Cost of insurance in Canada: What you should know as a newcomer

Most of us are well aware of the concept of insurance. As you plan your move to Canada, educating yourself with the insurance options in Canada can help you make smart financial decisions, reduce insurance costs and assist in financial planning.  

Insurance is a policy or contract between you and an insurance provider. This policy allows you to be compensated for specific losses (or damages) to your assets, life, or health, provided certain terms and conditions outlined in the contract are met. Having insurance is a good way to plan for the necessary financial support to cope with unforeseen or unexpected circumstances. It helps reduce the risk of having to pay out of pocket for any mishaps.

In this article, we’ll share information on five key types of insurance (health, car, life, tenant, and home), elaborate on the factors that affect your insurance premium, outline the average costs of insurance, and also provide some tips on how you can reduce your insurance premiums. 

Average cost of insurance in Canada

There are many types of insurance available in Canada; some essential ones are health, car, life, tenant, and home insurance. As an insurance holder, you are required to make periodic monetary contributions (known as insurance premiums) toward your policy. These premiums vary by type of insurance and are calculated based on a variety of factors. Here’s a look at some of them. 

Health insurance

You may have heard that healthcare in Canada is free and paid for by the government. Typically, government-funded provincial and territorial health insurance will cover most of your basic health needs. However, certain items and services such as prescription medicines, physiotherapy, special nursing services, dental treatment, ambulance services, prescription eyeglasses, wheelchairs and other durable equipment, critical illness or severe injury, and any medical expenses incurred while travelling may not be covered by provincial health insurance. There are private or supplementary health insurance plans available from various providers you can purchase to cover these specific services. 

Some key factors influencing the cost of your health insurance are: 

• Services covered in your plan (such as prescription medicines, dental care, physiotherapy, prescription eyeglasses, disability, critical illness, long-term care, etc.); 
• Percentage of coverage (the higher the coverage and the lesser your out-of-pocket expense/deductible, the more expensive your plan);
• Number of individuals covered/dependents – whether it’s just yourself or if it includes family members as well;
• Your age, health history and any pre-existing medical conditions; and 
• Province of residence. 

How much does private or supplemental health insurance cost in Canada?

In Canada, families spend an average of $4,000 CAD per year on private or supplemental health insurance. However, do keep in mind that this cost would vary depending on factors such as the overall coverage, deductible, number of dependents, age, health history, and province/territory of residence.

To put the health insurance cost in perspective, here’s an average of some exams, treatments, and procedures in Toronto:

• Dental procedures: A root canal averages approximately $800 CAD, tooth fillings are usually between $80 to $350 CAD, and dental cleaning can cost approximately $300 CAD.
• Eye exam and prescription eyewear: Pricing can range from anywhere between $75 to $250 CAD and up. In Canada, eye exams are generally not covered by the public healthcare system. There are some exceptions for children, seniors, and those requiring an eye exam due to a medical necessity. Eyeglasses average approximately $150 CAD.       

Delivering a baby in Canada as a permanent resident (PR)

If you are giving birth in Canada as a PR, your expenses are covered through government-funded health insurance. You may only incur additional expenses if you opt for a private postpartum room, which could cost a few hundred dollars unless covered by private or supplemental insurance. 

Tip: Many employers in Canada provide health insurance as part of employee benefits. Coverage for eye care or dental care is usually part of such insurance. Therefore, before purchasing private health insurance, do check the plans provided by your employer.

Car or auto insurance

Car or auto insurance is essential if you own a car or any other vehicle. It protects you from having to pay to repair your vehicle if it’s damaged or in an accident or if your vehicle causes an injury to another person. In Canada, it is illegal to drive without insurance. 

Key factors influencing the cost of car/auto insurance

The cost of car insurance in Canada depends on a few factors such as the province or territory you reside in, your age, past driving experience and overall driving record, car model, deductible etc. 

How much does car insurance cost in Canada?

The cost of car insurance varies by province. To give you an idea, here are the average auto premiums in Canada, according to the latest data released by the General Insurance Statistical Agency (GISA) and the Insurance Bureau of Canada (IBC):

Tips to reduce auto insurance premium

• Provide your Vehicle Identification Number (VIN) to the insurer. Without the correct VIN, you could be quoted a premium for a different, more expensive make or model of the car.
• Shop around and compare auto insurance quotes from multiple insurers before you buy. 
• Increase your deductible (the amount you pay out-of-pocket to cover the cost of a claim). 
• Sign up for usage-based insurance (UBI) (also known as telematics or pay-as-you-drive). This technology customizes insurance to your pattern of driving. It works by monitoring your real-time driving behaviours to provide an objective picture of your driving habits. If you exhibit better driving habits or improve your driving behaviour, you can potentially save on insurance premiums at the time of renewal. These programs can benefit young drivers and new drivers by reducing the premium and helping them build insurance history much quicker.
• Drop the collision coverage on an older car. Collision coverage is designed to pay for the damage to your car if you’re in an accident that is your fault, but the most insurance will pay is the value of your car. For example, if your vehicle is worth less than $2,000 or $3,000 CAD, the cost of collision coverage may not be worth the benefit. 
• Look into an insurance package deal for your car(s) and home.
• Install an approved theft deterrent system in your car. 
• Maintain a good driving record by avoiding license suspensions, parking tickets, and convictions for driving offences.
• Adjust how frequently you use your car.
• Drive safely, and ensure you have winter tires on your car from November to April.
• Take public transit to keep your annual kilometres low.
• Exclude high-risk drivers from your policy.   

Life insurance

Life insurance helps provide financial support to your family and loved ones after your death. Money obtained from a life insurance policy is a tax-free, lump-sum amount. 

Key factors affecting the cost of life insurance

Your age is one of the most important factors that determine the price you pay; the younger you are, the lower premium you pay. Gender is also considered – life insurance costs more for men than women. Other factors include the coverage amount (i.e. the amount of money your beneficiaries will receive as your death benefit if you die while holding your policy), the length of your insurance policy (the longer the term, the more you pay), and any pre-existing health conditions.

How much does life insurance cost in Canada?

Since life insurance depends on personal characteristics, it’s challenging to arrive at an average amount. You can, however, get an estimate by entering your details online in the RBC Life Insurance quote tool. 

Tips to reduce life insurance premium

• Purchase a life insurance policy when you’re young and healthy.
• You can save more if you opt for term life insurance instead of a permanent life insurance policy. Term life insurance provides coverage for a specific period of time – typically 10, 20 or 30 years, while permanent insurance policies remain in place for the rest of your life (as long as you keep paying your premiums).
• Choose a shorter-term policy. 
• Shop around and get quotes from multiple insurers before you decide to buy. 
• Making annual payments instead of monthly will provide some savings. 
• Quit smoking; it could get you substantial savings. Data highlights that smokers pay 2x to 3x more for life insurance than non-smokers. To qualify as a non-smoker, you have to quit smoking for 12 months before applying for insurance.
• Avoid non-medical life insurance (one that doesn’t require you to undergo a medical exam). 

Tenant insurance

Getting tenant insurance is usually a requirement if you’re renting a home in Canada. Tenant insurance typically offers property protection, covers third-party liability such as flooding or fire caused by neighbouring apartments and visitor injury, and provides additional living expenses if your unit is undergoing repairs after a disaster. Note that even if your landlord has a homeowner insurance policy, it doesn’t cover your items or your liability, making it essential for you to get a separate policy. 

Key factors affecting the cost of tenant insurance

Some of the factors that determine your cost of tenant insurance are: 

• The type of property (basement apartments may cost more due to the risk of flooding); 
• The coverage for personal belongings; 
• Your address (to factor in crime rate and proximity to a fire hydrant and a fire station); 
• Your liability limit; 
• Your claims history; and 
• The age and overall condition of the building you live in.  

How much does tenant insurance cost in Canada?

Renter’s insurance is generally inexpensive; however, the cost can go up if you have additional protection needs that require extended coverage. On average, Canadians pay between $20 to $30 CAD per month in tenant insurance.

Homeowner’s insurance

Home or property insurance helps cover the costs if something unexpected happens to your home and belongings. Homeowner’s insurance can not only help replace your property in case of a fire or natural disaster, but it can also help you cover the costs of home repairs after a bad storm. It usually includes coverage for damage caused by fire or natural disasters like earthquakes, storms, etc. It also covers additional living expenses if your home is unlivable from an insured event, theft, and personal liability in case someone gets injured on your property.

In Canada, you’re not legally required to have homeowners insurance. However, if you’re applying for a mortgage, your bank or lender will often require you to hold an active home insurance policy. Owning a home is a major responsibility, and your financial security could be impacted if something goes wrong. So, it’s advisable to get homeowner’s insurance. 

Key factors affecting the cost of homeowners insurance

The biggest factors affecting the insurance premium are the size and composition of your property (the larger the home, the higher the premium). Some additional factors considered are: 

• The quality of construction used to build your property and its age; 
• Type of residence (semi-detached, condo, holiday home, etc.); 
• Condition and value of various contents and appliances in your home; 
• Piping and electrical setup; 
• Location (if your home is located in a flood plain, earthquake zone, or tornado-prone area); 
• Crime rate for the neighbourhood you live in; and 
• Your claims history.

How much does homeowners insurance cost in Canada?

According to the JD Power & Associates 2018 Canada Home Insurance Study, the average annual cost of home insurance in Ontario was $1,284 CAD – the highest in the country along with the Atlantic provinces. This compares to a low of $960 CAD in Quebec and $1,200 CAD in western provinces. 

Tips to reduce homeowners insurance premium

• Bundle your home insurance with other policies such as auto insurance. Bundling can entitle you to a discount. 
• Shop around and compare quotes before you decide to buy. 
• Installing home security items may help you get a discount.
• Increasing your deductible (out-of-pocket expenses for a claim) will help you save money on your premiums. 
• Maintain your home in good condition. Installing a new furnace that lowers the potential for a fire hazard, changing your siding from flammable wood to non-flammable aluminum or brick siding, and/or reducing hazards by regular maintenance of items such as repairs to your roof, porch steps, walkways and driveways may make you eligible for a reduced homeowners insurance premium.

Knowing the factors that affect insurance costs and being aware of the average costs of different types of insurance can help you understand if your premiums are fair or if it’s time for a change. Speak to an insurance advisor at RBC to get quotes that work for you!