If you lease or finance a car in Ontario, the lender or leasing company will typically require collision and comprehensive coverage, often with a maximum deductible, and will ask to be named as loss payee on your policy. The law only requires liability, accident benefits and uninsured automobile coverage, but your contract usually asks for more.
Key takeaways
- Collision and comprehensive are optional by law, but lenders and lessors almost always require them for the life of the loan or lease.
- Your contract may cap your deductible and may set a minimum liability limit, so read it before you shop.
- The lender or lessor is usually named as loss payee, which means it is paid first if the car is written off or stolen.
- OPCF 5 deals with rented or leased vehicles, and gap or waiver of depreciation cover can protect you against owing more than the car is worth.
Why lenders and lessors have rules
When you finance a car, the lender has a financial stake in it until the loan is paid. When you lease, the leasing company owns the car and you pay to use it. In both cases, a badly damaged or stolen car would leave someone out of pocket, so the contract tells you how to protect the vehicle.
Those rules are set by your finance or lease agreement, not by Ontario law. That is why two people with similar cars can see different requirements. The wording in your own contract is what counts, and it is worth reading the insurance section before you sign, not after.
The mandatory coverages still apply
Every Ontario policy must include third-party liability (legal minimum $200,000), statutory accident benefits and uninsured automobile coverage. A lease or loan does not change that. Many lessors ask for a higher liability limit than the legal minimum, and most people choose $1 million or $2 million anyway. Our guide on how much liability coverage you need can help you think it through.
On 1 July 2026, some accident benefits became optional to buy, while medical, rehabilitation and attendant care benefits remain mandatory. Contracts may be silent on this, so check your policy and ask your broker what is included. The explainer on the July 2026 changes covers the details.
What lenders and lessors typically require
Requirements vary, but these items come up often.
Collision and comprehensive
Collision pays for damage to your car when it hits something or is hit. Comprehensive pays for other damage, such as theft, vandalism, fire or a falling branch. An all perils policy combines the two with one deductible. Lenders usually want both, in one form or the other. If you want the basics first, read about collision, comprehensive and all perils.
A maximum deductible
A deductible is the amount you pay before the insurer pays the rest. Because a high deductible means the car is less protected, many contracts set a ceiling. The number varies by lender, so do not assume. A higher deductible usually lowers the premium, but it also raises what you pay after a claim. Pick a figure you could pay tomorrow without stress. More on this is in our guide to deductibles.
Loss payee
A loss payee is a party named on your policy who has a financial interest in the car. If the car is written off, the insurer typically pays the loss payee first, up to the amount owed, and any remainder goes to you. On a lease, the lessor is usually the registered owner, and the policy is set up to reflect that. Your broker can add the right wording and send proof of insurance to the lender.
Proof of insurance and continuous cover
Lenders usually ask for proof of insurance at the start and may ask again at renewal. If your policy lapses, some contracts allow the lender to buy cover on your behalf and charge you. That is rarely cheaper or better, so keep your policy active and tell your broker about any change.
OPCF 5 and leased vehicles
OPCF stands for Ontario Policy Change Form, which is a standard endorsement that changes a policy. OPCF 5 is the endorsement for rented or leased vehicles. It exists because a car you do not own raises questions that a standard policy may not answer on its own, such as whose coverage applies and for what.
Exact wording, how it is used and whether you need it depend on the policy and on your lease terms. It is also not the same as OPCF 27, which gives legal liability cover for non-owned vehicles you borrow or rent. Rather than guess, ask your broker three things:
- Does my lease require OPCF 5, or is it already built into my policy?
- What does it change in practice if there is a claim?
- How does it work with the loss payee on my lease?
For a wider look at add-ons, see OPCF endorsements explained.
Gap and waiver of depreciation
New cars often lose value quickly. If you owe a lot on a loan or lease and the car is written off, the insurer pays based on the car's value at the time, which can be lower than your balance. The difference is the gap.
There are two things people often mix up:
| Option | What it is aimed at |
|---|---|
| Waiver of depreciation (OPCF 43) | Changes how a total loss on a newer car is calculated |
| Gap cover | Addresses a shortfall between the car's value and what you owe |
Some lessors build gap protection into the lease. Some lenders or dealers sell it separately, and some insurers offer similar protection. Availability, price and rules vary, so compare the options and ask for a clear written description of what is covered. It is worth asking more about it if you made a small down payment, chose a long term, or rolled an old balance into the new loan.
A simple example
Picture a 2021 compact SUV, financed in Toronto, and written off after a collision.
- You carry collision with a deductible that fits your lender's limit.
- The insurer values the car and, because the lender is the loss payee, typically pays the lender first up to the balance.
- If the valuation is lower than the balance, you may still owe the difference unless you have gap cover or similar protection.
- Any remainder after the loan is settled would go to you.
Every claim is different, so this is an illustration, not a promise of what will be paid.
Common mistakes to avoid
- Dropping collision once the car feels old. While you still owe money or lease the car, the contract usually requires it.
- Picking a deductible above the lender's limit. This can put you in breach of your agreement.
- Not telling the broker about the lease or loan. The loss payee must be named correctly for payment to go smoothly.
- Assuming gap is included. Check your documents and ask.
- Ignoring the end of the lease. Damage that goes beyond normal wear can lead to charges, so read the return conditions.
What to ask your broker
- What coverages and maximum deductible does my loan or lease require?
- Is the lender or lessor listed as loss payee, and have they received proof of insurance?
- Do I need OPCF 5, and what does it do in my case?
- Do I have gap cover or waiver of depreciation, and what would a claim look like in numbers?
- What liability limit do you recommend, and does my lease set a minimum?
- What happens to my coverage when the lease ends or I pay off the loan?
Ontario brokers are licensed by RIBO, and consumer information is available from FSRA and the Insurance Bureau of Canada.
Before you act
Find your finance or lease agreement and read the insurance clause. Then compare it with your current declarations page, which lists your coverages, limits and deductibles. Write down any mismatch and bring it to your broker. When you are ready, you can request an auto insurance quote and compare the coverage, not just the price.
Reviewed October 2026. This article is general information and not insurance or legal advice. Rules change, so confirm the details with a broker and the official sources below.
