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There are a few assets in life that come with big-ticket price tags, and a new car is one of them. Considering how valuable your new vehicle is, it makes sense to protect yourself financially if your car is ever damaged, vandalized, or stolen. And that’s what a car insurance policy promises.

New vehicle insurance is a crucial type of policy that protects you in a variety of circumstances, whether you’re at fault for what happened or not. 

Do You Need Car Insurance?

While some types of insurance are not mandatory – like life insurance – car insurance is. Before you take your new car out on the road, you’ll need to take out an auto insurance policy. 

It’s the law, and if you are ever found without an active policy in place, you could be fined heavily as well as have your license suspended for at least 30 days. On second offences, your fines can translate to tens of thousands of dollars, and your license could be suspended for up to one year. 

Plus, you risk having your car temporarily impounded. Clearly, driving without car insurance can cost you dearly.

That said, there are varying degrees of vehicle insurance that you can choose from. Although a basic policy is required, there are more comprehensive policies that are optional but offer more coverage.

How Much Does New Vehicle Insurance Cost?

The cost of car insurance varies from one person to another based on a variety of factors, including the following:

  • Vehicle type. Luxury cars tend to be more expensive to insure because of their higher value and increased likelihood of being targeted for theft. 
  • Your location. Where you live plays a role in the premium that your auto insurance provider will charge you. For whatever reason, certain locations are more susceptible to collisions and theft than others, and insurers charge accordingly.
  • Your driving history. If you have a clean driving record, you may be charged a cheaper premium. The opposite is also true: if you have a history of collisions, tickets, and claims, your premiums will likely be higher. 
  • Mileage. The more mileage you put on your car each year, the more your premiums will cost.
  • Claims history. Making a number of claims will increase the cost of your policy.
  • Your age. Younger adults are more likely to engage in reckless behaviour on the road and therefore may be more susceptible to getting into accidents. As such, their premiums may be higher than an older, more experienced driver.
  • Your gender. Males are slightly more likely to get into incidents on the road than women, which is why their premiums are usually slightly higher. 
  • Your marital status. Premiums for married folks are generally lower than those who are single. 
  • Your credit score. In some cases, your insurance provider may take your credit score into consideration. A higher score will usually translate into a lower premium, and vice versa. 

Having said all that, the average cost of auto insurance is just over $1,100 a year, or close to $100 a month.

Who Does Auto Insurance Cover?

An auto insurance policy may cover the following parties in the event of a collision:

  • Driver
  • Passengers
  • Other individuals who are involved

In certain provinces, passengers who are injured or others who are involved in an accident and have their own policy will need to file a claim with their policy first.

What Type of Auto Insurance Policies Are There? 

There are a handful of types of auto insurance policies, one of which is mandatory and the rest are optional.

Liability Insurance

This is the most basic type of vehicle insurance and is mandatory for Canadian drivers. Liability insurance covers damages done to another person’s car or property as a result of a collision that you are involved in. It also covers injury or death to others that your vehicle caused. However, this policy does not cover the cost of repairing your own vehicle.

Collision Insurance

This is an optional policy that you want to consider if you are looking for more coverage for yourself and your vehicle. It includes compulsory liability coverage and covers the cost of repairing or replacing your car if you hit another vehicle or object. It may also provide coverage for you if you are ever involved in a collision with another driver who is not insured. 

Comprehensive Insurance

This policy is much more comprehensive than the others – hence the name – and offers the highest coverage available. It covers the cost of damage done to your car as a result of vandalism, theft, accidental damage, flood, fire, hail storms, and wind storms. It also provides compensation for key replacement, rental cars, and emergency accommodation. 

How To Compare New Vehicle Insurance Policies

When shopping around for new vehicle insurance, consider the following factors:

  • Rates. Obviously, lower rates will appear more attractive. Just be sure that you’re not compromising coverage in the name of a cheaper rate. 
  • Get a few quotes. Don’t just get one quote from an insurer and base your decision on the information you’re given. It’s much more helpful if you consider two or three quotes with the same coverage amount that you require. 
  • Look for exclusions. Find out if there are any exclusions in your car insurance quote before committing yourself. The goal is to get all the coverage you need without any unpleasant surprises if you ever have to file a claim.

How Do You Buy Car Insurance?

To buy an auto insurance policy, follow these steps:

Gather the necessary documentation. 

  • Make, model, and year of your car
  • Vehicle identification number (VIN)
  • Your driver’s license
  • Recent traffic tickets
  • Past claims (if applicable)
  • Existing policy (if applicable)

Confirm any other drivers on the policy. If your spouse or child with a G2 license will be driving the vehicle, you will need to confirm them as secondary drivers. 

Choose your policy. If you are looking to add on to your basic liability insurance policy – such as with collision or comprehensive coverage – you’ll need to let the insurance agent know so they can set up your policy accordingly.

Choose your deductible. You can choose the deductible to pay before the policy kicks in. A higher deductible usually means your premiums will be lower, while a lower deductible will translate into higher premiums. 

How To Get The Cheapest Rate

Why pay more for new vehicle insurance than necessary? Luckily, there are some ways to snag a lower rate on your policy:

Look For Discounts

Most insurance providers offer some form of discount in a variety of settings. For instance, they may offer discounts to seniors, those who belong to certain organizations, and those who have a clean driving record with no claims.

Bundle Your Insurance Policies

If you are looking for home or life insurance in addition to auto insurance, consider taking all of these policies out with the same insurance provider, who will likely offer a discount for bundling insurance products.

Choose A Higher Deductible

A deductible is only payable when you file a claim. Instead, the premiums are required to be paid on a regular basis. By choosing a higher deductible, your premiums will be lower, which can save you money over the long run if you don’t file any claims along the way. 

Choose The Right Coverage

While there are more comprehensive policies that can offer more protection, they come at a price. If you don’t think you need all the bells and whistles, then perhaps a basic policy may be all that you need, which will cost less. 

For instance, you may not need comprehensive coverage if you drive an old car. If your vehicle is ever totalled or severely damaged in an accident, your payout might not be that much because of its lower value. In this case, a basic liability policy should suffice. 

Drive A Cheaper Car

Luxury cars tend to be more expensive to insure, as are older vehicles. You may be able to secure lower premiums by driving a newer, cheaper vehicle. 

Keep A Clean Driving Record

Do your best to drive responsibly and avoid putting yourself in a position to get pulled over and ticketed. A driving record that’s full of infractions will cost you more in higher premiums. 

Enroll In A Defensive Driving Course

The majority of insurance providers offer discounts to drivers who have taken a defensive driving course. This can be especially helpful if you have a tainted driving record. 

Combine Your Policy With That Of Your Spouse

While the overall rate may be higher when you combine policies, the price per person will be lower. 

Keep Your Credit Score Healthy

Most insurers look at your credit rating when determining how much to charge you in premiums. Studies have shown that those with higher credit scores are less likely to file a claim. 

Check out how gender affects your car insurance rates

Final Thoughts

Even though car insurance is mandatory, it’s extremely useful and can provide you with peace of mind if you’re ever involved in a car accident. Imagine the sky-high costs that could come with medical bills, repairs to all vehicles, and legal fees. Without insurance, you would be on the hook for paying it all out of pocket. Just be sure that wherever policy you take out, it fits your budget and provides adequate coverage.

Priyanka Correia, BComm avatar on Loans Canada
Priyanka Correia, BComm

Priyanka Correia is a Marketing Coordinator and personal finance expert at Loans Canada. Priyanka completed her Bachelor's degree in Marketing at Concordia University and has published work that has been mentioned in various news media. She is passionate about money management and educating Canadian consumers about how to take control of their financial lives.

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