Ever get anxious when you’re speaking to an insurance broker? The broker starts using terms like ‘Third-Party Liability’ or ‘Comprehensive,’ and you have no idea what they’re talking about. You smile and nod, just waiting to sign on the dotted line and get out of their office as quickly as possible.
Phew. You made it! You drive out of the lot having successfully acquired automobile insurance and without having embarrassed yourself…
But also without really knowing what insurance you have.
This attitude – while understandable – can really cost you in the long term, particularly if you’re involved in an incident and the safety net you thought you had just isn’t there. This handy primer to car insurance in Canada will tell you everything you need to know about the basics, so you can start making smarter, more informed choices and ultimately save more money.
If you are taking an automobile out on a public road in Canada, you need insurance. That’s an indisputable fact. But the exact level of coverage depends on the province you live in. All provinces require you to take out Accident Benefits, Third-Party Liability, and Uninsured Motorist coverage. Still, Alberta, Ontario, Quebec, and the Atlantic provinces also require you to have Direct Compensation Property Damage (DCPD) insurance, too.
- Accident Benefits
Accident Benefits provide compensation if a person is injured during an incident you are involved in. It doesn’t matter who the person is – you, a passenger, another driver, a pedestrian – and it doesn’t matter who is at fault. The default industry figure covers up to $1,000,000 in compensation, but this can be raised or lowered.
- Third-Party Liability
Third-Party Liability comes into play when you are at fault for an incident. It is called third-party insurance because your insurer (the second party) will pay on your behalf (the first party) to a third party (the person you hit.) Depending on the nature of the incident, this could be medical bills, vehicle damage/replacement, or property damage/replacement.
- Uninsured Motorist
Everyone needs insurance to drive on the roads in Canada… But not everyone does. Uninsured Motorist kicks in if you are killed or injured by an uninsured driver, your vehicle is damaged by an uninsured motorist, or an uninsured motorist kills or injures you when you are not in your car. This also covers hit-and-run incidents where the other driver cannot be located.
- Direct Compensation Property Damage (DCPD) (AB, ON, QC, NL, PE, NS only)
DCPD coverage means that no matter who is at fault for an accident, your insurer will pay you compensation to repair/replace your property – i.e., your vehicle. In provinces without DCPD, the insurer of the party determined to be at fault for the incident will pay for all parties to replace/repair their property.
It’s a big world out there, filled with all kinds of strange or unexpected situations you might encounter. Optional insurance gives you added peace of mind. How much peace of mind you want is entirely up to you.
- Collision Insurance
Collision insurance covers accidents where you collide with a stationary object – whether that’s a brick wall, a guard rail, or someone else’s parked vehicle. Note that this will only cover damage to your vehicle, not to the object you crashed into.
- Comprehensive Insurance
The opposite of Collision insurance, Comprehensive coverage is what you need if something happens to your vehicle when it is stationary. The exact list varies from policy to policy, but this covers things like vandalism, theft, and extreme weather events.
- Guaranteed Auto Protection (Gap) Insurance
Gap insurance is used when you still owe money on a loan or lease for your vehicle, but your vehicle is completely written off. If the payout your insurance provider offers, you will not cover the outstanding money you owe, and Gap insurance makes up the difference.
- Umbrella Insurance
All insurance policies have a liability limit – i.e., how much the insurer will pay you for any individual accident. If the combined total bills go over this amount, you have to pay the extra yourself. Umbrella insurance covers this excess figure.
- Usage-Based Insurance
Some insurance providers offer Usage-Based Insurance, where they will install a monitoring device in your car or an app onto your phone. They will track this data to see how far you regularly drive and also observe your driving behaviour – which can lead to reduced rates.
So, there you go – you’re now better informed the next time you need to negotiate your rate. But don’t be too hasty cutting back on the optional coverages. Think you don’t need Collision or Comprehensive? How many times as a Canadian have you encountered icy roads or sudden hailstorms?
Get in touch with a member of our team today – we’ll be happy to explain how paying a little extra today can save you much more in the long term.