for Manitoba and Saskatchewan): This covers the repair costs to your vehicle if you're not at fault in an accident. It streamlines the claims process by going through your own insurance company instead of dealing directly with the at-fault driver's insurer.

What are the types of optional car insurance coverage?

We have the following six categories for optional car insurance coverage in Canada. Just like mandatory coverage, the options may vary a bit from province to province.

• Collision coverage: It pays to repair the damage to your car if you collide with another object or vehicle, even if it's your fault. This is not mandatory but highly recommended, especially for newer cars or those with a loan/lease.
• Comprehensive coverage: It protects your car against damage from theft, fire, vandalism, weather events (hail, falling objects) and other incidents not covered by collision insurance. You can also get "specified perils" coverage for a limited list of events (fire, theft, etc.).
• Gap insurance: This fills the gap between the actual cash value of your car (what it's worth at the time of an accident) and the amount you still owe on your loan/lease if your car is written off (declared a total loss). Having gap insurance is important if you have a new car that depreciates quickly or a large loan/lease balance.
• Uber insurance (ride-sharing Insurance): Standard car insurance may not cover you if you're using your car for ride-sharing services like Uber or Lyft. Specific ride-sharing insurance provides coverage during different periods: while waiting for a ride request, driving to pick up a passenger, and with a passenger in the car.
• Umbrella insurance: It provides additional liability coverage beyond the limits of your regular car insurance policy. Umbrella insurance usually kicks in if you cause a major accident and your standard liability limits aren't enough to cover all the damages.
• Usage-based insurance (UBI): It’s a relatively new option that uses telematics (devices that track your driving habits) to determine your insurance premium.

What are the types of car insurance in Alberta?

In Alberta, car insurance options include Third-Party Liability and Accident Benefits as mandatory coverages, while Comprehensive, Collision, Specified Perils, and All Perils are optional for added protection against a range of incidents, from collisions to natural disasters. Check out our guide on the best car insurance in Alberta

What are the types of car insurance based on driver type?

Young drivers (typically under 25) are statistically at a higher risk of accidents, which means car insurance can be significantly more expensive for them.

Here are the main types:

1. New driver insurance: This is for individuals who have just received their driver's license. It's often the most expensive category due to the lack of driving experience.
2. Student driver insurance: This is a temporary policy for learners who are practicing driving with a permit. It typically provides limited coverage but allows the learner to get behind the wheel legally with a licensed supervisor.
3. Young driver insurance: This is a broader category that encompasses new drivers and students, but may also extend to young adults (typically up to 25 years old). Premiums can vary depending on age, driving record, car type, and location.

Tips for young drivers to get affordable rates

• Stay on a parent's policy as a named driver for as long as possible, if allowed. Their good driving record can significantly improve your premium.
• Choose a safe and economical car model associated with lower insurance costs.
• Maintain a clean driving record by avoiding tickets and accidents.
• Consider usage-based insurance (UBI) if your driving habits are good. UBI rewards safe driving with lower premiums.

Also, shop around and compare quotes from multiple insurers to find the best deal for your needs. You can use our comparator to get personalized quotes right here in no time.

Types of car insurance coverage: Policy-based

Here are the types of car insurance policies you can normally find in the market:

• Bundled auto insurance: This option combines your car insurance with other insurance policies from the same company, often home or property insurance. Bundling can offer significant discounts compared to buying each policy separately.
• High-risk auto insurance: This is designed for drivers considered high-risk by insurers due to factors like young age, a new driver's license, a poor driving record (tickets, accidents), or driving a high-performance car. 
• Low-rate auto insurance: This targets drivers considered low-risk by insurers, such as those with a clean driving record, driving a safe car model, or low annual mileage. It may offer lower premiums compared to standard policies. 
• No-fault auto insurance (Quebec only): This applies specifically to the province of Quebec. In a no-fault system, regardless of who caused the accident, each driver's injuries are covered by their own insurance company.

Public vs. private car insurance

In British Columbia, Saskatchewan, and Manitoba, you can get auto insurance through public systems administered by the provincial corporation. 

Other provinces and territories operate under private insurance systems, enabling drivers to choose their preferred insurance provider. Quebec stands as the exception with a hybrid model, wherein you can get liability insurance exclusively from the government.

Choosing between public and private car insurance

Eventually, your choice depends on where you live in Canada. If you reside in a province with public insurance, that's your primary option (except for optional add-on coverage in Saskatchewan).

But if you have a choice and affordability is a major concern, public insurance might be initially attractive. However, depending on your driving record, car type, and desired coverage, private insurance might offer comparable rates with more flexibility. Besides: 

• Public systems prioritize essential coverage, which may be sufficient for low-risk drivers with older vehicles.
• Private insurance allows you to customize your plan for more comprehensive protection.

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Sunny Yadav Copywriter

Sunny has over six years of experience curating engaging content spanning across industries. Specifically in finance, his expertise is insurance reviews and lending and investment topics.