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Car Insurance 101 – What You Need to Know

What is car insurance? What if I have a used car? Or I want to drive an Uber? Whether you’re new to insurance or want to know a little bit more beyond the basics, you’ve come to the right place. Fasten your seatbelt and get ready to learn everything you need to know about car insurance so you can make confident, informed decisions when it comes to covering your wheels.

Do I need car insurance?

100%. No questions asked. In fact, you can’t even drive your new or used car home without it. Not only does it protect you from the cost of paying out of pocket in the event of an accident, damage to your vehicle or damage/injuries caused by yourself or your vehicle for which you’d be held liable, it’s the law. This is also the case with rented vehicles and vehicles for hire.

Do I need insurance to rent a car?

Yes. Rental companies typically offer basic protection on their vehicles if you need to purchase it, however there are exclusions so be sure to review their policy before driving off the lot. Also be sure to check the credit card you’ll be using to pay for the rental, as they often provide basic protection automatically when you rent a car (so no need to purchase it from the rental company).

Do I need insurance to drive an UBER?

Absolutely. While most ridesharing companies offer insurance, all drivers are required by law to have their own personal auto insurance policy.

Do I need insurance to rent a UHAUL?

You sure do. Though UHAUL doesn’t require proof of insurance, you’ll be on the hook for any damages so it’s kind of a no-brainer. They do offer complete line of insurance services depending on your needs so you can purchase it directly from them.

What about temporary car insurance? Can you buy it?

You can. If you find yourself in the unique position of requiring insurance for a short amount of time, buying temporary insurance allows drivers to pay-as-they-go with coverage available anywhere from one day to six months.

What are the different types of car insurance coverages?

There are two categories of coverages in your insurance policy: mandatory and optional. What’s considered mandatory and optional features, however, can differ wildly from province to province, so be sure to check with your provider so you know what you’re working with.

Mandatory Types

  • Third-party liability - This covers you, and anyone else given permission to drive your car, for damages caused to a third party or their property (these include claims for property damage, injury or death).
  • Accident benefits - This provides compensation if you, your passengers, or a pedestrian suffers an injury due to a car accident, no matter who is at fault.
  • Uninsured motorist – This ensures that your medical bills will be paid if you and your passengers sustain injuries from an accident involving an insurance-less driver.

Optional Types

  • Collision – The most commonly considered add-on, collision insurance helps cover the costs of replacements or repairs to your vehicle, as well as the other one involved, should you get into an accident. Though you just have to pay a deductible (making it a smart option for new car owners), it’s important to note that you set your deductible amount when purchasing your policy. A higher deductible can help you save on your overall insurance, but it means you’ll be shelling out more should an accident occur. Making a claim can also have a considerable impact on your premium, especially if you’re at fault.
  • Comprehensive – This protects your car when you’re not behind the wheel – if it gets stolen, vandalized, or damaged in a storm, for instance.

Public versus private car insurance. What’s the difference?

In Canada, there are two different insurance systems: public and private. Basically, the difference is that a public system is run by the government, while a private system is run by for-profit organizations. Interestingly enough, where you live determines which one you must use. Let’s take a closer look.

  • British Columbia, Saskatchewan, and Manitoba run on government-owned and operated insurance systems.
  • In Quebec, the government manages auto insurance for bodily injuries while private insurers take care of damage to the vehicle.
  • In Ontario, Alberta, Nova Scotia, New Brunswick. P.E.I., Newfoundland and Labrador, Nunavut, Yukon and Northwest Territories it’s a private system all the way.

How to go about getting private car insurance

So, where can you go to buy a private car insurance policy? There are three ways to look at it:

  • Bank/Credit Union – A lot of financial institutions can offer insurance plans backed by larger insurance companies. If you go this route, you’ll work with someone directly from that institution and they will only be selling their own products and nothing else.
  • Insurance Company Direct – Some companies sell their products right to the customer. Though it is an independent insurance agent you’ll be working with, they too typically only sell one insurance company’s products.
  • Broker – If you’re looking to comparison shop, a broker is the ticket. They sell on behalf of multiple insurance companies, kind of like a mortgage broker.

And here are a couple of other how-tos:

How to get insurance for a used car

Buying used car insurance is pretty much the same as buying new car insurance. The only difference is, the condition of the vehicle (or how much wear and tear it’s been through) and how old it is will be factors in determining your rate (good news, it’s typically cheaper than new car insurance).

How to get insurance online

Thanks to companies like Sonnet, it’s never been easier to get auto insurance online. You simply answer a few simple questions, customize your coverage, purchase it securely and you’re off to the races. Another way to use the internet to your advantage is to check out comparison sites like There you can compare rates for all kinds of trustworthy car insurance companies so you can choose what works best for you.

What do you need to buy car insurance?

Time to get your documents all lined up. There are five things you need to provide insurance companies in order to get the ball rolling.

  • Your driver’s license
  • Your current insurance company and policy number (if you have one)
  • Your driving history within the last 3 years (only traffic violations, not parking tickets)
  • Any claims you made within the last 8 years
  • Your vehicle’s info –make, model, year (get this information by decoding your VIN if you don’t have it on hand)

What do I need in order to renew my car insurance?

Whether you’ve chosen a broker, a company or your banking institution, the car insurance renewal process goes a little something like this:

  1. You receive a notice in the mail 30-60 days prior to your renewal date.
  2. You look over the terms and details of your policy to see if you want to make any changes for the new year.
  3. You go ahead and renew, and then either pay the full amount upfront or continue on with your current payment schedule.

Common insurance terms, defined

  • Deductible – This refers to the amount that you will be responsible to pay in the event of a claim.
  • Liability – This covers the amount that an insured individual becomes legally obligated to pay due to bodily injuries, damage or financial losses caused to others.
  • Premium/Annual Premium – This is the amount you would pay for a specific type of insurance coverage for a specified policy term.
  • Domestic – This type of coverage takes care of your normal day-to-day driving, like shopping, driving to work or visiting family.
  • Comprehensive – This is optional coverage protects your car from damage caused by things other than an accident, like a tree falling on your car during a storm.
  • Paid-in-Full – With this type of policy, your insurance rate is locked in for period of time, like 6 months or a year, and paid upfront (so you don’t have to think about it).
  • Excess – This refers to the amount you have to pay upfront to get a claim started (it’s refunded to you if you are not at fault).
  • Collision – This type of coverage protects your car if you are at fault, or even partially at fault, in an accident.
  • Without Prejudice – This happens when two parties are in dispute and one makes a settlement offer to the other without accepting liability for the accident. It’s usually done to reduce the claim (or eliminate it altogether) so premiums don’t go up.
  • Underwriting – This is the process whereby a company evaluates the risk of insuring a driver and their vehicle.
  • Telematics – This is a system that is used to collect data about your driving habits. Insurance companies may use it to customize your insurance to fit your pattern of driving by monitoring your real-time driving behaviours.

And that about covers it. Everything you need to know to get started on your car insurance journey. Remember, knowledge is power when it comes to getting the right car insurance. To learn more about how to make sure you’re getting the right solution that suits your needs and your budget, read how to get the best car insurance.

This article is for informational purposes only and isn’t to be relied upon as a professional advice.