To start, let’s define insurance. Insurance is a way of sharing risk. An insurance policy is a contract, which covers a set amount of time, in which one party (an insurance company) agrees to pay for another party's financial loss resulting from a specified covered event. The party seeking the insurance pays for this agreement through an insurance premium. Insurers then use the premiums paid by all policyholders to pay for the financial losses of the few people who need to make a claim as a result of a particular covered event.

When it comes to auto insurance, consumers purchase insurance for their vehicles. Its primary use is to provide protection against losses incurred as a result of car accidents, theft, vandalism, or some other event that causes damage, liability or injury where the vehicle is involved.

In Canada, each province and territory establishes their own required minimum insurance coverages. However, you can often get options that go beyond the basics. One of the nice things about automobile insurance is you can customize your policy to ensure you've got the specific protection you need, without paying for extra insurance you may not require.

Automobile insurance and the law
Regardless of where you may be driving in Canada, if you plan to drive a vehicle on public roads the vehicle must be covered under an insurance policy with certain minimum compulsory coverages. It is the law in all provinces and territories. So where do you go to get a basic auto insurance policy with the coverages you need? Well that depends, on which province or territory you’re talking about.

In the Northwest Territories, Yukon, Nunavut, Alberta, Ontario, New Brunswick, Newfoundland and Labrador, Prince Edward Island, and Nova Scotia you will have to purchase your car insurance coverage through a private insurer.

In British Columbia, Saskatchewan and Manitoba, the basic auto insurance policy is purchased through a government agency. In these provinces, drivers usually purchase their insurance coverage when registering the vehicle. You may also be able to purchase extra options and coverages that go beyond the basic policy. These can be bought either through the government agency or if in British Columbia for example, you can choose to purchase this portion through a private insurer.

In Quebec, your basic insurance coverages are provided by two sources; the government agency Société de l’assurance automobile du Québec (SAAQ) and private insurers. The government agency provides coverage for Quebec residents who sustain bodily injury in an accident. This coverage is funded through premiums collected as part of the fees for vehicle registration and driver licensing. All other auto insurance coverages, including the mandatory Civil Liability coverages, are purchased through private insurers.

Your insurance is valid anywhere in Canada and the United States. It’s a good idea to carry whatever proof of insurance you are given at all times because you must produce it if a police officer requests it, when you first register your automobile, and each year when you renew your licence plate sticker. If you decide to drive into Mexico however, your insurance policy won't cover you or your automobile. You must arrange for insurance coverage separately when, and where, you enter Mexico.

You are not required by law to purchase car insurance to cover damages to your automobile. But if you have a newer automobile, you'll want to protect your financial investment and consider purchasing Collision and/or Comprehensive coverage. Additionally, if you're leasing or financing your vehicle, the leasing company or bank will often require you insure your car or truck for Collision and Comprehensive coverage. They will not release the funds to purchase the automobile until you commit to that coverage.

What’s an automobile insurance deductible?
When you make a claim because you’ve been in an accident or your vehicle was damaged, a small portion of the claim is usually paid by you first, then your insurance company. The portion you pay is called your deductible.

There are occasions when you may not be expected to pay the deductible. For example, you are often not responsible for paying the deductible when:
You are hit by another driver which causes damage to your vehicle and you are 0% at fault.
You are responsible for damages to another party and your insurance company has paid for the damages under your Third Party Liability
You are claiming for Accident Benefits for injuries
You have a total loss of your vehicle due to theft, lightning or fire