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Different types of auto insurance in Alberta.

In Alberta, there are mandatory and optional auto insurance coverages that provide drivers with protection, while also offering the flexibility to customize their coverage to their needs. Here’s a brief breakdown of both mandatory and optional coverages, as well as endorsements available to Alberta drivers.

Mandatory car insurance coverage

Alberta’s insurance system requires that drivers carry a minimum of $200,000 in third-party liability insurance for their vehicles. A basic insurance policy in Alberta also includes coverage for the cost of medical care and the cost of repairing your vehicle.

• Third-party liability:  When you’re deemed at fault for a collision that results in personal or property damage to others, third-party liability covers you.

• Accident benefits: Covers the cost of medical care for you and your passengers. It includes rehabilitation costs, funeral expenses, death benefits, and income replacement.

• Direct Compensation Property Damage (DCPD): An insurance coverage that helps cover the cost of repairing or replacing your vehicle if you’re not at fault in a collision. You receive the benefit if you were not at fault for causing the accident.

Optional car insurance coverage

These coverages are not mandatory, but they provide extra protection for a wider range of risks.

• Collision coverage: The costs to repair or replace your car if it’s involved in a collision with an object other than a car is covered by collision coverage. It has a deductible.

• Comprehensive coverage: Covers damage to your car caused by insurable perils like theft, vandalism, and fire is handled by comprehensive coverage. It has a deductible.

• Specified perils coverage: You can get protection against specific risks of your choosing with specified perils coverage. You must specify which perils you want coverage against. It has a deductible.

Auto insurance endorsements in Alberta

 An endorsement are additional coverages or exclusions added to your insurance policy. They are used to tailor your policy to better suit your coverage requirements or specific situation.

• Limited Glass (SEF 13D): Drivers in Alberta tend to file more glass damage claims because of severe weather conditions the region faces. This endorsement restricts coverage for glass damage because of frequent past claims, resulting in a lower premium.

• Loss of Use (SEF 20): This endorsement provides compensation for a replacement vehicle (or alternative transportation like cab) if your car is damaged in an accident. There is a specified limit, and it will only cover your vehicle if it’s damaged due to a loss specified in your policy.

• Legal liability for damage to non-owned automobiles (SEF 27): This endorsement extends the coverage to rental cars. Again, up to a specified limit and subject to conditions specified in your policy.

• Accident Rating waiver (SEF 39): This endorsement prevents your premium from increasing after an at-fault accident.

• Limited Waiver of Depreciation (SEF 43R): This endorsement will waive the depreciation costs on repair or replacement of a new vehicle.

• Family Protection (SEF 44): This endorsement protects you if you or your family members are involved in a collision with an underinsured or uninsured driver.

Factors that determine car insurance rates in Alberta.

Insurance rates in Alberta are set by private insurers but are regulated by the Automobile Insurance Rate Board (AIRB) and the Office of the Superintendent of Insurance. When setting insurance rates, companies take into account several factors, including:

• Your age and gender,

• Your marital status,

• Your physical address,

• The make and model of your car,

• Your driving record,

• Any previous claims,

• What the vehicle is used for,

• And how much coverage you require.

Alberta’s auto insurance system & its legal requirements

By law, all drivers in Canada are required to have car insurance. However, coverage requirements, how the insurance system works, and who it’s provided by (private or public insurers) differ from province to province.

In Alberta, all drivers are required to hold third-party liability, accident benefits, and DCPD insurance coverage. While collision, comprehensive, and specified perils coverage is optional. Alberta currently has an at-fault based system. This means that if you were involved in a collision – and although you can recover compensation through the accident coverage claim – you can also sue the at-fault driver and their insurance company for additional damages.

In 2022, Alberta implemented mandatory DCPD where drivers claim damages from their own insurers instead of through the at-fault driver’s insurance company. If you may be at-fault or partially at-fault, you can claim from your own collision coverage.

An at-fault collision will stay on your record for six years, and your premiums may increase.

If caught driving without car insurance, Alberta’s Traffic Safety Act stipulates that you are liable to pay a fine starting at $2,875 and going up to $20,000 for the second offense. Driving without insurance will increase your premium the next time you want to purchase a policy and furthermore, if you get into an accident, you will have to potentially shell out thousands of dollars for property and physical damages and repairs.

Alberta’s auto insurance authority and rate regulation

Insurance rates in Alberta are set by private insurers but are regulated by the Automobile Insurance Rate Board (AIRB) and the Office of the Superintendent of Insurance. However, the way in which insurance premiums are calculated is unique to the province – in that insurance providers use a Grid system to determine rates. The Grid system is a government-mandated framework designed to cap the maximum premium that drivers pay. It takes into account your driving history and your claims history.

Here's how insurance companies use the Grid system to determine your rates:

• When calculating insurance, companies have to compare their premium with the Grid. They must charge the lesser of the two premiums.

• This rule doesn't apply if you’ve had a driving or criminal conviction within the last three years, three or more at-fault claims within the last six years or you’ve been convicted of insurance fraud.

• Premiums for drivers who remain claims-free and free of traffic tickets will decrease over time.

• For each year without an at-fault claim, premiums can decrease by anywhere between 5% to 50%.

• Inexperienced drivers who have completed a driver’s education course start 10% below the maximum entry-level premium.

• Each at-fault claim moves the driver up five rungs on the Grid. It also results in extra surcharges (the same applies if you have a driving conviction).

• Car insurance companies in Alberta must apply to AIRB for permission to raise rates across the board.

While the Grid was designed to ensure affordability of auto insurance, over the years, good drivers are finding that they are paying more to subsidize premiums for bad drivers. In 2021, drivers paid an average of $65 to subsidize bad drivers. Consequently, the provincial government has made changes to the system. In 2024, AIRB introduced the Good Driver Protection plan, which prevents companies from raising the rates of policyholders beyond the Alberta’s inflation rate if they meet the definition of a “good driver.” There are also proposals to increase AIRB's oversight around premium increases in the future.

Alberta car insurance considerations by demographic

As previously mentioned, your insurance rate depends on a number of factors, including your age, driving experience, and record. Here are some ways in which insurance rates might differ for different demographic groups, and the reason behind it.

Alberta car insurance for seniors

While insurance premiums typically decrease as drivers gain experience, rates begin to rise slightly after the age of 70 due to the perceived increase in risk. However, there are still opportunities for seniors to save on insurance costs. Membership in professional associations like the Canadian Association for Retired Persons (CARP) can unlock special discounts, and opting for usage-based insurance is another way to reduce premiums, especially if driving frequency decreases in retirement. Additionally, many insurers, such as Intact Insurance, offer discounted rates for seniors.

Alberta car insurance for new immigrants

Car insurance premiums for new immigrants are often high initially, as they lack experience navigating Canadian roads and driving conditions. Exceptions exist for some countries – like the United States where driving experience is comparable to Canada or the United Kingdom that has a licence exchange agreement with Canada – thus allowing for lower premiums. For most newcomers, however, going through the Alberta licencing process is necessary. And premiums will gradually decrease as you gain driving experience in Alberta. To help reduce insurance costs, newcomers can consider bundling their home and auto insurance with the same provider to take advantage of potential savings.

Alberta car insurance for students

As a student or young driver, auto insurance in Alberta tends to be expensive as you do not have substantial driving experience. Once you reach the age of 25, rates start declining as there is now, a demonstrated driving history or record. One way for students or young drivers to reduce their premiums is being listed on their parents’ auto insurance policy. Not only is it more affordable to be a secondary driver, but it also allows you to build driving history, which can help secure better rates when you’re ready to purchase your own auto insurance policy.

Alberta car insurance for high-risk drivers

Drivers who have a history of traffic violations or driving convictions are classified as high-risk. Auto insurance rates for high-risk drivers generally means higher premiums and limited options for insurance providers who are willing to insure you. High-risk Albertan drivers can obtain coverage through the Facility Association that provides coverage (and thus, higher premiums) when one cannot obtain insurance with standard auto insurance providers. High-risk drivers can work to improve their driving record and reduce premiums over time.

Trends in Alberta car insurance rates

Auto insurance rates in Alberta are administered by private insurance companies but are regulated by the AIRB. Traditionally, Alberta has high auto insurance rates. The government and regulatory authority have tried to curtail insurance rates through a mandatory direct compensation property damage (DCPD) coverage in 2022 and a temporary rate freeze in 2023.

Alberta brought on DCPD to stabilize auto insurance premiums

Alberta introduced DCPD coverage with the intent of creating a more efficient way to resolve auto insurance claims and to better align premiums with the actual costs of vehicle repairs. With DCPD coverage, your insurer covers damage to your vehicle when you’re not at fault in an accident, rather than having to claim damages from the at-fault drivers’ insurance. If you’re in a collision and not at fault, your insurance rate is not impacted by the claim. This simplifies the claims process and creates a more transparent system where your premiums are directly tied to your driving record and vehicle, rather than the actions of other drivers.

Alberta introduced a temporary rate freeze to curtail runaway car insurance prices

The Alberta-wide rate freeze was in place for all of 2023 and was intended to provide temporary relief to drivers facing higher premiums because of inflation and increased claims costs. Despite these regulations, the insurance market in Alberta continues to see increased rates. In fact, there had been a 5.24% increase in auto insurance premiums in Alberta during the rate pause.

Other trends driving car insurance rate hikes

Let’s look at some trends that are impacting auto insurance.

• Inflation impacts every aspect of an insurer’s business, from claims costs to vehicle repairs. As inflation drives up expenses, insurance companies adjust their premiums to account for these rising costs.

• Bodily injury claims are significantly affecting insurance premiums in Alberta – having increased by 79% in 2022 compared to ten years prior, according to a 2024 IBC report – and are expected to only grow in the coming years.

• The cost of vehicle parts and repairs has increased 15% over the past two years as  a result of inflation and global supply chain issues, according to the same IBC report. Repair time has also increased because of part supply and labour shortages, and increased complexity of repairs.

• Car thefts are an ever-present concern for insurers andthe IBC estimates that the average cost of a stolen vehicle claim in Canada is over $9,000. Auto theft claims in Alberta rose by 55% from 2023 to 2021. Alberta consistently ranks as one of the provinces with the highest rates of auto theft, and insurers pass on the cost of auto theft to consumers by increasing premiums.