How Does Car Insurance Work in Ontario?

Buying your first car is always an exciting moment in anyone’s life. It’s understandable that you would be itching to hit the road immediately. However, before you do, it’s vital that you get car insurance but how does it all work?

Thankfully, here we’ll answer all your questions. We’ll cover everything you need to know about car insurance in Ontario, including what types of coverage are mandatory, optional coverage you can buy, and how to buy auto insurance in the province. Let’s get started!

How Car Insurance Works in Ontario

Car insurance Ontario is compulsory. If you drive a vehicle in the province, you must have auto insurance.

Car insurance is a contract between a car insurance company (insurer) and an individual (policyholder) where, in exchange for premiums, the insurer agrees to protect the policyholder against financial loss in the event of an accident, theft, or other car incidents.

The amount of protection policyholders will get varies, depending on the type of coverage they buy. Ontario has certain minimum requirements. That is, the provincial government makes some types of car insurance coverage mandatory.

However, policyholders can buy extra coverage beyond the mandatory minimum. Generally, the more coverage policyholders go for, the higher the insurance premium they pay. Let’s take a look at car insurance in more detail.

Mandatory Car Insurance Coverage Under Ontario Law

If you drive a car in Ontario, the law requires you to have the following types of car insurance coverage:

• Third-party liability insurance
• Uninsured automobile coverage
• Accident benefits
• Direct Compensation-Property Damage (DC-PD)

Third-Party Liability Insurance

The law requires drivers to have third-party liability cover up to at least $200,000. Third-party liability insurance protects you if you cause an accident that damages someone else’s property or results in an injury or death.

While the minimum third-party liability coverage required by Ontario law is $200,000, you can choose to have more than that. In fact, insurance brokers usually suggest having more than $1 million in third-party liability coverage.

Uninsured Automobile Coverage

Uninsured automobile coverage protects you when you are involved in an accident caused by an uninsured driver. It’s important to know that your insurance company protects you in accidents you cause. If you did not cause the accident, the at-fault driver’s insurer pays the compensation.

In Ontario, you’ll file the claim with your insurer. But they’ll only handle it and pay for the damages if they can later seek compensation from the at-fault driver’s insurer. Thus, if the at-fault driver is uninsured, you would not receive compensation from your insurance company. Your remedy will be suing the at-fault driver for damages. This is why uninsured automobile coverage is so important.

Ontario law requires that every driver in the province has uninsured automobile coverage as part of their auto insurance policy. Therefore it’s not something you need to worry about when buying a policy, as it will be automatically included.

Accident Benefits Coverage

Accident benefits coverage (also called Personal Injury Protection) is a type of car insurance that provides compensation for medical and rehabilitation expenses when you are involved in a car accident, regardless of who caused the accident.

Examples of things that accident benefits coverage covers are:

• Medical expenses
• Cost of rehabilitation
• Income replacement
• Funeral expense
• Death benefits

Direct Compensation-Property Damage (DC-PD)

Direct Compensation Property Damage is a type of car insurance that protects you if another driver causes a car accident that damages your car and items in it.

Consider that your expensive iPhone 15 Pro in your car also gets damaged when you’re involved in a car accident caused by another driver. Your insurer will compensate you for the car but not for the phone. This is where the Direct Compensation-Property Damage (DCPD) coverage comes in.

Ontario law mandates motorists to have DC-PD coverage. With this, both your car and its contents are protected if you’re involved in an accident. The coverage limit for vehicle content is $25,000.

However, the DC-PD coverage only applies if:

• The car accident happened in Ontario
• A minimum of two vehicles was involved in the accident
• You are not at fault for the accident
• All cars involved in the accident are insured

Optional Coverage You Can Buy in Ontario

While the four types of coverage above are required by Ontario law, there are other types of car insurance coverage that are not required by law but may be beneficial to a policyholder in the event of a car-related incident.

These include:

Comprehensive Insurance – This is an optional coverage that protects your car from damage not caused by collisions (such as vandalism, fire, theft, etc.).

Collision Coverage – This optional coverage covers damage to your car in the event of a collision with another vehicle or an object (regardless of who is at fault for the accident).

All Perils Coverage – This optional coverage is a combination of comprehensive and collision coverage. It typically covers all types of damages except those explicitly stated.

Specified Perils Coverage – This optional coverage covers only damages explicitly listed in your policy.

How To Buy Car Insurance in Ontario

Ontario does not have a public insurance system. So, in the province, you must buy auto insurance from private insurance companies.

For a company to sell car insurance in Ontario, it must be licensed by the Financial Services Commission of Ontario (FSCO). FSCO maintains a list of all licensed car insurance companies. So, you can check with FSCO to find a car insurance company.

Rates differ between companies, so checking different car insurance quotes Ontario can help you find the best rate. It can also be a great idea to use a car insurance broker as they can give you bespoke advice and search a range of insurance companies to get you the best deal.

Final Thoughts

Car insurance is compulsory in Ontario. So, before you hit the road with your car, you’ll need to get yourself a policy. Driving without mandatory insurance is a serious offence that can result in license suspension and a monetary fine.

Hopefully now you have a much clearer picture of why car insurance is important and what can be included within your policy. If you’re looking for an Ontario car insurance policy or simply need more advice, contact Ron Johnston Insurance today and we’ll be more than happy to help.