If you turn on the radio or television you are bound to hear countless ads promising lower car insurance rates in minutes if you switch to their provider.
What these ads often leave out, however, is that these cheaper plans are usually sub-par. Basic car insurance tends to cover only the mandatory minimum required by the government.
So, while you may save on lower insurance premiums each month, you could stand to lose much more money if the coverage is insufficient when you need a most.
But how can you know how much insurance you actually need? This guide to types of car insurance will help you understand what different plans cover and what you need to be safe on the road.
What's the Mandatory Minimum?
The Canadian government requires all drivers to carry a certain minimum amount of insurance. The purpose of this mandate is to ensure all drivers are sufficiently covered if they cause damage to a person or property while operating their vehicle.
Mandatory minimums vary from province to province. All provinces, however, require what is considered "third party liability."
This covers any person or property (ie, "third-party") that is injured, killed, or damaged as a result of a collision you cause with your automobile. In most cases, the minimum coverage is $200,000.
Other types of car insurance, like statutory accidents, benefit coverage or direct compensation and property damage may not be required depending on where you live. That does not mean, however, that it isn't a good idea to have them.
Should I Carry More Than the Minimum?
If you live in a province that only requires third party liability insurance, you should almost certainly carry more than the mandatory minimum. Let's take a closer look at the other types of coverage you should consider.
Personal Injury Coverage
One important type of coverage to consider is coverage for medical bills, disability, or death.
Medical Coverage
In Canada, over 10,000 people are seriously injured in a motor vehicle collision every year. Adding medical coverage to your insurance plan will ensure that injuries are covered that may not be fully covered by your health insurance.
Disability Coverage
You may also want to consider disability coverage. This coverage will provide relief if you are temporarily or permanently disabled and therefore unable to work.
Death Benefit
Finally, you may also want to consider insurance with a death benefit. This is especially important if you do not have life insurance to make sure you would provide for those you leave behind.
Property Damage
While it is important to consider the possibility of personal injury, this is not the only factor to keep in mind. When you purchase car insurance, you also want to make sure you are protecting the cost of your vehicle.
Mandatory minimum coverage only requires you to carry insurance for damage to another person's vehicle, not to your own. So, if you were in an at-fault accident that damaged your vehicle, you would be unable to make a claim.
Comprehensive vs Collision Coverage
When covering your vehicle, you have the option to choose collision coverage or comprehensive coverage.
Collision coverage applies to any damage sustained as a result of a collision with another vehicle. This covers repair or replacement costs, regardless of who is found to be at fault.
Comprehensive coverage covers damage to your vehicle by causes other than collision. For instance, if a tree branch falls on your car, the damage would be covered by comprehensive.
Some drivers choose to forgo comprehensive coverage for older vehicles. Their reasoning for doing so is that the cost of the deductible would be higher than they would be willing to pay to repair the car. For instance, in the event of damage, the driver may prefer to replace an old car rather than pay a $1,000 deductible to repair it.
For some drivers, this may be the right choice. Keep in mind, however, that comprehensive coverage also covers events where your vehicle is a total loss, such as flooding or theft. In these cases, it may still be worth it to have the coverage.
Property Damage
When you're driving your vehicle, you're often transporting valuable possessions: electronics, sporting equipment, etc. If you do not have property damage coverage, you would not be able to get compensated to replace these items in the event of an accident.
Other Types of Car Insurance
When it comes to car insurance, coverage for personal injury and property damage are the two major categories. That said, there are a couple additional types of coverage you may want to consider.
Uninsured and Underinsured Motorist
Even though Canadian law requires all drivers to carry auto insurance, not all drivers abide by this law. For this reason, it is important to protect yourself with uninsured and underinsured motorist coverage. With this coverage, you will be able to cover injuries and property damage for an accident where an uninsured driver was at fault.
Loss of Use
Sometimes, your vehicle may be unavailable for use while it is being repaired after a collision. This can be inconvenient if you depend on the vehicle for work. Loss of use insurance covers the cost of a rental vehicle in these instances.
Accident Rating Waiver
Auto insurance companies use a variety of metrics to calculate your risk as a driver. They rely on these metrics to determine how much to charge you for your insurance.
One metric most companies use is driving history. This is because a driver without a history of at-fault accidents is considered less risky than a driver without such a history. But, if you pay for an accident rating waiver, your rates won't go up even if you are involved in an at-fault accident.
Types of Car Insurance: Getting What You Need
With a better understanding of the different types of car insurance available, you will be able to get the right amount of insurance coverage for your needs.
Want to get the lowest price for the best coverage? Use our free online quote tool to find great rates in Canada!
