What Is the Insurance Act of Ontario?

Posted on May 13, 2021

Canada is often stereotyped as a calm, quiet place to live where the citizens are law-abiding and polite. Thankfully, this stereotype is generally true, and the laws in place protect us.

In the case of auto insurance, however, there are still many violators who either do not understand the law or choose to ignore it. The Insurance Act of Ontario ensures every driver registers and is financially covered in the case of an accident. 

Insurance in Canada is simple once you understand the basics, but Ontario has some of the strictest laws. You should choose a car insurance policy with premiums you can afford while still being fully covered for possible incidents.

In this guide, you will quickly learn how auto insurance works, what the Canadian laws state, and what could happen if you don't choose a policy.

How Does Car Insurance Work in Canada?

In order to get car insurance in Canada, you will need to pay premiums. Premiums are monthly payments you make to continue your coverage.

Insurance companies determine the premium you will pay based on several factors related to your driving history and personal information. These factors include:

  • Age and gender
  • Your car make and model
  • The place you live
  • How much you drive
  • History of claims
  • Driving record
  • How much coverage you need
  • How much you're willing to pay for a deductible

In the case of an accident where you make a claim, you will pay a deductible before the insurance company pays for the remaining damage. You may be able to combine policies, like auto and home insurance, with the same company to receive discounts.

Under the law, an insurance company has several obligations to its customers. For example, they must treat their customer's interests as their own. They have to fairly investigate every claim and look for reasons to pay rather than deny the customer coverage.

Insurance companies cannot deny claims without explanation. Companies must disclose significant facts found in the investigation to the customer.

What Was the Key Change of the Insurance Act of 2015?

In 2015, the Insurance Act affected policies applied on or after August 2016. The Insurance Act of Ontario includes certain statutory conditions that must be adhered to for all insurance plans. 

This Act makes sure that insurance companies comply with new laws for disclosures to their customers. It also requires that companies give and receive specific information. The Act restricts insurance companies from arguing excessively over claims and imposes new penalties for those who break the conditions.

Finally, this act requires that insurance companies respond, investigate, and pay for claims in a reasonable amount of time.

Does the Insurance Act of 2015 Apply to Consumers?

The Insurance Act of 2015 not only applies to companies, but to their customers. These new conditions ensure that the customer provides and updates any risk factors that could determine premiums. They also ensure that only customers listed on the policy are using the insurance, and the policy is not abused.

Due to this new act, customers must be willing to allow the insurance company to regularly inspect vehicles. Customers also cannot withhold any important information from claims.

All information for a claim must be promptly sent to the insurer for them to process.

What Is the Short Term Insurance Act?

In the case of visiting Ontario for a lengthy amount of time, you may need to buy short-term insurance to meet the strict requirements of the local government. This insurance can cover you from one month to six months.

If you are an Ontario resident that drives their car very infrequently, you might benefit from only paying for short-term insurance when you need it. This policy can also be helpful if you are transferring a car to a new owner and only need a temporary license sticker.

Most companies only offer policies for a minimum of one year. You can find some rare policies for only six months. It is possible to apply for a permit from Ontario that will last for ten days during your visit. Otherwise, it is advisable that you buy an insurance policy and cancel it when you no longer need it.

The Short Term Insurance Act deals specifically with how to handle insurance debts. Insurance debts come with the parameters of "prescription" and "time bars."

Time bars require that the customer must make a claim within a certain period of time. The Act states that time bars cannot be a period of fewer than six months and that prescription cancels the insurer's debt after three years of the debt's due date.

What Are the Three Types of Car Insurance in Ontario?

In Ontario, it is legally required that every car and driver have insurance. You may need to have a policy that covers you, your passengers, and other people involved in the accident. In some areas, passengers involved may need to make a claim on their own insurance first.

The three main types of mandatory car insurance in Ontario are:

  1. Third-Party Liability insurance
  2. Direct Compensation
  3. Accident benefits

Liability insurance covers any losses and damage that your vehicle has caused in the case of an accident. This coverage applies to human injury as well as vehicle damage but does not apply to your own vehicle or person.

Direct Compensation will help cover your damages to your own vehicle and contents if the accident was someone else's fault. Accident benefits will cover your medical costs and loss of income related to your accident.

Collision insurance will cover repairs or replacements of your own vehicle. Ontario does not require that you have collision insurance, but it is highly recommended. 

Kingston, Napanee, and Brockville are cheap areas for car insurance policies. Premiums in these cities can be as low as around one thousand dollars. In comparison, Vaughan, Mississauga, and Brampton have the highest premiums at over two thousand dollars.

What Happens if You Are Caught Driving Without Car Insurance in Ontario? 

Ontario requires car insurance, which means you will face penalties if you drive while uncovered. However, this offence is not considered a criminal offence.

This offence will not go on your criminal record, but it will still be recorded and have serious consequences. If an officer pulls you over, and you cannot provide proof of insurance, you could be charged with two offences:

  1. Driving or allowing someone to drive your car without insurance
  2. Failing to show the officer proof of insurance

Driving without insurance in Ontario stays on your record for about three years.

The penalty for driving without insurance could be large fines, license suspension for a month to a year, and having your vehicle towed and impounded for up to three months. It's possible that it will be difficult for you to get insurance after this offence as well.

First-time offenders could be fined a minimum of $5,000. Companies that offer insurance to high-risk drivers will charge high premiums. You could be charged up to $10,000 a year. The Provincial Offense Act could also apply a 25% surcharge in court to your fine to fund services for victims of car accidents without insurance.

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Car Accidents Without Insurance in Ontario

Without insurance, you will be financially responsible for the damages you cause in an accident. You will have to pay for all the repairs or a replacement for your own vehicle. All of your medical costs will be directly charged to you without any financial help.

 Not only will you have to pay for your own damages, but everyone else's. This is true even for scenarios in which you are not at fault for the accident.

Lawsuits can also be filed against you to help financially compensate for injuries of the other driver and passengers. Insurance companies might also take you to court to help pay for the losses they incurred from the damages and legal fees.

Can I Drive My Parents' Car if I'm Not Insured on It?

If your parents allow you to drive their car, they should add you to their policy by listing you as an additional driver. Your parent would be listed as the principal driver and anyone else in the household who uses the car is an additional or occasional driver.

Insurance policies are placed on a vehicle, not the driver. Therefore, if you rarely drive the car in question, it is okay to drive it as long as it is insured.

Avoid Penalties From the Insurance Act of Ontario

The Insurance Act of Ontario protects insurance companies and the insured, so it is important to understand the policies and follow the laws of Ontario when driving.

If you need help finding the best insurance plans for your vehicle, you can count on Insurdinary to recommend companies and policies for you. Get a quote for auto insurance today!

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