Buying an automobile: Life, health and loss of employment insurance
If you take out a loan to buy a vehicle, automobile dealers and lending institutions are allowed to offer life, health and loss of employment insurance on your loan. This insurance will reimburse all or part of your loan if:
- You die;
- You become disabled and cannot work; or
- You lose your job.
Is this insurance mandatory?
As a general rule, this insurance is not mandatory. Sometimes, the business that lends you the money to buy your vehicle requires you to have this type of insurance. However, you do not have to accept the insurance it offers. There are several options to choose from!
Option 1: Demonstrate that you already have insurance
You may already be covered, for example, by your group insurance plan at work. Check to see whether your coverage is sufficient.
Option 2: Buy life insurance from the insurer of your choice
Before buying a vehicle, you could consult a financial security advisor about how much it would cost for insurance that would give you the same coverage as what the lender requires.
Option 3: Accept the offer from the business lending you the money
Automobile dealers and lending institutions can sell life, health and loss of employment insurance on a loan without being certified by the AMF. However, if they do, they must:
- Give you an explanatory document;
- Clearly state the exclusions (what's not covered by the insurance);
- Indicate the commission they receive, if it exceeds 30% of the cost of the insurance;
- Inform you of the procedure for submitting a claim;
- Explain your recourse if the insurer refuses to pay your claim.
A mandatory fact sheet
When offering you insurance, the dealer must give you a fact sheet called Let’s talk insurance! Take the time to read it so that you know your rights and can make an informed decision.
Fact sheet (pdf - 147 KB)This link will open in a new windowUpdated on 12 June 2019fact sheet regarding the rights for a consumer, buying an insurance without a representative
You have responsibilities, too
Before you decide, make sure that you:
- Have received all the information and have read the documents. If something isn't clear, ask for clarification.
- Answer all questions correctly. If, for example, you conceal a previous health problem, the insurer could refuse to compensate you, and your insurance contract would be worthless!
If you accept the product offered by an automobile dealer or lending institution, you will receive confirmation of insurance within 30 days.
Include the cost of the insurance in the loan?
You can often add the cost of the insurance to your automobile loan. If you do, you'll pay interest on the cost of your insurance.End of the warning
10 days to terminate your insurance contract
You can terminate your contract within 10 days of signing it.
You will not have any costs or penalty. You’ll be reimbursed any premiumsA premium, or insurance premium, is an amount that a person or company must pay on a regular basis to keep their insurance in effect. For example, if Mary has to pay $200 per year to keep her life insurance in effect, then the premium is $200.
The premium should not be confused with the face amount, or insured amount, which is the amount that the insurance company has to pay out. In the same example, if Mary has life insurance that pays $100,000 to Peter upon her death, then the face amount is $100,000. you’ve already paid.
Is your insurance included in your automobile loan? Then your reimbursement will probably go towards reducing your loan. You might therefore have the same monthly payment, but you’ll have fewer payments to make.End of the insight
Documentation and tools
- Let's talk insurance (pdf - 147 KB)This link will open in a new windowUpdated on 12 June 2019
- 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