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
No one can make you buy replacement insurance. However, the financing company might, based on your credit report, require you to have your loan insured so the company will be repaid in the event of death or disability. Even in this case, it’s your choice which insurance product and insurer to 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 the state of your health could prevent you from receiving full coverage.
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 deal with a damage insurance agent or damage insurance 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, in which case, the amount of your monthly payments would most likely not decrease. Instead, the number of payments would be reduced, thereby shortening the repayment period.
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 document 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. These types of coverage are not required. If you want to benefit from them, you will have to choose either the replacement cost endorsement or the 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 and brokers and damage 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 - 2 MB)This link will open in a new windowUpdated on 25 February 2013
- Insurance sold by Lenders and merchants (pdf - 558 KB)This link will open in a new windowUpdated on 6 January 2020