As you probably know, there’s nothing more important to your new vehicle than obtaining proper car insurance. Once you’ve driven off from the dealership with your new best friend on four wheels, you’ll quickly realize that you just can’t go anywhere without car insurance. Sure, car insurance is perhaps one of the most annoying financial requirements that we need to endure in our lives, but once you get into a collision, you’ll be relieved and happy that you have it, as it sure does pay off.
According to statistics, in 2019, there were approximately 23 million cars registered in Canada. In addition, all motor road vehicles, including buses, trucks, motorcycles, amount to a staggering 35 million units. This means that the car insurance market in Canada is remarkably developed and diverse.
For that reason, it can prove quite the hassle to choose the right insurance provider for you, but luckily, we will lay out the thought process in this article. We’ll go through the various types of car insurance out there, the many elements that affect the premium costs, and other things you need to consider before you decide.
How Does Car Insurance Work?
To begin with, you should know that car insurance works very similarly to your home insurance, as in this case, the policy covers your car instead of your home. For example, once you’ve bought an insurance policy from a respected insurance provider like Brokerlink, you’ll pay annual or monthly premiums for them to cover your car from damages. These premiums are being calculated to match the insurance company’s evaluation of the yearly costs of covering your vehicle.
The price of the premiums depends on several elements. The most influential one is the insurance company’s estimation of how much they’d have to pay out in eventual claims during the year. This is basically the price you pay for the company to take over the risk of operating your vehicle. Once it collects all the premiums from customers, the company piles them up together and uses them to cover any losses from each one of them during the year. So be careful when penning your contract, and ensure you understand which losses you’ll be covered for. These contracts can be tricky to understand, so maybe it’s in your best interest to consult with an insurance agent before making the deal.
How Do I Know If I Need A Car Insurance Policy In Canada?
Basically, anybody operating a motor vehicle in Canada needs a valid insurance policy. If you fail to do so and get caught in, let’s say, Ontario, you’ll be looking at a fine from $5,000 to $50,000, as well as a license suspension and impounding of your car.
Additionally, driving without an insurance policy will mark you as a high-risk driver. This means that you will pay higher premiums to an insurance company or even maybe be refused a policy. Suppose you are uninsured and get involved in an accident by your fault and cause injury or death to the other party. In that case, you will be held personally responsible for covering all the other party’s costs, including medical.
Different Types Of Car Insurance Available in Canada
Now that you know how car insurance works and that you definitely need a car insurance policy in order to drive your vehicle on an everyday basis, here are the four most commonly obtained types of car insurance policies that you might want to consider getting from your trusted insurance provider:
Third-Party Liability Coverage
This is the most fundamental type of coverage and it protects the policyholder from damages caused to another party’s property. What’s most important is that it also shields you from damages in the event of someone dying or getting injured in an accident where you are culpable. This type of coverage is compulsory in Canada.
Collision coverage includes third-party liability coverage. It also protects you when you hit anything other than a vehicle, like a handhold or a building on the side of the road. In most cases, it will also cover you if you get in a collision with an uninsured driver. This type of coverage is more expensive than the standard liability coverage.
This type of coverage provides the widest range of security. Additionally to medical and accident-related damages, it also covers you in the unfortunate events of floods and auto theft. As you may presume, this is the most expensive option out of the three mentioned.
Specified Perils And All Perils
These optional coverages are meant for people who want to protect themselves from specific perils. Theft-related damages and natural disasters are the most common. The all-perils option is the broadest there is, covering the cumulative protection that comprehensive and collision coverages offer.
Once you’ve understood the basics of car insurance, you need to take into account several other factors that will influence the price of your premiums: The province you reside in, the type of vehicle you drive (production year, model), demerit points, your driving history, age and gender.
Insurance companies have a legal right to discriminate based on age and gender. This is the case because companies expect riskier behavior from male drivers and younger drivers on the roads. You can also save up on your premiums by bundling up (choosing the same company for car and home insurance), raising your deductibles, and researching the market for new policies, not merely renewing your old one automatically.