How does U.S. car insurance work in Canada?

Do you need car insurance to drive in Canada? Absolutely, but fortunately, your U.S. car insurance will cover you.

Because of reciprocal laws between the two countries, Canada honors your U.S. insurance, and vice versa, in the event of an accident or claim and to meet insurance requirements.

“Most standard personal auto policies automatically include Canada in the ‘policy territory,’ and so there is not much the policyholder needs to change in order to have their insurance coverage apply in Canada,” says Dana Kerr, associate professor of risk management and insurance at the University of Southern Maine.

The policy territory describes the areas where coverage is available.

“For liability coverage, in particular, standard auto policies have language called ‘out of state coverage’ that commits the insurance company to automatically adjust coverage and policy limits to be consistent with the insurance laws in states (and provinces) where an accident occurs when it is different from the state of primary residence,” he says.

Is car insurance in Canada the same as in the U.S.?

As in the United States, Canadian drivers are required to have a driver’s license and auto insurance. Canada requires liability insurance, which pays for damage to another person’s property, injuries and medical expenses.

Some Canadian provinces also require drivers to have accident benefits, which pay for the driver’s own medical costs or loss of income from an accident. This varies from province to province, just as requirements in the U.S. vary from state to state.

Other types of coverage such as comprehensive are generally optional, as they are in the States. This coverage is for damage to your own vehicle from things like falling tree branches, vandalism and other non-accident-related damage.

Canadian insurance covers similar things, but how insurance is handled differs. For instance, this applies in Manitoba, which has a fully public insurance system, while some provinces, like Quebec, have a hybrid system. Other provinces have a private system much like the American one. In a province with a public insurance system, the insurer handles all claims.

Is my state minimum coverage enough to drive in Canada?

Yes, but before any road trip, it’s always a good idea to check with your insurance company to confirm what type of coverage you have. If you only have the bare minimum, now might be a great time to look into beefing up your policy. This holds true for domestic travel as well.

“Generally, my opinion is that state-mandated liability insurance coverage amounts fall well short of what a potential legal judgment might require someone to pay as the result of an auto accident,” Kerr says.

Consider increasing your limits before you travel.

“It's a start, but just having the minimum amount of insurance coverage still leaves the insured driver exposed to paying significant legal damages out of pocket. An auto accident does not have to be that severe for the compensatory damages to exceed state-required minimum amounts of auto insurance coverage,” he says.

An umbrella insurance policy is another option for increased liability.

“Insured drivers consider buying personal umbrella liability insurance that extends their coverage limits to financially protect themselves in those situations. And that recommendation holds regardless of whether someone is traveling to Canada or not,” Kerr says.

Do I have to show proof of insurance in Canada?

If you are pulled over in Canada, you must show proof of insurance.

You should bring your driver’s license and passport with you, the vehicle’s valid registration along with proof of your car insurance.

“The card issued by their insurance company in the U.S. should be adequate,” Kerr says, ”but a good backup is to pack a copy of the actual auto policy itself (or at least the declarations page of that policy).”

What happens if I have an accident in Canada?

If you are involved in a car accident while driving in Canada, contact your insurance company to report the accident within 24-48 hours. Don’t wait any longer.

Your insurance company will assign a claims adjuster to investigate the accident and walk you through all the paperwork. In case of damage to the vehicle or an injury, the adjuster will conduct interviews with all parties involved and help determine what happened and who was at fault.

Adjusters collect police and accident reports, pictures, and medical records and visit the accident scene whenever possible.

The FSRA - Financial Services Regulatory Authority of Ontario, which regulates the property and property casualty insurance industry and other financial sectors, has some helpful guidelines in case of an accident in their province:

  • Stop your vehicle and pull over if it’s safe to do so
  • Call police and emergency services if anyone was injured or suspected to be injured
  • Exchange your driver’s license and insurance information with the other person involved
  • Contact the police if the damage seems to exceed $2,000 or if you’re unsure
  • Take pictures of the scene and any damage -- this will helpful in the claims process
  • In the province of Ontario, you must visit a Collision Reporting Centre within 24 hours to report the accident
  • Don’t leave the scene of the accident, as this can incur criminal charges in certain parts of the country

It’s a good idea to know the procedures for the province you plan to visit.

Will my rates go up if I have an accident in Canada?

Your rates can go up if you are considered at fault – sometimes even partially at fault, even if the accident happened in Canada.

During your claims adjuster’s investigation, the cause of the accident and who is at fault will be determined. This will be a key factor in whether or not your rates will go up.

If the accident is determined to be the other driver’s fault, your rates will probably not go up. Your policy may also have an “accident forgiveness” provision, so be sure to ask.

Do I need to buy insurance for a rental car in Canada?

Your personal auto insurance coverage usually extends to a car that was rented in the States and is honored while used in Canada. Be sure to ask the rental company representative if you can drive the vehicle across the border.

Be aware that there may be additional charges for renting an RV or a vehicle other than a car or SUV.

The rental car agency can most likely provide you with a “proof of insurance” in case you are pulled over.

If you rent the car in Canada, you can purchase additional insurance at the rental agency known as a collision damage waiver (CDW) and other additional insurance. Your credit card may include some coverage for a rental car, so be sure to check. However, the auto insurance you already have provides basic coverage for a rental car.

Other things to know when traveling to Canada

  • You need a passport to cross the border and a valid driver’s license to drive a car in Canada.
  • If you stay for an extended period of time, you will need to look into obtaining a visitor’s visa or a Canadian insurance policy, as your U.S. policy will become invalid.
  • As with any trip, it might be a good idea to look into travel insurance.
  • You can purchase travel insurance at a rental car agency or through a travel agent.
  • Canadian drivers can be licensed at 16. The age for renting a car in Canada is 21.

Being prepared is one of the best ways to have a safe and fun trip. Just make sure you have all of the necessary documents with you when you travel to ensure you’re in compliance with Canadian laws.