Guide to car insurance coverage

Understand coverage types so you can build your perfect policy.

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No one ever plans to be in an accident, but according to the Canadian Transportation Safety Board there are around 160,000 car accidents in the Canada every year. Understand your coverage options so you can build the policy that’s right for you.

What’s included with basic coverage?

Mandatory third-party liability insurance coverage is required in every province and territory. Some provinces require more coverage than others. Mandatory insurance typically covers medical fees, vehicle repair and property damages, and bodily injury. Make sure you’re meeting your province’s minimum requirements.

Medical liability

Covers injuries to another person in an at-fault accident, including medical care, legal help and funeral costs.

Property damage liability

Covers damages to someone else’s property in an at-fault accident, including repairs to vehicle, buildings or fences.

Accident benefits/bodily insurance

Covers your healthcare after an accident including ambulances, nursing care and lost income.

Optional car insurance coverage to consider

Unlike mandatory coverage which is required everywhere, the following coverage types are optional. These optional coverage features offer extra protection against other mishaps that might happen to you or your car.

Collision

If you’re at fault in an accident, your collision insurance kicks in and pays for damage to your car.

Comprehensive

Ensures that you’re covered for the expense of replacing or repairing your vehicle, regardless of fault, and damages that aren’t within your control like vandalism, theft, and damages to your windshield.

Gap insurance

This insurance covers the gap between how much money you receive from your insurer due to a write-off and what you may still owe on your car.

Emergency road service (ERS)

If you break down on the side of the road, you’ll have help when you need it. This coverage can include light mechanical labour, new batteries, tire changes or a tow.

Uninsured motorist coverage

You’ll get coverage for damage to your vehicle, injury or death if the motorist who hit you is uninsured.

Perils coverage

Covers perils, either specifically named or universal, that can occur to your vehicle such as weather damage.

What coverage do I need?

When you’re shopping around for the lowest price car insurance, you’ll see several options with big price differences. When comparing whether to add certain kinds of coverage, consider both the minimum provincial requirement and if the optional coverage is worth it.

The cheapest car insurance isn’t always the right one for your needs, even if saving money is your number one priority. Consider how you’d pay for your car if it was stolen or totaled in an accident. Could you afford a new car without insurance?

Liability claims, for example, could total much more than the bare minimum if you crash into someone’s garage or a car full of passengers. If you’re looking for the cheapest coverage, play around with maximum coverage and monthly payments. An extra $5 a month could cover you for hundreds of thousands in extra coverage. But for an older car that’s worth less than your annual premium, consider cutting comprehensive coverage.

How much does coverage cost?

ProvinceAverage Annual PremiumDetails
British Columbia$1,680Most expensive rates in Canada. Rates expected to increase.
Ontario$1,445Highest frequency of claims and crime in country affect private insurance
Alberta$1,251Insurance expenses account for only 2.7% of disposable income in province which is the lowest in the country.
Newfounland & Labrador$1,132Rates increased from average of $700 12 years ago due to increase in claims and lawsuits.
Manitoba$1,080Rates have fluctuated dramatically year to year.
Saskatchewan$936Rates fluctuate yearly dude to changes in public system.
Nova Scotia$842Rates have decreased yearly due to low number of claims relative to rest of country.
New Brunswick$819Following Alberta, insurance expenses account for only 2.8% of disposable income in province.
Prince Edward Island$796Most efficient privatized insurance systems in county with low rates and low number of claims yearly.
Quebec$642Least expensive in the country. Combines public and private insurance.

Note: rates as of June 2018.

How much extra car insurance coverage can I afford?

You can afford the most coverage by getting exactly what you need — and nothing more. While it can be beneficial to spend a little extra on your annual premiums, you don’t always need the most expensive policy.

  • Have high-deductible health insurance? Pay about $50 a year to add on $1,000 of medical payments coverage. Once your car insurance has paid the deductible, your health insurance can cover the rest.
  • Have a new car? Add gap insurance so you don’t end up paying two car loans if yours is totaled in an accident and needs to be replaced. When your car is paid off, take it off your policy.
  • Have an old car? Collision insurance may have been a great idea when your baby was new, but it might be time to re-evaluate. If your deductible costs almost as much as your car, you can ditch this add-on.
  • Don’t have a hefty savings account? Uninsured motorist coverage could be worth the extra money. Without it, if you’re injured in an accident where you’re not at fault, you’ll have to take the other driver to court to get the money. And you’ll have to pay for any bills yourself until you have a settlement, even if you’re unable to work.

What you won’t be covered for

While exclusions may vary between providers, you generally won’t be covered for:

  • Damage caused by mechanical failure, depreciation, rust, wear and tear or changes made to the vehicle
  • Damage incurred due to participation in a race or your vehicle generally not being safe
  • Damage that was caused intentionally
  • Any damage incurred if the person driving didn’t have a license, was drunk or on drugs
  • Drivers not listed on your policy

Bottom line

Effectively comparing car insurance quotes requires understanding the ins and outs of each type of coverage to decide if you need it and what’s covered. Compare car insurance companies and get multiple quotes to find the right policy and coverage for you.

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