You can’t buy or lease an automobile from a dealer without meeting at some point with the business manager. The business manager can offer two types of insurance: car loan life insurance and replacement insurance (Q.P.F. No. 5).
Here are five tips that will help you make an informed decision if your automobile dealer offers you these types of insurance.
1- You don’t have to say yes
You’re not under any obligation to purchase the insurance offered by an automobile dealer. Even when a lending institution asks you to be insured, it’s your choice which insurance product and insurer you go with. You’ve got time to look around for the best deal. If you like what the dealer is offering, you can purchase the insurance from its website or by phone.
2- You may not need the insurance
If you’re offered loan life insurance, check whether you’re already covered by similar insurance (at work, for example) so you don’t end up paying twice for the same coverage.
Also check whether you’re over the eligible age or whether your state of health could prevent you from receiving complete protection.
To determine whether you might benefit from the coverage, take the time to read the explanatory document the dealer is required to give you.
3- It’s best to shop around
You will probably get a better price if you shop around. On average, insurance from an automobile dealer costs more than from a broker or an insurer.
If you choose to include the cost of the insurance in your loan, you’ll pay interest on the cost of insurance, in addition to the interest on your car loan.
So take the time to read about the insurance product in the explanatory document the dealer is required to give you, and compare it with other products and prices offered elsewhere.
Did you know?
According to the Annual Report on Financial Institutions published by the AMF, you can expect to pay more for replacement insurance when you do business with an automobile dealer than when you deal with a damage insurance agent or broker or an insurance firm that offers its products online.End of the insight
4- You have the right to change your mind
You can change your mind anytime in the 10 days after you purchase your insurance. To cancel your contract, you must notify the insurer by registered mail using the Notice of rescission in the explanatory document the dealer has given you.
If you cancel within the 10-day period, you will not have to pay any costs or penalties and will be refunded any premiums you’ve already paid. If the cost of the insurance is included in the car loan, the refund could be used to decrease the amount of your loan, which could result in a reduction in the number of payments you are required to make.
An insurer can give you more, but not fewer, than 10 days. You can find this information in the documents given to you by the automobile dealer employee.
5- Don’t leave without the Fact Sheet
When offering you insurance, the automobile dealer employee must give you a Fact Sheet informing you of your rights. You must read it through, sign it and take a copy home with you.
The employee must also give you an explanatory documetn containing a comprehensive description of the coverage offered, the exclusions and the procedure for submitting a claim. The Fact Sheet (pdf - 134 KB)This link will open in a new windowUpdated on 29 October 2018 and the explanatory document are tools designed to help you make an informed decision.
Replacement cost endorsement or replacement insurance: Which one should I choose?
Your insurance agent or broker, or your insurance firm that offers products online, is proposing to add a replacement cost endorsement or replacement insurance to your automobile insurance. The automobile dealer is offering you replacement insurance. You have to choose either the replacement cost endorsement or replacement insurance because you can’t claim an indemnity under both at the same time if there’s an accident or your vehicle is stolen.
How do you make an informed decision? First find out about each these products. Damage insurance agents brokers and insurance firms that offer products online are allowed to compare the two products for you and advise you on them. Automobile dealers are not.
Documentation and tools
- Let's talk insurance! (pdf - 134 KB)This link will open in a new windowUpdated on 29 October 2018
- Choosing Auto Insurance (pdf - 382 KB)This link will open in a new windowUpdated on 25 February 2013
- My First Car Insurance Policy (pdf - 1 MB)This link will open in a new windowUpdated on 18 July 2012
- Insurance sold by Lenders and merchants (pdf - 972 KB)This link will open in a new windowUpdated on 29 September 2017