Why auto insurance is mandatory in Canada

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In Ontario, auto insurance became mandatory in 1990 when Compulsory Motor Insurance Act has been presented. If a person chooses 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.

Compulsory versus optional car insurance

In Canada, provincial and territorial agencies govern auto insurance rates and regulations. However, certain coverages are required nationwide. For instance:

  • Liability insurance — This covers losses, such as injury or death, that your vehicle causes to other people, as well as damage to their property. However, it does not cover the cost of repairing your own vehicle.

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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.
  • Back to back insurance — This covers the cost of repairing or replacing your vehicle due to damage or loss other than a collision, such as vandalism, fire or theft.

Drivers can also choose to pay for insurance endorsements or “top-ups”. These can include things like loss of use coverage, if you need to rent a car after a collision, and accident forgivenesswhich will prevent your premium from increasing after your first at-fault claim.

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Why is auto insurance compulsory in Canada?

Compulsory car insurance is designed as financial protection for anyone involved in a car accident. Some costs, such as medical and rehabilitation services, can be prohibitive, and insurance provides a cushion for people who need these services but otherwise could not afford them. In addition, compulsory insurance compensates collision victims.

Although each province has different rules and regulations regarding mandatory insurance, most have a mandatory minimum threshold for liability insurance of $200,000, although many experts recommend $500,000 to $1 million. . Adding endorsements to the bare minimum may increase costs depending on your insurance provider, but can protect you and reduce costs in the long run.

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