Auto insurance is a necessary evil, and as Canadians, we’re used to paying some of the highest rates in the world! But don’t worry, if you live in Ontario there’s no HST tax on your car insurance.
Does that mean I’ll save money?
The answer is yes – but it depends on how much coverage you need. If an individual has enough liability coverage for damage or injury to others (or their property) then they will have reduced costs over time because this type of policy usually covers what other people might call “the bare minimum.” However, those who want comprehensive protection from expensive accidents may be better off investing more upfront by purchasing additional types of auto policies like collision or uninsured motorist coverages.
Table of Contents
Pre-HST: Ontario Retail Sales Tax (RST)
Prior to the implementation of Harmonized Sales Tax (HST) on July 1st, 2010, Ontario had a Retail Sales Tax (RST) tax that applied 8% towards most types of goods & services sold at point-of-sale locations including automotive accessories. However, because car insurance premiums were never included in this list they continue to remain untaxed.
Effect of Harmonized Sales Tax (HST Ontario)
Ontario’s new HST system, which took effect in 2010, includes the elimination of its PST on goods and services. However, it retained an 8% PST for other types of insurance premiums. This means that car insurance is exempt from this tax while other types of insurance are taxable at 8%.
HST on Accident Claims
Recently, there have been some cases brought before the courts in Ontario about HST and accident claims. A few insurance companies were charging HST on the claim they paid out to people who had an accident, instead of paying it themselves. Some recipients of this charge went ahead with a court case challenging whether or not that was allowed by law – but their filing recently got thrown out because of a technicality that the courts were not bound to hear due to it being under the umbrella of the LAT jurisdiction.
Tax Breaks
Individuals looking to insure their vehicles should take advantage of this tax break. While many people are aware that HST is applied on most purchases in Canada with few exceptions, they may be under the impression that there will also be a standard 15% HST automatically added to the quoted price. You might be wondering if you’re paying for just the insurance premiums or if there other things in that price.
When looking at your quote, it’s important to remember a couple of key points:
- First, when you get the amount quoted by your insurer--it is just an estimate and doesn't include any additional costs;
- Second, knowing how much covers what (i.e., actual cost) will allow comparison shopping;
- Third, the quote is not subject to any HST
Car Insurance Tips
Car insurance in Ontario can be a confusing topic for many people. It’s not uncommon to hear about common mistakes that are made. Here are some tips to make sure you are prepared before you purchase a car insurance policy:
- Research: Knowing which vehicles are more expensive to insure can save you money when it comes to your car insurance premiums. For example, if you have a specific model of car, like an Audi or Mercedes Benz, be prepared for higher monthly payments. On top of this, there are many other benefits such as having security features or winter tires installed.
- Read the policy: If you have an auto insurance policy, it's important that you read through the document and make sure everything is clear. You may not agree with some of the terms or think your car coverage will cover something when in reality it won't.
- Be honest: Insurance companies will void a claim if they find out you're lying on your insurance application. For example, some people might not give their complete address because it would show up as less risky for them in that area and lead to cheaper rates. If an individual lies and there is ever any need to make a claim, then at best you'll have your coverage voided, or more likely nobody will cover you!
- All insurance companies are different: When an individual gets an insurance coverage quote they just assume that all the other companies will offer them similar premiums, but this may not be true at all! This is because each company places weight on some metrics more than others in determining their own premium rates. They use many of the same metrics to determine your rate - it's how they rank these measurements (i.e., importance) and assess the response of your questions about things like previous accidents, or tickets. This can make all the difference when comparing policies between insurers.
- Ask questions: Insurance companies are not perfect and they can make mistakes that result in you being overcharged for your insurance. If you feel like something isn't right with your plan, then speak up! For example: if the renewal rates went up without any changes from when the policy was first issued, there might be a mistake somewhere. Double-check the policy for issues relating to what kind of coverage you need, or when exactly your policy should start or end.
- Keep your insurance provider informed: You should always keep your insurance company in the loop when it comes to any changes, especially those affecting cost or coverage. Your rates and policies are based on what you supplied them with during application, so be sure not to forget anything! The type of information an applicant must provide includes: your name and address, driver's license number (if changed), and Vehicle Identification Number (VIN)
FAQs
What tax is charged on insurance in Ontario?
One type of taxation that has been added as more Canadians try to take care of their own health costs is Premium Tax-or “premiums” which are paid by all Ontarians who have an active business license located inside the province borders. The Ministry of Finance administers the premium tax to insurance companies and:
- administrators of funded and unfunded benefit plans, also referred to as Ontario uninsured benefit arrangements
- anyone buying insurance placed with an insurer not licensed in Ontario
- reciprocal or inter-insurance exchanges.
Here are the insurance premium tax rates:
| Type of Insurance | Rate |
|---|---|
| Life | 2% |
| Accident | 2% |
| Sickness | 2% |
| Property | 3.5% |
Is there GST on vehicle insurance?
No, there is no GST on car insurance. Both GST and QST do not apply to insurance premiums.
Is a car insurance claim taxable?
Most auto insurance claims for medical bills are tax-exempt. This is because when it comes to health care and car accidents, the company will usually pay a hospital directly or simply reimburse you for medical expenses that would not be considered income by most employers.
