All About Car Insurance

By law, anyone who owns or operates a car needs to be insured. If you’re a new driver (or just want to brush up on your knowledge), read on to find out more about how car insurance works and how your coverage breaks down.

Mandatory vs Optional

When buying insurance, you’ll quickly learn that there is a difference between coverage that is mandatory (every driver must have it) and optional (it’ll help you out and cover you in a variety of situations but isn’t something you legally must have).


For Ontario drivers, you must have Third Party Liability Coverage (with a minimum requirement of $200,000 though higher is recommended, often around 1 – 2 million). In the case that you are negligent and someone else is killed, injured, or they suffer damage to their property, this will protect you and cover any costs relating to settling claims or requiring a legal defence team.

You must also pay for basic Accident Benefits coverage (meaning that if you are killed or injured in a car accident anywhere in Canada or the US, your benefits will be provided regardless of who caused the accident).

You also need Uninsured Motorists coverage (with a minimum $200,000 limit) to protect you in case your are injured or killed in an accident with an uninsured motorist or hit-and-run driver (you will be covered up to the extent that you are not at fault). Any damage to your car caused by an identified uninsured driver will be covered up to $25,000 (with a possible deductible of $300 that you have to pay out of pocket).

Finally, there is Direct Compensation Property Damage which is automatically included in your premium (with a standard deductible of $0, though that can be increased). This coverage means that any damage to your vehicle and/or its contents caused by someone else will be paid for (to the extent that you are not at fault).

Other Optional Add-ons

Two types of coverage that aren’t mandatory but are highly suggested for cars that are 5 years old or newer are Collision and Comprehensive. You can get them separately but most people get them together. Comprehensive covers your car should it be damaged in an act of vandalism, fire, flooding, windstorms, lightning or theft. Collision covers any damages incurred by your vehicle in both a collision or an accident – for instance, your car rolling over or hitting a tree or building (which is particularly important for car owners whose vehicles are expensive to replace). If you don’t have collision cover and have an accident in which you are found entirely at fault, your insurance won’t cover you.

All Perils combines collision and comprehensive and is the broadest type of coverage you can get. Specified Perils, on the other hand, only covers losses that are due to the specific causes listed in your policy (often relating to theft and fire).

Other Categories of Insurance

No Fault Insurance

This is a category of insurance you can get that means that your insurance company will cover you and provide benefits regardless of who is at fault for your accident. It simply means you will not have to deal with the other driver’s insurance company for coverage as your company will handle the claim no matter whose fault the accident is.

Accident Forgiveness Insurance

This category of insurance ensures that your insurance company will not raise your premium even if you are the one at fault (or partially at fault) in your first accident. There are often a number of factors that are considered before a driver is approved for accident forgiveness (how long they’ve been licensed, any previous convictions, license suspensions or accidents, speeding tickets etc).

Occasional Driver

If you’re not the sole driver of your car, it’s often considerably cheaper to get insurance as an occasional driver on your parent or guardian’s insurance policy rather than paying the premium as a principal driver.

Usage Based

If you’d rather have your premium be based on your actual driving habits and car usage, you can have something called a Telematics device installed in your car. This device will monitor your driving habits and how often you get behind the wheel to give a more accurate estimate of how safe of a driver you are to your insurance company (often resulting in a considerably lowered premium).