Auto Insurance

Gifting someone a car this Christmas? Great. Now what about insurance?

By: Brennan Doherty on December 15, 2020

Every year at Christmas, more than a few lucky drivers are escorted outside to get a first glimpse of their gift — a car.

No official figures exist on the number of cars, SUVs, and trucks delivered by St. Nick each Christmas, but Statistics Canada estimates around 114,000 vehicle sales occurred in Canada last December. That’s low compared to the traditional sales months of May and July, but still substantial. By year-end, many dealerships are trying to hit end-of-quarter sales quotas and offer decent deals on whatever’s left on the lot. 

Purchasing a vehicle as a gift for someone is fairly straightforward. But what about things like car insurance and vehicle registration? How can a gift-giver ensure that the recipient of the car is properly insured and road-ready by Christmas? 

How to insure a gifted vehicle

Insuring a gifted vehicle is actually simpler than it sounds. “It would be the same as anybody getting a new vehicle,” says Ashley Kaspar, Director of Insurance Distribution for CAA Insurance. “Typically, you would have about 14 days from the time you get your vehicle in your possession to adding the vehicle to your existing policy.” In other words, the giver doesn’t need to set anything up with the insurance company in advance of giving the gift — that’s on the recipient to do within two weeks of receiving it.

Kaspar says anyone lucky enough to receive a car for Christmas should call their auto insurance provider as soon as possible to ensure they have the coverage they need. This is especially true if you already have an insured older vehicle and receive a brand new one for Christmas. “The coverage you may have had on that older vehicle may not be the same coverage you want on that newer vehicle,” Kaspar says. 

For example, if your older vehicle no longer has collision coverage, but you want that protection for your newly acquired vehicle, the 14-day grace period only covers your existing insurance policy. In other words, if you wanted collision coverage on the new vehicle, you’d want to sort it out before getting behind the wheel.

There is one exception to the 14-day grace period, and that’s if you are giving a vehicle to someone who doesn’t already have car insurance. Kaspar says this can happen if an elderly grandparent gives an uninsured grandson or granddaughter one of their vehicles. Of course, it is illegal in Canada to drive without insurance, so the recipient will need to set up their own active insurance policy if they don’t already have one. Even if they’re already listed on the gift-giver’s insurance policy as a secondary driver, they will need to set up their own separate insurance policy if a gifted vehicle is in their name. 

Does the insurance company need to know that the car was given as a gift? And could the fact that it was a gift impact someone’s insurance rates? Kaspar says no to both questions. 

“There is no difference between if it was a gift or if you’ve purchased it yourself.”

How to register a gifted vehicle

As with nearly everything to do with cars and trucks in Canada, the specifics of registering a vehicle vary from province to province. In Ontario, anyone who receives a new car can only register the vehicle after they have properly insured it. If you’re buying that gift vehicle from a registered dealer, you don’t need to worry about this step — the sales staff will sort it out for you.

If you’re buying used, however, you as the buyer will need to register the vehicle yourself. You’ll need proof of insurance, all of the vehicle’s relevant information, the original vehicle permit from the seller, the plate portion of the permit (so the recipient of the vehicle can attach their own licence plates), proof of purchase, and your own driver’s licence. Registering a vehicle isn’t free, either. For example, in Ontario, vehicle permits cost $32, a new or replacement licence plate is $59, and a licence plate sticker is either $60 or $120, depending on where in the province you live. 

When you transfer the car to its new recipient, they’ll have to register the vehicle in their own name, too. That means they’ll require their own proof of insurance, the permit, and their own licence plates. If they’re a new driver and don’t have plates or insurance, it’ll be up to them to sort all that out before they hit the road. By law in Ontario, a vehicle permit must be updated with a new driver’s details within six days of transferring the vehicle’s ownership. 

Gifting a car could exempt you from paying sales tax

In Ontario, there is a loophole that allows someone to give a used vehicle to a member of their extended family without paying the usual retail sales tax. The government’s definition of “family” includes adopted siblings, in-laws, and half-siblings. Basically, you require all of the usual documents for transferring a vehicle — proof of insurance, a vehicle ownership permit, your driver’s licence — on top of a specific sworn declaration document from the Ontario government and a Safety Standards Certificate. 

This document requires both the recipient and giver of the vehicle to state their relationship to one another. It also asks the giver for some information about when and from whom they originally bought the vehicle. There’s also a separate form required if you want to transfer licence plates as well. 

Especially important to point out given that we’re still battling the coronavirus pandemic is that none of these actions can be done by mail. If you are in Ontario and looking to take advantage of this exception, all the paperwork must be completed at a ServiceOntario office in person.

Ensuring a vehicle is road-ready before it goes under the metaphorical Christmas tree can be a hassle, and its very lucky new driver may not have it easy, either. But with a few quick phone calls to their insurance provider and some up-to-date paperwork, they’ll be ready to set out behind the wheel of their new ride.