Auto insurance FAQ

Even if you know the basics of car insurance, we know there are probably still a few questions you may have. Check out our FAQ’s below.

Do I really need auto insurance?

Yes – in Canada, it’s the law: your vehicle has to be insured. The exact requirements vary from province to province, but every jurisdiction mandates a minimum amount of liability insurance. Most drivers should invest in a broad spectrum of insurance, not just liability, so that they’re protected in the event of unexpected, unavoidable scenarios, like an accident, fire, or theft. After all, bad things can happen to anyone.

What is no-fault insurance?

A type of insurance system used by providers in several provinces, like Ontario and Alberta. Under the no-fault insurance system, you skip the hassle of pursuing the at-fault driver’s insurer to get compensation. Instead, your own provider pays out your benefits, which usually means you get quicker and more convenient service.

But who’s at fault in an accident still matters. If you’re found at fault, that verdict goes on your record and your insurer could raise your premiums.

What is an auto insurance deductible?

The amount of money that you must pay out of pocket to cover damages. Your insurance provider will pay for all covered costs beyond your deductible. For example, if your policy has a $500 deductible, you would pay the first $500 of your claim, and your insurance company would pay the rest, up to a pre-determined maximum amount.

So, naturally, your deductible impacts your car insurance rate. When you commit to a higher deductible, your provider doesn’t have to contribute as much money to your claims. As a result, your premium lowers.

How do providers determine insurance premiums?

They evaluate a long list of variables, including your age, commute, and driving record. Insurers also consider the make, model, horsepower rating, and safety features of your vehicle before calculating your rate.

Try our auto insurance comparison service if you want to shop for the lowest rates. Just plug your information into our quoter -- even though insurers have access to all the same info, you’ll notice that each one offers a slightly different rate.

Does a good credit score help you save on your auto insurance? Can you be charged more if you have bad credit?

The answer to these questions will vary across Canada, since each province and territory has different rules as to whether auto insurers can legally assess your credit score. (Home insurers follow another set of rules altogether.)

In Ontario and Newfoundland, for example, auto insurers are banned from ever using your credit history when underwriting auto insurance, while in Alberta, an insurer can access that information with the consumer’s explicit consent. In some provinces, no regulations exist at all. In others, like Nova Scotia, auto insurers are permitted to take credit history into account, at their discretion.

In provinces and territories where it’s legal for auto insurers to assess your credit score, insurers may take that information into account while determining your premium rate. Some, but not all, will do this.  

Does my marital status impact my auto insurance premium?

It could. In certain provinces, namely Ontario, insurers are allowed to use your marital status to set your premium. But there’s no real way to determine how much weight your insurer puts into it. Some use it, while others don’t.

Do I get an automatic discount on my car insurance when I turn 25?

It’s a myth — you won’t magically get a discount at the stroke of midnight on your 25th birthday. But it has persisted because, statistically speaking, most drivers see their insurance rates steadily fall throughout their twenties. This trend is prevalent among drivers who’ve been insured since the age of 17 (when they first earned their licence) and have a good driving record. However, we discovered that the most significant drop in annual premiums actually occurs around age 21.

Young people pay more for car insurance. It’s an unavoidable fact. Your driving history, the type of vehicle you own, and the insurance company you choose also play a big part in determining your premium.  

If I have to make to make a claim or make a change to my auto insurance policy, do I contact the broker that sold me the policy or the insurance company?

If you’ve purchased insurance from a broker, you should file your claim through them. Your broker’s job is to act as your advocate should the insurance company try to dispute your claim. Your broker will help you gather all the information you need to make the report and submit it to the insurance company. If you need to file a claim, don’t hesitate — get in touch with your broker immediately.

How soon before my renewal should I shop for insurance and how long is the quoted rate valid?

Your auto insurance provider will send you paperwork a few weeks before the renewal date — this is generally a good time to start shopping around for rates.

That said, you don’t have to wait until your policy is close to expiring. Seeing what’s out there at any point of your contract is a good idea. Although they are subject to provincial regulatory oversight, insurance rates are not determined by the free market. Each company uses its own claims history to set rates (though provincial governments have a major hand in regulating rates; take the Financial Services Commission of Ontario, for instance), so you could very well be paying too much.

As for how long quotes are valid for, that varies company by company. However, any deadlines should be prominently displayed, and when quotes do expire, you should not have any difficulty getting a new one.  

I’m moving to a new province — what do I do about my car insurance?

Moving provinces can be an exciting — and daunting — experience. The good news is that applying for a new car insurance policy isn’t something you need to cross off your to-do list until your move is officially complete. In fact, you’ll want to keep your insurance current until the move is complete. Here’s how you can prepare:

  • Contact your insurance company and ask for a claims experience letter. This report documents your claims history and you’ll want to have this on hand to show an insurer. It usually takes a week to arrive in the mail. You could do this before or after the move.
  • Get a new driver’s licence once you’ve moved in. Every province gives you a limited timeframe to exchange your old licence for a new one.
  • Determine the minimum insurance needed in your province.
  • Compare rates — this is a perfect time to see if you’re getting the best value.

I’m temporarily moving to another province for school. Where do I insure my car — in my home province or the province my school’s located in?

Different provinces have different auto insurance rules. For the most part, you don’t have to apply for a new policy if you’re moving away for school, you can keep your insurance from your home province. But you need to bring this up with your current insurer before you move. 

I'm renting a car. Will my current auto insurance company cover the rental vehicle or do I have to buy coverage from the rental company?

It depends. Is the insurance package the rental company offering better than the coverage you have on your car at home? Then it might be a good idea to shell out for rental insurance. If not, your personal car insurance carries over to rental cars — as long as your policy has physical damage coverage. You’ll have to call your insurer or broker to extend your policy. You may need to purchase an endorsement, a product that extends your policy (it costs around $40 a year).  

If you don’t already have car insurance, you may have to purchase it from the rental company.

What impact do traffic tickets have on your auto insurance rates? 

Traffic tickets can raise your auto insurance premiums. Unless, of course, you’ve purchased a policy that offers forgiveness for your first infraction. These products can be purchased on top of your policy (and you’ll want to purchase it before you need it). Serious infractions can definitely send your premiums skyrocketing — a major criminal conviction can double your premium. But insurance companies don’t take the number of demerit points you have into consideration. The type of offence matters more.

Can I become the primary driver of two cars to prevent my teenager from being made a primary driver?

The short answer is no. A single person who owns more than one vehicle can be the primary driver of multiple cars. But you lose that privilege when the number of cars matches the number of licensed drivers within the household. Under that scenario, every car needs to be matched with a primary drier. 

The only way around this available isn't an appealing one. It involves asking an insurance company to exclude a driver from being on a policy. It’s also an option that insurance companies rarely offer, especially to teenagers.

Are car insurance policies only available for one year? I'm only looking for something short-term — say, three to six months.

Short-term auto insurance is definitely a thing. However, many insurers don’t offer it. If you can find it, short-term insurance — which can provide coverage for as little as a single day, up to several months — is ideal if you are lending your car to someone and don’t want to add them to your existing policy under the visitor designation (and there are good reasons not to do this). It's also ideal when you are buying a new car and need temporary coverage for your old one while you wait for it to be sold.

Do I need a driver’s licence to register a car?  

Yes, you do need a licence to register a car. In Canada, you don’t need a driver’s licence to buy a car, but in order to drive it, you need to register it — which, of course, requires a licence. Also, keep in mind that federal law requires auto insurance for all cars that will be driven. You need a licence to apply for coverage as well.

Can I insure a car with just comprehensive coverage even if I don't hold a licence?

In Canada, there are three main types of auto insurance: third-party liability insurance, collision insurance, and comprehensive insurance. Third-party liability insurance is the most basic type of insurance and required by federal law. Buying only comprehensive coverage for your car is therefore not allowed. Moreover, most auto insurance providers need your licence information to issue a policy.

Does a car need to have licence plates on it if I'm not driving it?

No, it doesn’t need plates if you’re not planning on driving it. But remember, you can’t drive the car on public roads without both plates and insurance. If you bought a car that doesn’t have plates, make sure you have a plan to get the car back to your house — lawfully.