Should you opt out of add-on car insurance?

For this week’s Top Story, we’re looking at how the minimum coverage won’t likely be enough auto insurance for Canadian drivers. In Ontario? Check out the new auto insurance reform changes how you buy a policy.

You’re commuting to work when you’re rear-ended on the highway. Or maybe you’re parked at the mall and someone sideswipes your car. Even worse: You skid out on black ice and cause a multi-car pileup. While car insurance is a legal requirement across Canada, simply having coverage doesn’t mean you have the right coverage.

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Between mandatory minimums and a menu of optional add-ons and endorsements, navigating the Canadian insurance market can leave even experienced drivers financially vulnerable. Because there is no one-size-fits-all approach, we’re looking under the hood of Canadian car insurance coverage, from the mandatory to the optional, to help you hit the road with peace of mind.

Canadian car insurance systems explained

While car insurance is mandatory for drivers across Canada, each province and territory independently regulates its own system. And that’s either public, private or a hybrid. 

• Public: administered by government-owned insurers, in British Columbia, Saskatchewan and Manitoba
• Hybrid: used in Quebec where bodily injury coverage is purchased from a public insurer and vehicle/property damage (civil liability) coverage is sourced from a private insurer
• Private: in the rest of Canada insurance is offered entirely by private companies

Mandatory coverage typically includes liability coverage, accident benefits, direct compensation and uninsured automobile coverage, though this varies by province.

While the particulars depend on where you live, here’s a breakdown of the core components:

• Third-party liability: covers the medical, rehabilitation, vehicle repair, and property damage costs of others in a collision you cause, plus legal fees to defend you if you are sued
• Accident benefits: pays for any medical care, rehabilitation and attendant care benefits needed after an accident. The scope of this coverage may vary by province—Ontario, for example, recently changed what is included
• Uninsured motorist coverage: offers compensation if you are injured or killed by an uninsured or unidentified driver
• Direct compensation for property damage (DCPD): where your own insurance company pays to repair your vehicle if you are not at fault for an accident involving another insured driver, sparing you from having to deal with the other driver’s insurance company

Canadian auto insurance requirements

To see how these rules apply where you live, the mandatory coverage types and minimums by province are outlined below:

Source: Insurance Bureau of Canada (As of July 2026. Subject to change)

Note: Alberta will have changes to automobile insurance in January 2027, moving to a no-fault model.

Why the mandatory minimum may not be enough

It may be tempting to default to the provincial minimums to save money. For example, the mandatory minimum coverage for third-party liability is $200,000 if you live in Ontario. But only buying the minimum means you run significant financial risk.

“Provincial minimum coverage is designed to meet the legal requirement to drive, not necessarily to fully protect your financial future,” says Aaron Blackwood, senior sales manager at Mitch Insurance. “In many cases, relying on the minimum limits can leave drivers significantly underinsured if they’re involved in a serious accident.”

For example, many insurance professionals recommend carrying at least $2 million in liability coverage, well above provincial minimums. If you cause an accident resulting in $800,000 in damages but only carry the $200,000 minimum, you’re personally on the hook for the $600,000 shortfall, plus legal fees. And depending on your insurance profile, the premium difference could be hundreds for millions in coverage.

“The cost difference of the additional coverage is often relatively small compared to the protection it provides if you’re found responsible for an accident involving serious injuries or significant property damage,” says Blackwood.

Mandatory versus optional coverage: optional doesn’t mean unnecessary

Beyond mandatory requirements, standard coverage extends protection to your vehicle in case of an accident. While this coverage is legally optional (depending on your province), it is typically required by lenders if you lease or finance your vehicle. Without it, you could face thousands in out-of-pocket expenses if you get into an accident.

“One of the biggest misconceptions is that if you ‘have insurance,’ you are automatically fully protected. But coverage varies by province and by policy, and optional coverage does not necessarily mean unnecessary coverage,” says Elliott Silverstein, director of government relations, CAA Insurance. “Something optional may still be valuable or important depending on your current lifestyle, family situation or future needs.”

Standard optional coverages include:

• Collision or upset: damage from hitting another vehicle or object, like a guardrail
• Comprehensive: non-collision damage, such as vandalism or a tree falling on your car
• All perils: combines collision or upset and comprehensive coverages for maximum protection
• Specified perils: coverage limited to named risks, such as flood, fire, hail or theft

Depending on your province, you can further customize your coverage with endorsements. Popular options include loss of use to cover alternate transportation during repairs, and accident forgiveness to protect your premium from rising after your first at-fault claim.

“The best advice is to focus less on whether a coverage is mandatory or optional, and more on what financial risk you’re comfortable assuming,” says Blackwood, using the example of collision and comprehensive coverage–optional in many situations, but these provide protection for damage to your vehicle from accidents, theft, vandalism, weather events or falling objects. “Ask yourself, ‘If this happened tomorrow, could I afford to pay for it out of pocket?’ If the answer is no, it’s worth discussing that coverage with your insurance broker.” 

How to decide on the coverage you need

“We see many people focusing exclusively on price without comparing coverage. Two policies with similar premiums can offer very different levels of protection, deductibles, endorsements and claims support,” says Blackwood. “Understanding what’s included is just as important as understanding what it costs.”

While insurance terminology can be confusing and thinking about the need to protect yourself from an accident can be overwhelming, don’t let that stop you from getting the right protection. “Auto insurance can be complex, so the best step is to speak with a broker, agent or insurance professional,” says Silverstein. “Ask questions, and make sure you have both the right types and the right amount of coverage for your situation.”

Read more from this issue of The Get:

1. Find out how to repair your stuff (from tech to clothes) for free
2. How to spot deepfakes; tips from investigative journalist Craig Silverman
3. Here’s how Canadians can save on baggage fees at the airport
4. Which provinces have the best wines for the best value?