In Canada, auto insurance is mandatory for all drivers who own or operate a vehicle. The specific requirements for auto insurance may vary by province or territory, but generally, there are four basic types of coverage that drivers must have:

1. Third-Party Liability Insurance: This type of insurance covers the cost of damage or injury to other people or their property that you may cause while driving. The minimum coverage amount for this type of insurance varies by province or territory, but it typically ranges from $200,000 to $2,000,000.
2. Accident Benefits Coverage: This type of insurance covers medical expenses, rehabilitation costs, and lost income for you and your passengers if you are injured in a car accident, regardless of who is at fault. The minimum coverage amount for this type of insurance also varies by province or territory.
3. Direct Compensation Property Damage (DCPD): This type of insurance covers damage to your vehicle and its contents caused by another driver. This coverage is only available in provinces that have a no-fault insurance system, which includes Ontario, Quebec, Nova Scotia, New Brunswick, and Manitoba.
4. Uninsured and Underinsured Motorist Coverage: This type of insurance provides coverage in case you are in an accident with a driver who is either uninsured or underinsured. It is not mandatory in all provinces, but it is highly recommended.

If you are financing your car, your lender may require you to purchase collision and comprehensive coverage in addition to the above-mentioned types of coverage. Collision coverage will pay for repairs to your vehicle if you are in an accident, while comprehensive coverage will cover damage caused by theft, vandalism, or natural disasters.

The specific requirements for auto insurance may vary by province or territory, so it is always a good idea to check with your local insurance provider or government agency to ensure that you have the appropriate coverage.

How does financing a car work with insurance?

When you finance a car, you will typically be required by your lender to have both collision and comprehensive insurance coverage. This is because the lender wants to protect their investment in the vehicle. If you are involved in an accident, collision insurance will cover the cost of repairs to your vehicle, while comprehensive insurance will cover damages caused by theft, vandalism, or other non-collision events.

When you purchase a financed car, your lender will likely require you to add them as a lienholder on your insurance policy. This means that if you have an accident and file a claim, the insurance company will issue a check to both you and the lender to cover the cost of repairs.

Do I need full coverage on a financed car in Ontario?

Yes, if you have a financed car in Ontario, you will need to have full coverage auto insurance, which includes collision and comprehensive coverage. This is because lenders require borrowers to have full coverage in order to protect their investment in the vehicle.

Collision coverage will pay for damages to your car in the event of a collision, regardless of who is at fault. Comprehensive coverage will cover damages to your vehicle caused by theft, vandalism, fire, hail, or other non-collision events.

In addition to collision and comprehensive coverage, you will also need to have third-party liability insurance, which is required by law in Ontario. This coverage will protect you if you are found liable for damages or injuries caused to another person or their property while driving your car.

The minimum amount of third-party liability coverage required in Ontario is $200,000, but it is recommended to have higher limits of coverage for better protection.

What happens if you don’t have full coverage on a car loan?

If you don’t have full coverage on a car loan, you may be in breach of your loan agreement. When you finance a car, the lender is considered the owner of the vehicle until the loan is fully paid off. This means that they have a vested interest in protecting their investment in the car, which is why they require borrowers to have full coverage auto insurance.

If you fail to maintain the required coverage on a financed car, the lender may take action against you, which could include:

1. Adding their own insurance coverage: If you don’t have full coverage, the lender may add their own insurance coverage to the vehicle, which is usually much more expensive than what you could find on your own. This will likely result in higher monthly payments for you.
2. Declaring your loan in default: If you fail to maintain the required coverage, the lender may declare your loan in default, which means that you have breached the terms of the loan agreement. This could result in repossession of the vehicle, and the lender may sue you for the remaining balance of the loan.
3. Suspending your registration: In some provinces, such as Ontario, if you don’t have the required insurance coverage, your vehicle registration could be suspended. This means that you won’t be able to legally drive the car until you have the appropriate coverage.

In summary, it is important to maintain full coverage on a financed car to protect your investment and comply with the terms of the loan agreement. If you are having trouble affording the required coverage, it is important to speak with your lender and insurance provider to explore your options.

Do you pay more insurance for a finance car?

Generally, insurance rates for a financed car may be higher than for a car that is fully paid off. This is because lenders typically require borrowers to have full coverage auto insurance, which includes collision and comprehensive coverage. These types of coverage are usually more expensive than just having liability insurance, which is the minimum required coverage in most provinces in Canada.

Insurance rates for a financed car may also be affected by several other factors, such as the make and model of the vehicle, your driving record, your age and gender, your location, and the amount of coverage you choose.

How much liability insurance should I have on my car in Canada?

The amount of liability insurance you need on your car in Canada will depend on the province or territory you are in. Here is a breakdown of the minimum requirements for liability insurance in each province and territory:

1. Alberta: $200,000 third-party liability insurance is the minimum required by law.
2. British Columbia: $200,000 third-party liability insurance is the minimum required by law.
3. Manitoba: $200,000 third-party liability insurance is the minimum required by law.
4. New Brunswick: $200,000 third-party liability insurance is the minimum required by law.
5. Newfoundland and Labrador: $200,000 third-party liability insurance is the minimum required by law.
6. Northwest Territories: $200,000 third-party liability insurance is the minimum required by law.
7. Nova Scotia: $500,000 third-party liability insurance is the minimum required by law.
8. Nunavut: $200,000 third-party liability insurance is the minimum required by law.
9. Ontario: $200,000 third-party liability insurance is the minimum required by law.
10. Prince Edward Island: $200,000 third-party liability insurance is the minimum required by law.
11. Quebec: $50,000 third-party liability insurance is the minimum required by law.
12. Saskatchewan: $200,000 third-party liability insurance is the minimum required by law.
13. Yukon: $200,000 third-party liability insurance is the minimum required by law.

What’s the difference between owned and financed?

The difference between owned and financed car insurance is related to the ownership of the vehicle.

If you own your car outright and do not have a loan or lease on it, you will only need to have the minimum required insurance coverage in your province or territory. This usually includes third-party liability insurance, which covers damages or injuries you may cause to others while driving. You may also choose to add additional coverage, such as collision or comprehensive insurance, for greater protection.

If you have financed or leased your car, the lender or leasing company technically owns the vehicle until you have paid off the loan or lease. This means that they will require you to have full coverage auto insurance, which includes collision and comprehensive insurance, in addition to the minimum required coverage. This is to protect their investment in the vehicle in case of damage or loss.

When you have a financed car, you will also need to add your lender as a lienholder on your insurance policy. This means that in the event of a claim, the insurance company will issue a check to both you and the lender to cover the cost of repairs or replacement.

In summary, while the minimum required coverage may be the same for both owned and financed cars, the lender or leasing company will require you to have full coverage insurance if you have a loan or lease on the vehicle.