Buying a car any time is an exciting experience, and when it’s brand new, there’s that much more thrill. Dealers will, of course, make the process as effortless as possible for you. They can help arrange financing and various purchase options and they will take care of registering and licensing the car for you too. All you need to do is arrange auto insurance for the new vehicle.
The insurance process in Canada is similar in all provinces and territories. Auto insurance must be in place on all vehicles using public roads, so proof of insurance is a requirement for vehicle licensing. You don’t need to own the vehicle yet to insure it, and your agent or broker will guide you through the process so that you can share insurance information with the new car dealer. You’ll be on the road in no time.
There are, however, a few special circumstances that may apply to new vehicles. Read about those here so they won’t be a surprise when you visit the dealer.
Minimum Mandatory Car Insurance Policies
Each provincial and territorial government has minimum amounts of insurance that any vehicle must carry. While amounts and details vary across the country, the big players in mandatory coverage are third party liability insurance and statutory accident benefits. Depending on the province, there may also be sections that apply to direct compensation – amounts your own insurance company may pay directly to you under certain circumstances – and uninsured/unidentified motorist coverage, when the other driver’s insurance doesn’t cover your loss when they’re at fault, or when they leave the scene of an accident.
Every car must meet minimum standards of insurance for your home province. In practice, most drivers opt for much more liability coverage than required, since serious accidents can cost much more than the minimum to settle.
Since financing is often necessary for a new car purchase, you may be required to carry insurance above and beyond the provincial amounts.
Auto Insurance Requirements for Financed Vehicles
While it’s your name on the registration and insurance slips, in the early days of car ownership, a lending agency may effectively be the owner of your car. They front the money for the purchase, and you pay them back, month by month.
This gives the lender a vested interest in your vehicle. Should something happen and the car is destroyed, for example, if the vehicle isn’t adequately insured, its owner/driver may have trouble paying both monthly loan amounts along with expensive repairs.
Therefore, it’s not uncommon for optional insurance as a condition of the new car loan. This takes the form of collision and comprehensive coverage. These additional policy endorsements ensure the help of an insurance company in case the new car suffers damage or loss. The driver doesn’t bear the entire weight of repairs or replacement and the financing company’s investment is protected.
Drivers can also add additional endorsements to new cars to protect themselves over the rapid depreciation of new cars experience. This ensures that, should a new car be damaged, it will be repaired or replaced to new car condition and its replacement cost, rather than its actual cost value – also known as ACV – which may be substantially less.