What is short-term auto insurance, and how does it work?

Most people in Canada have regular car insurance, which remains in force for as long as the person insured has the car and continues to pay the premium.

In certain situations, however, it doesn’t make sense to buy and maintain car insurance coverage. It’s a better idea to get temporary coverage through short-term auto insurance.

What exactly is short-term auto insurance?

Like the name says, short-term auto insurance covers a brief period of time. This can be anywhere from a day up to a few months. Some policies can even cover a whole year. For shorter policies, prorated premiums can be quite expensive compared to the cost of regular insurance.

Short-term auto insurance is a specialty product. Many insurers don’t offer it for a number of reasons, including a lack of expertise in that sort of underwriting, as well as the tiny premiums not being worth the hassle. By the time an agent goes through the underwriting process, a premium of $25 or $50 just isn’t enough for some insurers.

Without short-term insurance, people who only need insurance for a month or two would be stuck purchasing a six-month or year term and canceling early, a process that can be costly including fees for terminating the contract early.

Who should use short-term auto insurance in Canada?

There are several reasons why someone would get short-term auto insurance.

One of the more common reasons is someone who travels to buy a car. If an American traveler comes to Canada, buys a car, and decides to drive around for a month or two before heading back to the United States, short-term auto insurance is a great option.

The other common reason is when buying a car. If you have already switched from an older car to a newer one with plans to sell the previous car within 30 days, a short-term policy can make sense. You could drop the existing insurance on the older car for temporary insurance, content in knowing it’ll expire after the car is sold and the buyer gets their own protection.

Another reason to purchase temporary insurance is when a friend comes to visit and wants to use your car. Some insurance policies include additional drivers while others don’t. It’s best to check before letting anyone borrow a vehicle, just in case.

It might just be simpler to add a visitor to your car insurance policy, but there are reasons not to, like being a little nervous about their ability to drive. If you add someone to your policy and they get into an accident, your rates will go up.

Note that folks who rent a car don’t have to purchase temporary insurance, since the rental company’s insurance will cover drivers even from other countries, or you might be covered by your credit card.

Use a broker

Getting short-term auto insurance in Canada is as simple as making a phone call to your insurance broker and giving them a few details.

A word of warning, however. Short-term insurance is a relatively rare product. Many of Canada’s top auto insurers just don’t have it, and it’s very possible you might talk to insurance brokers who can’t offer it. Be diligent when you shop around for it, and look for a company that specializes.