The need for car insurance for a short period of time pops up occasionally. Probably the most common situation is when car ownership is being transferred and a short-term license plate is in use. Generally, insurance coverage will match the term of the license. However, car insurance is provincially regulated, so each province has its own rules and regulations.
Insurance for car rentals is another situation where short-term coverage is required. This is most often purchased from the rental agency itself or provided as a perk through credit card companies or under an employer’s fleet insurance.
While temporary insurance is commonly available through most of Canada, it’s not in the country’s most populous province. Ontario’s insurance regulations are the most rigid in Canada and its insurance rates are the highest. Some companies offer six-month policies, but 12-month terms are, by far, the most common. It’s important to note that this doesn’t affect car rentals.
Provincial Insurance Requirements
Any car on the road must be insured to the standards of the province in which it’s registered. This is universal across Canada. In most cases, you need to present proof of insurance before you can register your vehicle and buy license plates.
Common Temporary Insurance Products
While most car insurance is geared to 12-month terms, 6-month policies are offered in all provinces, though not necessarily by all insurance companies. Temporary licences are typically issued for periods of 10 or 15 days, depending on your location and provinces that have temporary insurance products will likely match the duration of the license.
Seasonal Vehicles and Other Situations
High-value and collectible vehicles may be stored over the winter to preserve their value. In cases like that, six-month policies might work for some. In other cases, a used car may be purchased for a hobbyist to repair or customize in a home shop. Insurance may only be needed to drive the car from the seller’s location to the shop, and then the vehicle will be off the road for an extended period of time.
Coping in Ontario’s Insurance Environment
While Ontario’s situation is harder to work than, say British Columbia which offers a 15-day temporary operation permit, you do have alternatives to control costs.
Since you’re stuck buying at least six months’ worth of insurance, you could buy it and cancel, once your car is parked in your shop. However, most policies have cancellation penalties that essentially negate the advantage of doing this.
You can, though, alter your policy without cancelling it. Car insurance isn’t simply one product. It’s comprised of different subsections. You can make changes to these to suit your needs. Using the example of the hobbyist’s used car. He obtains a temporary permit using a 12-month insurance policy. To keep costs down, he chose high deductibles for each section as well as the minimum coverage allowed by Ontario regulations. These choices keep his premiums down as much as possible.
In the temporary registration period, he drives the car home from the seller’s location and drives the vehicle around a bit to assess its condition and the work he has to do. By the end of the 10-day period, the car is on blocks in his shop, no longer driven.
On Day 11, the hobbyist calls his insurance agent and cancels accident benefits and collision coverage on his policy, since he no longer requires these when his car is not driven. He maintains comprehensive coverage for two reasons. The first is that his car remains protected in case it’s stolen from his garage or destroyed if, for example, the garage catches fire. Secondly, though, he maintains his 12-month policy, though with reduced rates, because he also has reduced coverage. He doesn’t invoke any cancellation fees. Once his car is ready for the road again, he can re-instate full coverage and re-register his car for road use.