Why auto insurance is mandatory in Canada


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In Ontario, car insurance became mandatory in 1990 when the Compulsory Automobile Insurance Act was introduced. Should people choose to drive without insurance, a maximum fine for a first conviction is set at $25,000 and a maximum fine of $50,000 is set for a subsequent conviction. 

Mandatory versus optional auto insurance coverage

In Canada, provincial and territorial bodies govern auto insurance rates and regulations. However, certain coverages are required countrywide. For example: 

  • Third-party liability insurance — This covers losses, such as injury or death, that your vehicle causes to other people, as well as damage to their property. It does not cover the cost of repairs to your own vehicle, however. 

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  • Accident benefits — This covers the costs of your own medical expenses and loss of income when you are injured in an accident.

Other forms of auto insurance that are optional but not mandatory include: 

  • Collision insurance — This covers the cost of repairing or replacing your vehicle if you hit another vehicle or object. 
  • Comprehensive insurance — This covers the cost of repairing or replacing your vehicle due to other types of damage or loss than a collision, such as vandalism, fire, or theft. 

Drivers can also opt to pay for insurance endorsements or “add-ons.” These can include things like loss-of-use coverage, should you need to rent a car after a collision, and accident forgiveness, which will keep your premium from increasing after your first at-fault claim. 

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Why is auto insurance mandatory in Canada?

Mandatory auto insurance is meant as a financial protector for anyone involved in a car accident. Certain costs, like medical and rehabilitation services, can be prohibitively expensive, and insurance provides a cushion for people who need those services but may otherwise not be able to afford it. Also, mandatory insurance allows for compensation to be provided to collision victims. 

While each province has varying rules and regulations about mandatory insurance, most have a mandatory minimum third-party liability insurance threshold of $200,000, though many experts recommend $500,000 to $1 million. Adding endorsements to the bare minimums may increase costs depending on your insurance provider but may protect you and save costs in the long run. 

LowestRates.ca is a free and independent rate comparison website that allows Canadians to compare rates for various financial products, like auto and home insurance, mortgages, and credit cards.

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