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Car insurance for an unused vehicle

How to save on car insurance for a vehicle you aren’t driving.

What happens to your car insurance when your vehicle is not being driven? Maybe you’ve been posted overseas for work for 12 months, or maybe you’re seriously injured and unable to drive for an extended period.

The good news is that there are several ways to save on car insurance for a vehicle you’re not currently driving. Let’s take a look at each option, its pros and cons, and how to find the best car insurance for your unused vehicle.

Do I need car insurance if I don’t drive my car?

No — as long as you don’t drive your car at all.

It’s a legal requirement that you must have car insurance to drive your vehicle in Canada.
So if you plan on driving your car at all — even if it’s just driving it home from the dealership — you’ll need to maintain the minimum amount of coverage required in your province or territory.

But you may be able to drop additional coverage you’re not using while your car is off the road, like roadside assistance or collision coverage.

When should I put my car insurance on hold?

There are several reasons why you might want to temporarily suspend car insurance for a vehicle you’re not currently driving, including:

  • Your vehicle is kept in storage for long periods of time
  • Your car is broken down and in need of repair
  • You’ve been temporarily posted overseas for work
  • You’re travelling overseas for an extended period
  • You’re seriously ill or injured and unable to drive

How can I save on car insurance when I’m not driving?

If you’re not sure what to do with your car insurance while your vehicle is out of action, there are six options to consider.

  • Cancel your policy. The simplest option is to cancel your policy completely and then purchase new coverage when your car is back on the road again. This means you won’t have to pay anything for insurance while your car is not being used. However, you won’t have any coverage in place against off-road risks like fire, theft and vandalism.
  • Reduce your level of coverage. If you don’t want to cancel your policy, you may want to reduce your level of coverage – for example, switching from optional comprehensive or collision insurance to a lower level of cover. This allows you to save money on your premiums while still maintaining a certain level of coverage for your vehicle.
  • Get parked car insurance. Some insurers offer the option of storage coverage, which is designed for vehicles that are off the road while they’re repaired or restored. This allows you to insure your vehicle against a wide range of risks, but at the same time reduce your premium.
  • Get pay-as-you-go car insurance. Also known as pay-as-you-drive car insurance, these policies allow you to save money by only insuring your car for a limited number of kilometres each year. The less you drive your car, the less you pay for insurance.
  • Pause your car insurance. In some cases, the insurer may be willing to let you suspend coverage for a temporary period. However, this option is not available from all insurers.
  • Remove yourself as a listed driver. You can also consider removing yourself from your car insurance policy for a temporary period. If you’re no longer a listed driver, you can lower your premiums but still retain coverage for other drivers.

Check your provincial/territorial government regulations:

In provinces where you buy car insurance directly from the provincial government (like in British Columbia, Manitoba and Saskatchewan), you may not have all of these options available to you. So call or go online to your provincial insurance bureau to verify what insurance options you have for a car that’s not being driven.

Option 1: Cancelling your car insurance policy

The first option is to cancel your car insurance coverage altogether and then, when you’re ready to hit the road again, take out a new policy. This is the simplest way to save money on your premiums, as you won’t have to worry about paying for insurance while your car is off the road.

Pros and cons of cancelling your car insurance

Pros

  • You can cancel at any time. You’re free to cancel your car insurance with any insurer at any time.
  • You might get a refund. Your insurer may refund the unused portion of your premium.
  • Save money. You won’t have to pay for car insurance while your vehicle is out of action

Cons

  • No protection for your car. You won’t have any protection against non-driving risks after cancelling your policy. Fire, storms, hail, falling trees, theft, vandalism and floods can all cause costly damage to your vehicle while it’s off the road. Without car insurance cover in place, you’ll have to pay to repair the damage out of your own pocket.
  • Fee. Your insurer may charge a cancellation fee when you cancel car insurance.
  • Not an option if you have a car loan. Most car loan lenders require you to have comprehensive car insurance coverage for the life of the car loan. So if you haven’t paid out a loan secured by your vehicle, this option won’t be a viable choice.
  • Inconvenient. You’ll need to go through the hassle of cancelling, and then comparing policies and buying a new one at a later date

Option 2: Reducing your level of car insurance coverage

If you want to keep some car insurance cover in place, you could switch to a lower level of coverage. Let’s say you currently hold collision insurance on top of the mandatory insurance in your province or territory. With your car parked in a locked private garage, there’s no risk of it being damaged in a collision, so you could find cheaper car insurance by scaling back to just the mandatory insurance coverage where you live.

Pros and cons of reducing your level of car insurance coverage

Pros

  • Save money. Reducing your level of cover means your car insurance premiums will be lower.
  • You still have some protection. You can tailor coverage to suit your situation, so you can still enjoy the peace of mind of knowing your car is protected against key risks.

Cons

  • Car loan insurance requirements. If you’re still paying off a car loan, the lender will typically require you to have comprehensive car insurance in place.
  • You may pay for coverage you don’t need. If you keep mandatory insurance in place, you’ll be paying for liability insurance that you won’t use while your car is off the road.

Option 3: Get parked car insurance

Also known as parking insurance and comprehensive insurance, this policy provides protection against a range of non-driving risks while your vehicle is off the road, including:

  • Fire, storm and flood damage
  • Damage from falling trees
  • Theft and vandalism

Pros and cons of parked car insurance

Pros

  • Extensive cover. Parked car insurance covers a wide range of non-driving risks.
  • Provides peace of mind. A car is an expensive investment, and this type of cover provides a handy financial safety net.
  • Suitable for car enthusiasts. This type of cover provides added peace of mind and protection if you’re restoring a vehicle.

Cons

  • Cost. Parked car insurance may be more expensive than other options.
  • Not always worth it. If your vehicle doesn’t run and has a low value, it may not be worth buying cover.

Option 4: Get pay-as-you-go car insurance

The premise behind pay-as-you-go car insurance is simple: it doesn’t make sense that someone who drives 3,000km a year should pay the same for car insurance as someone who drives 30,000km a year.

This policy offers a way for you to only pay to cover the kilometres you actually drive. If you know you won’t be driving your car for an extended period, such as 3 months out of the next 12, you can choose to insure it for a reduced number of miles. This can lead to a significantly reduced premium, but it still lets you enjoy the peace of mind of comprehensive insurance coverage.

This type of cover is also known as pay-as-you-drive, usage-based or restricted-use car insurance.

Pros and cons of pay-as-you-go car insurance

Pros

  • Save money. This type of insurance offers a simple way to save on the cost of cover.
  • Provides peace of mind. Pay-as-you-go insurance still provides all the usual benefits of a comprehensive car insurance policy.
  • Flexibility. You can top up your mileage limit (for a cost) if you think you might exceed it.

Cons

  • Penalties for exceeding your mileage limit. Your claim might be rejected if you’ve exceeded your policy’s mileage limit. You may also have to pay a higher deductible.
  • You need to monitor your driving distance. You’ll need to keep track of how far you drive to ensure that you don’t exceed your limit.

Option 5: Pause your car insurance coverage

Some insurers will allow you to temporarily suspend car insurance coverage for a specified period. However, there may be a fee to do so. You’ll need to contact your insurer to find out whether they offer this option. There may also be specific requirements you need to meet depending on where you live — for example, Ontario residents will need to fill out a Suspension of Coverage (OPCF 16) form, and then complete a Reinstatement of Coverage (OPCF 17) to reinstate cover.

Pros and cons of pausing your car insurance coverage

Pros

  • Save money. You won’t have to pay for coverage while you’re not using your car.
  • Convenient. Unlike cancelling cover, this option means there is no need to compare and choose a new policy when you want to reinstate cover. You can keep the policy and level of coverage you want.

Cons

  • Not always available. Not all insurers will allow you to pause cover.
  • No cover. Your car won’t be covered for non-driving risks such as fire, theft, vandalism and storm damage while your policy is suspended.
  • Pause fee. You may need to pay a fee to put your car insurance on hold.
  • Car loan requirements. If there is outstanding finance on your car, you’ll probably need to maintain car insurance coverage at all times

Option 6: Remove yourself as a listed driver

The final option is to temporarily remove yourself as a listed driver from a shared policy. If you know that you won’t be driving the vehicle for an extended period but other people will, this allows you to reduce the cost of insurance but still maintain the same level of coverage. Many insurers allow you to add or remove drivers from your policy online, but in some cases, you might need to call your provider.

Pros and cons of removing yourself as a listed driver

Pros

  • Save money. Removing yourself from a policy will reduce your car insurance premium.
  • You’re still covered. You can still maintain the same level of coverage you already have for your car.
  • Simple. It’s usually easy to remove a driver from your policy online.

Cons

  • You need to be sure you won’t drive the car. If you’re not listed as a driver, either the policy won’t cover you when you get behind the wheel or you’ll be required to pay an unlisted driver fee should you need to make a claim

Can car insurance be transferred to another person?

No. Insurers consider a wide range of factors before deciding whether to insure you, including:

  • Your age
  • Your gender
  • Your driving experience
  • Your history of traffic infringements and penalties
  • Your claims history

Not only do these factors determine whether or not you will be covered, but they also affect your premium amount. That’s why you can’t transfer your car insurance to another person; they will either have to apply for their own policy or be assessed and added to your policy. If they are added as an additional driver to your policy, your premiums will be adjusted to reflect their risk level.

Bottom line

If you won’t be driving your vehicle for an extended period of time, you could cancel your car insurance policy altogether. But there are also a few ways you can enjoy the peace of mind of keeping cover in place while also reducing your premiums. Compare these options and talk to your insurer about the best choice for you, and compare other car insurance providers if you want to look for better cover elsewhere.

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