Types of Auto Insurance in Canada: What Each One Covers and How to Choose

All Canadians who operate a vehicle are required by law to have a basic car insurance policy, regardless of how often they’re behind the wheel or what they use their car for. However, what’s unique about Canadian auto insurance is that each province and territory uses a mix of public, private and hybrid car insurance systems, which govern what coverage is mandatory and optional, premium costs and who offers coverage:

Public car insurance system

In a public car insurance system, the provincial government is responsible for issuing car insurance coverage to motorists. Provinces like British Columbia, Manitoba and Saskatchewan operate under this framework and require drivers to purchase mandatory coverage and optional coverage through a single crown corporation, like the Insurance Corporation of British Columbia (ICBC).

Private car insurance system

In a private auto insurance system, car insurance coverage is sold by private insurance companies, meaning drivers have the option of where they wish to purchase coverage from. This model is used in Ontario, Alberta, Nova Scotia, New Brunswick, Newfoundland and Labrador, P.E.I., Yukon, the Northwest Territories and Nunavut. Drivers buy insurance through private companies or brokers and have the option of shopping around for a better rate.

Hybrid car insurance system

A hybrid system combines both private and public frameworks. For example, third-party liability coverage is provided through a public plan, while optional coverages for vehicle damage can be purchased through private providers. As of 2026, only Quebec operates under a hybrid system.

Ultimately, these different frameworks impact how pricing is determined, how claims are handled and what policies are considered mandatory vs. optional. However, what you’ll notice is that most mandatory coverages are similar across provinces and territories, despite their differences in insurance systems.

Mandatory coverages: what every driver needs

While provinces and territories have different insurance minimums, here’s a closer look at the mandatory insurance coverage you’ll need to purchase:

Third-party liability coverage

Third-party liability coverage provides the policyholder with legal protection if they injure someone else or cause property damage to another person’s property while operating their vehicle.

It covers all medical costs associated with bodily injuries, funeral expenses, repairs of damaged vehicles or property and legal fees up to your policy limit, regardless of whether you are found legally responsible or not. Provincial coverage minimums range between $200,000 and $1 million, but most drivers opt for $1 to $2 million voluntarily to ensure their assets are protected.

Example: If you rear-end another driver and injure them, liability coverage will pay for your legal expenses and their medical expenses.

Accident benefits

Accident benefits coverage can help pay for any loss of income or medical bills that may not be covered by health insurance if you, a pedestrian, other drivers or passengers in your vehicle suffer a bodily injury as a result of a car accident. Accident benefits include coverage for things like prescription medications, physical therapy, rehabilitation, funeral benefits and lost wages, regardless of who is found at fault for the collision.

Accident benefits coverage varies widely between provinces. For example, Ontario offers these benefits privately, with options to top up coverage, while Quebec’s benefits are fully funded publicly.

Example: You are T-boned by another driver at an intersection and suffer a bodily injury that requires you to take 7 weeks off from work. Your wages and medical expenses will be covered by your insurance company.

Uninsured/underinsured motorist

If you were to get into a car accident with another driver who is either uninsured or underinsured, uninsured motorist car insurance coverage would protect you and any passengers in your vehicle by paying for repairs or replacements of your own vehicle, lost wages, medical bills and more. Uninsured motorist insurance will also provide coverage if the other driver flees the scene of the accident.

Example: Your vehicle is damaged by a hit-and-run driver while parked in a public parking lot. This coverage protects you from paying for the damage to your vehicle out of your own pocket.

Direct compensation property damage (DCPD)

Direct compensation property damage coverage protects an insured vehicle and its contents against property damage, as long as you are found not the at-fault driver for the damage that occurred. Your own insurer will cover the damages, rather than the other drivers. DCPD is mandatory in Quebec, Nova Scotia, New Brunswick, Newfoundland and Labrador and PEI. As of January 1, 2024, drivers can opt out of DCPD using OPCF-49 (Agreement Not to Recover).

Optional auto insurance coverage

Additional coverage options available for drivers to purchase across provinces include:

Collision coverage

Collision coverage provides the insured vehicle and motorists’ protection in the event you get into an accident with another car or object on the road, no matter who or what is found to be at fault for the accident. A key difference between collision coverage and DCPD is:

• At-fault or single-vehicle crash: collision coverage.

• Not at fault for damage to your vehicle: DCPD.

Example: Your vehicle slips on an icy road and hits a guardrail. Your collision car insurance policy will pay for repairs, minus your deductible.

Comprehensive coverage (theft, glass, weather, animals)

Comprehensive coverage will offer the policyholder protection against various non-collision insurance risks, including theft, vandalism, fire, broken glass, flying/falling objects, animal impacts and severe weather conditions. Comprehensive auto insurance is often required for leased and financed vehicles. As severe weather-related claims expenses in Canada reached $8.5 billion in 2024 alone, opting for this additional coverage is highly recommended.

All perils and specified perils

All-perils auto insurance combines collision and comprehensive coverage and offers protection against a wide range of perils, excluding those specifically not mentioned in your policy. Specified perils protects you against only perils named in your policy and makes sense if you’re driving an older vehicle where full-coverage options don’t make sense financially.

Endorsement and add-ons

Endorsements and additional coverages allow drivers to customize standard auto policies for more personalized protection. Take a look:

• SEF 43/OPCF 43: Compensates you for the full value of a new vehicle if it’s written off (waiver of depreciation).

• SEF 44/OPCF 44: Increases compensation if you’re hit by an underinsured driver (family protection)

• Accident forgiveness (varies by province): Accident forgiveness prevents car insurance premium increase following your first at-fault accident.

• OPCF 27/SEF 27: Provides liability coverage when driving vehicles you don’t own, including rental cars and borrowed vehicles.

• OPCF 20/SEF 20: Covers damage to rental cars (rental vehicle coverage).

• OPCF 20: Pays for a rental vehicle or alternative transportation costs while your car is being repaired after a covered claim (loss of use).

• Roadside assistance: Roadside assistance covers towing, fuel top-ups, tire changes, lockouts and other roadside assistance in emergency cases.

Note that eligibility rules and acronyms vary by province. Confirm details with your insurance company or broker.

Specialty and modern options (UBI/telematics, GAP/replacement, ride share, classic and seasonal)

Here are some options worth looking into:

• UBI/Telematics: The programs reward good driving habits like smooth braking, speed control, time-of-day travelled, offering savings on insurance rates.
  Gap insurance: Covers your remaining loan/lease balance if your car is written off following a total loss when you still owe money.

• Replacement cost value: Replaces your vehicle with a brand-new car of similar value, without factoring in depreciation at the time of the loss.

• Ride share endorsements (Uber/Lyft): Required for part-time drivers as personal car insurance does not cover use of vehicle for business purposes.

• Classic car insurance: Provides the agreed value policies for classic cars.

• Seasonal insurance: Coverage for motorcycles, RVs and collector vehicles stored during the winter season.

Provincial differences (quick snapshot)

Here's how auto insurance coverage varies by province:

What affects cost (factors you control)

Your car insurance premiums are influenced by factors you can and cannot change that determine your overall risk profile. The higher your risk profile, the higher your insurance rates will be and vice versa:

• Where you live: Urban areas tend to have higher premiums compared to those who live in rural areas due to crime rates and traffic flow.

• Driving record: Multiple claims, at-fault accidents, traffic violations and convictions increase your premiums. Safe driving results in lower rates over time.

• Make and model of vehicle: Luxury cars and sports cars have higher repair costs and a greater likelihood of theft, which insurance companies will see as being at more risk than average cars with security features.

• Annual mileage: The more you drive, the higher the chance you’ll be involved in an accident, increasing your rates.

• Deductible: The higher your deductible, the lower your rates and vice versa.

Ways to save

Here's how you can save money on your auto insurance:

• Bundle home and auto insurance policies.

• Increase deductible amounts.

• Maintain a clean driving record.

• Install winter tires and anti-theft devices.

• Pay your premium upfront.

• Use telematics or usage-based insurance programs.

Contact BrokerLink today

BrokerLink is a leading brokerage in Canada with locations across the country. We work closely with customers to ensure they get car insurance policies tailored to their unique needs and budget.

If we're in your neighbourhood, come on into one of our offices to work with an experienced broker in person. If you can't make it in, feel free to give us a call during regular business hours. Alternatively, you can use our online auto insurance quote tool to get competitive insurance quotes from the comfort of your own home or wherever you may be!

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