Uninsured auto insurance 101: What you need to know

We know what you’re thinking: Isn’t every vehicle required to have insurance in Canada? 

Yes, but the bad news is not everyone follows the rules. It’s estimated that there are more than 2,000 uninsured vehicles on the road in Ontario alone. If you’re unfortunate enough to be involved in a collision with the driver of one of those vehicles, you can imagine the headache. (Learn more about third-party auto insurance, too.)

The good news is that you won’t be left high and dry, since uninsured auto coverage is a mandatory part of your auto insurance policy. Even the most basic policy has your back. “If you have a basic policy, you’re going to be covered,” says Pete Karageorgos, the director of consumer and industry relations at the Insurance Bureau of Canada. 

What is covered by uninsured auto? 

Uninsured auto coverage provides up to $200,000 for damage to property and injuries that otherwise would have been legally recovered from the other driver’s insurance policy. The injury portion is designed to address injury costs that may be over and above your own accident benefits limits. The damage portion is for repairs to your vehicle that you would otherwise be unable to claim.

Do I need uninsured auto insurance?

“Most commonly we see UA [uninsured auto] coverage being used to pay for damages to a car when the at fault driver was driving without insurance,” says Adam Mitchell, president of Mitchell & Whale Insurance Brokers Ltd. in Whitby, Ont. “Rather than the not-at-fault driver being left to sue a stranger to get their car fixed or be reimbursed for injuries, they are able to instead recover all or part of their loss from their own insurance policy.”

This can include being hit by an uninsured vehicle while you are driving your own vehicle, a passenger in any other insured vehicle, or even if you are hit as a cyclist or pedestrian while your car is elsewhere. So long as you have an Ontario Automobile Policy with road coverages on it, you have access to this coverage.

What about a hit-and-run scenario, where the other driver flees? 

Hit-and-run insurance coverage can get a bit tricky. 

“The distinction for hit-and-run scenarios depends on what you’re claiming,” says Mitchell. “If your vehicle is damaged in a hit-and-run, there is no coverage for the damage under the uninsured auto coverage. Meaning, in a hit-and-run, you need collision or all perils coverage to cover the damage to your car.” (All perils is also referred to as comprehensive insurance.)

According to Mitchell, this is the more common scenario insurance companies encounter, and hit-and-runs tend to happen with parked, unoccupied vehicles where no one is around to witness the accident. 

Vehicle damage is only paid under uninsured auto if the third party is identified, and it can be confirmed that they have no valid insurance. But more on that below (see “What to do if someone refuses to give their insurance info”).

If you do happen to be injured from a hit-and-run, you do have access to uninsured auto coverage for your injuries. “Should an injured party exhaust their accident benefits limits, they could then claim from the $200,000 uninsured auto coverage even in a hit-and-run,” says Mitchell, offering this example in Ontario. “In practice, this happens quite rarely as Ontario’s Standard Accident Benefits pay for injuries up to specified limits regardless of fault,” he says.

When you need additional coverage

You would need more coverage if your loss exceeds the limits of coverage. “Two-million is not a lot nowadays and this limit applies to all injured parties,” says Mitchell. “If you and your spouse are both injured, you are sharing that $200,000 limit between the two of you.” 

Given that this coverage has relatively low limits, Mitchell recommends insuring yourself first, before relying on the coverage of others, or this back-up coverage, to ensure you aren’t left with injuries that exceed your limits.

“In Ontario, we claim from our own accident benefits before dipping into uninsured auto coverage. By having increased accident benefits, you reduce the risk of the mandatory coverages coming up short,” says Mitchell. “Maintaining a $2-million limit for your family protection coverage, you also give yourself access to additional coverage should you exhaust the limits of the uninsured auto.”

Why is uninsured auto mandatory in Canada?

Basically, the intention of this mandatory coverage is that no victim is left without access to funds. “Without this coverage, accident victims would be left to sue the stranger that hit them, and that stranger may not have any assets,” says Mitchell. “In the event they do not, the victim would be left without access to funds to pay for damages or injuries.” 

Uninsured auto insurance also ensures you receive funds quickly. Think: If you’re a victim and you’re left having to pay for loss out of pocket, it may take you months or years in court to get those funds back. Instead, you can claim immediately from your own insurance company, so you’re taken care of quickly. 

How much does uninsured auto insurance cost in Canada?

If you have a car insurance policy, you likely already have this coverage, since it’s included with any policy that has liability coverage, or road coverages. The only exception would be policies for vehicles that are parked in storage with comprehensive only coverage, namely for fire and theft.

The cost varies from policy to policy just as all other coverages do, but typically this coverage represents a nominal portion of your annual premium, often coming in at less than $25 to $50 per vehicle annually.

What happens if you drive without insurance?

If you’re ever thinking of driving without insurance, spring for an Uber instead. “It’s a major offence with serious implications, including a $5,000 fine under the Compulsory Automobile Insurance Act (CAIA),” says Mitchell. “It will also affect your eligibility with many insurance companies.” So, when you look to get insurance in the future, you can expect to pay well above your previous rates. Translation: Sky-high rates.

What happens if you drive without insurance and get into an accident?

If you’re at fault, it will hurt. “You could end up being sued by the victim of the accident and/or their insurance company,” says Mitchell. “When an insurance company pays their customer under the uninsured auto coverage, they may then go after you to recover their losses.”

Even if the accident isn’t your fault, you’re in trouble if you don’t have insurance. “You may still be subject to fines under the CAIA,” says Mitchell. “You also would have no right to recover for your damages or injuries since The Insurance Act prevents uninsured drivers from recovering funds even if they are not at fault for the accident.”

If you are involved in a hit-and-run accident where you’re not able to get the insurance info from the other driver because they fled, first and foremost, call the police. “You’re legally obligated to stay at the scene of an accident,” says Karageorgos. “If someone doesn’t stop, that’s a red flag—they may be under the influence or uninsured.”

He also recommends recording as many details as you can and taking photos and videos. “Being in a collision is a stressful and traumatic event, so you want to have those details available when the police or your insurance company needs them.”

Make a record of everything that happened so you don’t forget, including notes on the location and which way the vehicles were travelling. Note the details about the vehicle itself, like the make, colour and model, any identifiers (like a bumper sticker or broken tail light) and if there were any passengers. 

What to do if someone refuses to give their insurance info

If someone does not want to provide their insurance information, contact the police. In an automobile accident, drivers are obligated by law to exchange insurance information. In the meantime, safely obtain whatever information you can, such as a licence plate, and a description of the vehicle and driver. Often a plate number and vehicle description can be used to locate the insurance associated with the plate. All of this is after the fact, we know. Again, try to remember as many details as possible so you can to pass them along to the police. 

Making a claim with uninsured auto insurance

Call your broker or insurer as soon as possible, before fixing your car or incurring large expenses. Of course, it’s OK to do what is reasonably necessary to get yourself safe or to follow a doctor’s orders. Remember, your insurance company has the right to evaluate all elements of the claim before issuing a payment to you. The sooner you make your insurer aware, the sooner you can expect to receive your benefits.

Know that an uninsured auto claim will take time and require documentation. As noted above, write everything down, take photos and collect witnesses’ contact information too, if you can. 

Expect your insurance coverage to have limits. Uninsured auto limits are quite low. If you want to make sure all potential costs of an accident are covered, you can buy higher limits on other types of coverage, such as collision and comprehensive (before a claim happens, of course). This reduces the chances that your actual loss will exceed the standard benefits. 

If you’re at fault for an accident, you’ll likely see changes to your rate on renewal—unless you bought a policy with accident forgiveness. An insurance broker can shop the market for you and make sure you get the best rate available. If you’re not at fault, you shouldn’t see your rates affected, so you can focus on your road to repairs and recovery.

But of course, worry about the afterwards, afterwards. Take care of yourself now and get a broker that can help you secure the right coverage to take care of you later.