Your monthly loan or lease payment is just one of the many ongoing expenses that come with vehicle ownership. One of the most significant costs you’ll incur buying a car is insurance. Not only is car insurance non-negotiable, but it’s easy to underestimate what your insurance costs will be if you buy a car without doing any research. In this article, we’ll look at why you’ll need car insurance, how to find it based on where you live, and what you can do to save as much money on car insurance as possible.
Go back to Section 5: Financing a car vs. leasing, and how to shop for cheap rates
What is car insurance?
Car insurance is a financial product that may protect you from certain liabilities in unexpected circumstances such as a crash, vandalism, natural disaster, or similar situations. Depending on your level of coverage, car insurance can cover expenses relating to vehicle damage, or personal liability if you’re involved in an incident that causes damage or bodily harm. In Canada, some form of car insurance is mandatory for every vehicle owner.
How to get car insurance across Canada
Car insurance is administered at a provincial and territorial level. Some jurisdictions mandate public car insurance, meaning it’s provided by government agencies. Others operate under a private car insurance model, where vehicle owners purchase insurance coverage from private businesses.
British Columbia and Manitoba provide all car insurance publicly through the Insurance Corporation of British Columbia (ICBC) and Manitoba Public Insurance (MPI) respectively. In Saskatchewan, vehicle owners pay for required insurance coverage through Saskatchewan Government Insurance (SGI), while extended coverage is available through private companies. Personal injury coverage in Quebec is provided by the provincial public insurance provider, the Société de l’assurance automobile du Québec (SAAQ), while private insurers provide coverage for property damages.
In all other provinces and territories — Alberta, Ontario, New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland and Labrador, Yukon, Northwest Territories, and Nunavut — drivers purchase automobile insurance policies from private corporations.
In general, rates from publicly administered insurance are lower but less negotiable. Where private insurance is offered, rates are open to competition and vehicle owners can cross-shop multiple providers to find the best rates available.
How to find cheap car insurance
Regardless of whether your home province or territory operates under public or private insurance, there are a few factors you can control that make a difference in your rates. Here are some things to consider if your goal is to keep your insurance costs as low as possible.
Drive safely to begin with
All insurers, whether public or private, give lower insurance rates to drivers with clean records. By keeping your record free of incidents, speeding tickets, and other infractions, you’ll be offered more favourable rates. When you’re tempted to speed or run a light because you’re late for an appointment, remember that charges like these stay on your driving record for years. The seconds or minutes you’ll save getting to your destination are almost never worth the risk.
Consider what type of vehicle to buy
Some vehicles naturally come with higher insurance rates than others. This is most often the case with cars that are frequently stolen, but it can also apply to sports cars that may encourage risky driving behaviours or high-end luxury vehicles that are expensive to replace. The easiest way to reduce these types of costs is to get a quote from your insurer before you agree to purchase a vehicle. One simple phone call to verify what your rates will be on a car that interests you can save you hundreds or thousands of dollars a year on insurance and avoid unpleasant surprises.
Check if you live in a high-cost area
Sometimes, your address can influence your insurance rates. If you live in an area that receives a higher number of claims than average — whether due to crashes, theft, or other incidents — your insurance rates are likely to be higher as a result. There’s not much you can do about this once you’re settled in a home. But if you’re considering a move and have multiple locations in mind, a quick call to your insurance provider might reveal some information that could save you money in the long run.
Shop around for rates
If you live in a jurisdiction with partial or fully private insurance, take the time to cross-shop rates between providers. Online rate quote aggregators and private insurance provider websites offer tools for collecting quick rate quotes. Call the three or four that offer the lowest rates to see if you can negotiate a better deal. Some people have success with insurance brokers, who can sometimes access better rates than you’d find on your own at no additional cost to you. It’s worth going through this process every time your insurance policy is up for renewal. You’d be surprised how much rates can change in a year!
Choose a higher deductible
A deductible is a flat fee you pay toward an insurable loss before your insurance provider steps in and covers the rest. For example, if you’re in a crash and you open a claim with your insurer, you’ll need to pay the deductible to your insurer before it will pay out any funds related to the claim. If you’re willing to agree to a higher deductible — for example, $1,000 instead of $500 — you may be able to negotiate a lower insurance premium. (A premium is the amount you pay to keep your insurance active.) This can be beneficial, provided you’re able to cover the higher deductible cost in the event of an incident.
Pay your premiums annually
Some insurers offer preferred rates to customers who pay their premiums in a yearly lump sum instead of paying monthly. If this is financially feasible for you, ask your insurance provider or broker to quote both types of payments for you to see if this provides any benefit.
Bundle your insurance products together with one provider
If you require homeowner’s or renter’s insurance, policies for multiple vehicles, or additional policies for a cottage, RV, business, or otherwise, you may be able to negotiate a discount for bundling all your policies under a single insurer.
Understand the types of insurance and consider what you truly need
No matter where you live in Canada, if you own a vehicle, there’s a minimum amount of insurance you’re required to hold by law. However, there are some types of coverage that are not mandatory and that you might not need depending on your situation. If you drive a very old car that wouldn’t be worth much if it needed to be replaced, for example, paying for collision coverage might not be beneficial to you. If you could easily replace your vehicle if it’s destroyed by a flood or fallen tree, perhaps comprehensive coverage isn’t right for you. Call your insurance provider at renewal time and go over your coverage with a fine-tooth comb to determine whether you might be able to remove costly coverage that you don’t need.
Ask for discounts
Some insurers provide discounts for customers who, for example, regularly use alarm systems, park in secured garages, or switch to winter tires. Ask your insurer whether any behaviour-based discounts are available.
Consider usage-based insurance
Speaking of behaviour-based discounts, some providers take this a step further and offer deep rate cuts to customers who drive safely and are willing to prove it. In usage-based insurance, you agree to have your driving tracked with either a telematics device or your mobile phone. If you meet the program’s expectations, you could see your insurance rates lowered by up to 25%.
Don’t leave any gaps in your insurance history
Insurers don’t like seeing gaps in your insurance history, so foregoing vehicle ownership for a while could cost you big in the long run. If you decide to sell your car and live without one, it might be wise to keep some level of car insurance active, even if it’s just for occasional use such as rentals or car-sharing services.
Use your membership benefits
Some organizations such as alumni or professional associations, automobile associations, or your employer may offer car insurance discounts. Keep track of these benefits so you can take advantage of them at renewal time.
Continue to Section 7: Evaluating the history of a used car
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