Does Your Canadian Auto Insurance Cover You In The Us?

Canadian auto insurance does work in the US, but there are some important differences between the two countries' insurance systems that drivers should be aware of. For example, in Canada, insurance is regulated provincially, and all provinces have a version of no-fault auto insurance, whereas in the US, many states do not have a no-fault system and instead have a tort system, where the insurance company of the driver found to be at fault pays for all damages. Additionally, liability coverage limits for auto insurance policies in Canada are in Canadian dollars, but any damages in the US will need to be paid in US dollars, which could leave drivers vulnerable to being sued for the balance if the proceeds of their insurance policy are insufficient. It is recommended that Canadians travelling to the US with their vehicles review their auto insurance coverage before their trip to ensure they have appropriate and sufficient coverage.

Review your auto insurance coverage with your broker or insurance company

Before you head to the US for the season, it's a good idea to review your auto insurance coverage with your broker or insurance company to ensure that you have appropriate and sufficient coverage for your vehicle while it is in the US. Here are some tips to help you review your auto insurance coverage:

Notifying your insurance company

First, find out if you need to notify your insurance company whenever you take your vehicle to the US. Some insurance companies require this, while others do not, and some will make a note on your file that you drive to the US every year.

Time limits

Most companies allow you to have your car in the US for up to 6 months, but this is not guaranteed, so be sure to check your insurer's time limits and restrictions for how long you can have your car outside Canada.

No-fault auto insurance

In Canada, insurance is regulated provincially, and because Canadian provinces all have a version of no-fault auto insurance, the limits are calculated with that in mind and vary from province to province. Ask your insurance company whether this could be an issue if you have an accident in the US.

Liability coverage

Liability coverage is a major concern when driving in the US. The liability limits for your auto insurance policy will be in Canadian dollars, but any damages you are liable for in the US will be in US dollars. Because your insurance coverage is in Canadian dollars, the proceeds may not be sufficient to pay for all damages, leaving you vulnerable to being sued for the balance. Check to see if your policy will cover your legal fees or travel costs in these instances.

Other types of coverage

It is important to verify whether other parts of your coverage will apply if you are in the US and review any limits, such as reimbursement for damaged luggage, clothing, or personal items in the vehicle, and death and funeral benefits. Remember that your limits will be in Canadian dollars.

Suspending insurance on other vehicles

If you have other vehicles that you leave in Canada that won't be used while you're away, you may want to consider suspending part of your insurance coverage on those vehicles to save money. However, check with your broker or insurer to ensure that you maintain coverage if your vehicle is damaged while you are away, even if you're not driving it.

Check time limits and restrictions for how long you can have your car outside Canada

If you are a Canadian planning a trip to the US and want to take your car with you, there are a few things you need to know about the time limits and restrictions for keeping your vehicle outside of Canada. Here is some essential information to help you plan your trip and ensure you are compliant with the regulations:

Firstly, it's important to understand the difference between taking your car to the US for personal use versus commercial use. If you are taking your car for personal use, you can do so duty-free for up to one year. This means you won't have to pay any additional taxes or fees for bringing your vehicle into the US for this period. However, it's important to note that your vehicle must meet US safety and emissions standards. If it doesn't, you will need to remove it from the US within that one-year period.

On the other hand, if you are engaging in commercial activities or plan to stay longer than a year, the regulations differ. For commercial use, you will need to obtain a Carnet de passages en douane (CPD). The CPD is a customs document that allows you to bring your vehicle to the US for up to one year without having to pay customs deposits upfront. It guarantees that any duties and import taxes will be paid if you end up keeping your vehicle in the country after your CPD expires.

It's important to plan your trip carefully and be mindful of the time restrictions. If you plan to keep your vehicle in the US for longer than one year, you must contact US Customs and Border Protection. They will provide you with the necessary information and requirements for extending your stay with your vehicle.

Additionally, when bringing your Canadian vehicle into the US, it's important to be aware of any specific state regulations or requirements that may apply. Some states may have unique emissions or safety standards that your vehicle must meet. Make sure to research the specific rules for each state you plan to visit to ensure your vehicle complies with all applicable laws and regulations.

In conclusion, taking your Canadian car to the US for a trip can be a straightforward process, but it's important to be mindful of the time limits and restrictions. By understanding the difference between personal and commercial use, obtaining the necessary documentation, and staying informed about state-specific regulations, you can ensure your vehicle remains compliant during your time outside of Canada.

Understand the differences between no-fault and tort insurance systems

In the United States, there are two general types of auto insurance systems: no-fault systems and tort systems.

No-Fault Systems

In a no-fault insurance system, it doesn't matter who is at fault for the collision from an insurance perspective. If you're involved in a collision, your own insurance company will pay that claim, including any damages to your vehicle or medical expenses. This is the case even if the other driver is at fault for the collision. In other words, drivers in no-fault states are responsible for damages to their own vehicles and their own medical bills after a collision with another driver.

No-fault insurance was introduced in the 1970s to combat insurance fraud. Supporters of no-fault insurance argue that it offers several benefits, including efficient claims payment, reduced load on courts (as there is no need to hire an attorney), and lower insurance premiums.

However, there are also drawbacks to no-fault insurance. For example, there are specified limits on when you can sue, and there is no incentive for drivers to maintain a good driving record, aside from policy premiums. Additionally, insurance fraud can be more common in no-fault states, and insurance premiums may be higher.

Tort Systems

In a tort auto insurance system or an "at-fault" state, the driver who caused the accident is responsible for paying the costs. An investigation will take place to determine the degree of fault for each driver, as it is rare for a single driver to be 100% at fault. The driver who is more at fault will pay their proportional share of the damages.

Supporters of tort auto insurance argue that it is a fairer system, as drivers are not penalised for accidents they didn't cause. Bad drivers are punished, while good drivers are not.

However, there are also drawbacks to tort auto insurance. There is often a huge backlog of car accident cases in courts, resulting in high court fees for both drivers and insurance companies. Additionally, drivers may have an incentive to commit hit-and-runs and flee the scene.

Pure No-Fault vs Modified No-Fault

It is important to note that there are two types of no-fault systems: pure no-fault and modified no-fault. In a pure no-fault system, your insurer would pay for any economic damages (such as medical bills or lost wages) up to the policy limit, and you would be prohibited from suing a negligent driver for "non-economic" damages (such as pain and suffering or loss of companionship). However, no states currently function under a pure no-fault system.

Instead, all no-fault states have adopted a modified no-fault system, where the insurer still pays for economic damages, but the insured may be allowed to sue for non-economic damages if they exceed a specified tort threshold. This threshold can be either verbal or monetary and is designed to limit lawsuits to more serious injuries.

Consider increasing your liability coverage when driving in the US

Canadian auto insurance does work in the US, but there are some things to keep in mind when driving across the border. One important consideration is liability coverage. While it is not a legal requirement to increase your liability coverage when driving in the US, there are several reasons why you may want to consider doing so.

Firstly, liability coverage limits for your auto insurance policy will be in Canadian dollars, but any damages you are liable for in the United States will be in US dollars. If the Canadian dollar is weak against the US dollar, the proceeds may not be sufficient to pay for all damages, leaving you vulnerable to being sued for the balance. This can be financially damaging and may require you to hire a lawyer in the US to represent you, which can be costly.

Secondly, the US is generally a more litigious country than Canada, and judgement or settlement amounts tend to be much higher. As a result, you are more likely to be sued in the US and be found liable for damages that exceed the standard coverage limits provided in your Canadian auto insurance policy. Some insurers recommend increasing your liability coverage to $2 million when spending time in the US, while others suggest going even higher.

It is worth noting that increasing your liability coverage often does not significantly increase your premium and can provide valuable peace of mind. Before heading to the US, be sure to review your auto insurance policy carefully and speak to your broker or insurance company to ensure you have adequate coverage for your specific circumstances.

Ask about a 'loss-of-use' provision if renting a car in the US

If you're a Canadian planning to drive in the US, it's important to review your auto insurance coverage to ensure you're protected in case of an accident. While Canadian auto insurance does work in the US, there are some key differences in insurance regulations between the two countries that you should be aware of. One important consideration is loss-of-use coverage, especially if you plan on renting a car during your trip.

Loss-of-use provisions, also known as loss-of-use clauses, are included in rental car agreements to hold renters accountable for lost income if they damage or total a rental car. This means that, in addition to the cost of repairs, you may be charged fees for the days the rental car company could not lease the vehicle to other customers while it was being repaired or replaced. These fees can add up to thousands of dollars, depending on the length of time the car is out of service and the daily rental rate.

While loss-of-use fees may seem reasonable at first glance, they are often seen as junk fees by consumers and insurance companies. The laws surrounding these provisions vary from state to state in the US, with some states, like New York and Wisconsin, prohibiting rental car companies from charging these fees, while others, like Colorado and Texas, allowing it. Furthermore, these fees are not always covered by personal auto insurance or credit card protection, leaving renters with unexpected charges.

To avoid being caught off guard by loss-of-use fees, there are several steps you can take. Firstly, carefully review your personal auto insurance policy or call your insurance company to confirm whether loss-of-use charges are included in your coverage, especially when renting outside of the US. Secondly, consider purchasing the optional Loss Damage Waiver (LDW) offered by rental car agencies, which releases you from responsibility for loss-of-use fees in the event of damage or theft. Lastly, if you plan to use a credit card for your rental, verify whether your credit card provider offers protection for loss-of-use fees. Some credit card companies, like Visa, offer secondary coverage for these fees, while others, like American Express, provide primary coverage through premium rental car protection programs.

By taking these proactive measures, you can ensure that you are prepared for any eventuality during your trip to the US and avoid unexpected costs in the event of an accident involving a rental car.

Frequently asked questions