Congratulations on buying your first new car! Car ownership can provide a new sense of freedom, opening the door to road trips, drive-in theatre dates or making short rides to the grocery store more pleasant. In addition, owning a car unties you from borrowing someone else’s vehicle, relying on your parents, or needing to take public transit. This article will explore some first car insurance tips to ensure you hit the road confident and protected.
As Uncle Ben said to Peter Parker: “With great power comes great responsibility.” First-time car owners in Alberta and Ontario must purchase their provinces’ legally required auto insurance. It’s best to work with an insurance expert to design a coverage package that protects you, your passengers, and the money you spent on your new wheels.
Frequently Asked Questions
First Car Insurance Tips
Which type of insurance is ideal for new drivers?
In Ontario and Alberta, the law states that you need to maintain at least a minimum amount of coverage on your vehicle. The mandatory coverages you need are:
Statutory Accident Benefits
Statutory accident benefits coverage applies if the driver or passenger is injured in an accident. There are five main components to accident benefits coverage in Ontario.
Medical, rehab and attendant care: This steps in to pay any medical expenses you may have that aren’t covered by your provincial health insurance. Common expenses include rehab, massage therapy or devices such as a wheelchair or walker.
Caregiver benefits: If the injured driver or passenger provides full-time support and care for their family, including children and older relatives, you can receive money to pay for a caregiver.
Income replacement coverage: If a driver or passenger cannot work because of an injury, income replacement coverage will help pay a portion of your usual salary.
Housekeeping and home maintenance: If you suffer an injury from an auto accident and cannot clean and maintain your home, this will step in to pay for help.
Death and funeral benefits: If the driver or passenger were to die in a car accident, the policy would pay a set limit to remaining dependants and a portion of the funeral costs.
Third-Party Liability Coverage
Third-party liability coverage pays for claims made by other people for injury or property damage caused by an accident for which you or someone driving your vehicle was responsible. This coverage will pay the cost of defending you in the lawsuit, as well as pay the price of settling those claims.
Direct Compensation – Property Damage Coverage (DCPD)
Unlike third-party liability coverage, DCPD covers damage to your vehicle or its contents if you are involved in an accident caused by someone else. However, there are limitations to this coverage, so be sure to ask your insurance professional for more information.
Uninsured Auto Coverage
Some drivers will be involved in an accident, and the other motorist doesn’t have insurance. You may also be the victim of a hit-and-run driver. Uninsured auto coverage protects the driver, passengers and pedestrians in the event of injury or death. Uninsured auto coverage also pays to repair or replace your vehicle if a known uninsured driver damages it (i.e. not a hit and run).
There are also some optional coverages that you may want to consider to protect your new car investment. These include:
Collision and Upset Coverage
As mentioned above, if someone else is responsible for an accident that damages your vehicle, you may be covered by direct compensation – property damage. Still, DCPD coverage does not cover any damage if you cause the accident. Collision insurance pays to repair or replace your car if you have an at-fault accident, whether a single-car accident or a multi-vehicle collision.
Comprehensive (Comp) Coverage
Many things that can happen to your car not covered by the coverages above are protected when you purchase optional comprehensive coverage. For example, Comp insurance protects you from damage when your vehicle is parked. Comprehensive coverage includes theft, vandalism, and damage from falling or flying items, such as falling ice, hail, or tree limbs.
First Car Insurance Tips
What information do I need to insure my car?
You will need to gather some information to buy your first car insurance. To receive a quote and purchase an insurance policy, you should have the following:
- Year, make, model
- Vehicle information number (VIN)
- Current mileage
- The address where you park/store your vehicle
- How you will use the car (personal use, business use, commute to work, etc.)
- How many miles you expect to drive within the next year
Information For Each Driver
- Date of birth
- Driver’s license number
- Any tickets within the past three years (know that insurance companies will check with the government to confirm)
- Any accidents within the past six years (insurers will also check this)
- Will this person be the primary driver or a secondary driver of the vehicle
- Whether you had previous insurance, such as on your parent’s car and the policy number)
With this information, you should be able to get an accurate insurance quote and, if you’re happy with it, have a policy issued.
First Car Insurance Tips
Why is first-time driver auto insurance so expensive?
Insurance companies base their premiums on risk. For example, years of data show that insuring first-time drivers – especially young males – is riskier than insuring older, more experienced drivers. The 2017 National Household Travel Survey shows teen male drivers 16–19 years old are almost 300% more likely to be involved in a fatal car crash than drivers between 30–59.
Not to pick on teen boys, but CDC research shows that the death rate from accidents for male drivers 16–19 is more than twice as high as that for female drivers the same age. Here are some of the contributing factors to these trends:
Inexperience: Teens and all new drivers are less likely to identify dangerous situations, making them more likely to make critical driving errors.
Peer pressure: When it comes to driving, the research shows that boys are more susceptible to peer pressure than females. For 16–17-year-old guys, having one passenger less than 21 in the car is associated with a 44% higher risk of being killed in a crash, and having two passengers doubled the risk of a deadly accident.
Seatbelts: In half of all fatal accidents involving young men, more than half of those killed were not wearing seatbelts.
Distractions: Teens can be easily distracted. One study found that 40% of teen boys had used their phones to text or email while driving in the past 30 days.
Speeding: Young men are more than twice as likely to speed as women of the same age.
How much does new driver insurance cost in Canada?
The section above shows why new drivers, especially younger drivers, pay more for car insurance than experienced drivers. Still, how much does new driver insurance cost in Canada?
Every driver and vehicle is unique. Where you live, driving history, how many tickets you’ve received, and your vehicle type are just a few factors affecting your rate. However, new drivers can expect to pay between $1,500 and $7,000 yearly. In addition, younger new drivers tend to pay more than older new drivers.
That premium will drop yearly, providing that you drive safely, don’t receive any traffic tickets and aren’t involved in at-fault car accidents.
How much insurance do I need?
As we mentioned above, you must have minimum insurance coverage by law. Still, these minimum limits might not be enough to pay for your medical expenses and liability exposures. Therefore, we highly recommend you speak with an insurance professional to discuss the options for increasing some or all these minimums to meet your particular needs.
If your vehicle is expensive, you may seriously want to consider adding collision coverage and comprehensive coverage. In addition, if you lease your car or use a bank loan to pay for the vehicle, your contract may require you to have these coverages.
First Car Insurance Tips
What is the best way to reduce costs while buying auto insurance?
There are many ways to reduce costs while buying auto insurance. A few of these include:
Invest in driver training: If you complete a driver’s ed course with a school registered with the province, you can save 20% to 30% on your insurance as a new driver.
Consider deductibles: Generally speaking, the higher your deductible, the lower your premium. However, this also means you’ll need to pay more out of pocket if you need to make a claim.
Drive safely: If you follow the rules of the road and avoid traffic violations and at-fault accidents, you can expect your insurance to go down every year for the first five years. However, your insurance will likely increase if you’re convicted of a traffic violation or experience an at-fault accident.
Take advantage of Usage-based insurance: Several Canadian companies offer usage-based insurance. Essentially, you install an app or device on your vehicle, and your insurance will go down if you drive safely. However, some companies will charge you a penalty if they discover you aren’t driving safely.
For more information, you can find an extensive list of insurance discounts available in this post.