AUTO INSURANCE 101
If you drive, you need insurance. Auto insurance is unlike other types of insurance because it is mandatory in Canada. Sometimes, the cost of the coverage is a little more than we would like to spend. But when you consider that every day there are accidents that cost tens or hundreds of thousands of dollars – covered by insurance – its value becomes clear. It is also clear that, while it may be about as exciting as doing your taxes, learning the basics of auto insurance will help you get the protection you need while controlling your costs. Public and private auto insurance. In B.C., Manitoba and Saskatchewan, government-owned insurers sell the vast majority of auto insurance and private companies are permitted to offer certain types of additional coverage. In Quebec, the government administers insurance covering bodily injury, while the property damage portion is covered by private companies. Everywhere else in Canada, private insurers offer all types of auto insurance coverage. Auto insurance differs in every province and territory, so ask about your province’s rules. And remember, there are always ways to customize your policy. It’s like buying a new car – you don’t have to get the one in the showroom. You can choose a different colour, save by doing without the fancy stereo, or spend a bit more for a leather interior. It’s your choice. Uncovering the coverages. In every province, there are types of coverage that are mandatory and others that are optional. Almost all coverages are subject to a deductible, which is the portion of a claim you agree to pay yourself, and to limits which are detailed in your policy. Some coverages are mandatory… Third Party Liability is a mandatory coverage that protects an insured person when his or her car injures someone or damages their property and that person is held legally responsible. Lawsuits can be extremely costly; so many drivers buy up to $2 million in liability coverage. In New Brunswick, Ontario and Quebec, damage to property is covered by a separate coverage called Direct Compensation – Property Damage. It’s called direct compensation because you will collect from your own insurance company even if you were not entirely at fault for the accident. Uninsured Automobile coverage, also mandatory, protects you from costs related to injury or death resulting from an accident with a driver who doesn’t have insurance or
who cannot be identified, such as a hit-and-run. It covers damage to your vehicle only if the uninsured driver is identified. Every province except Newfoundland and Labrador requires that you purchase Accident Benefits coverage as part of your policy. It provides compensation, including death and funeral benefits, if you, your passengers or pedestrians are injured or killed in a car accident, regardless of fault. It covers medical care not paid for by your provincial health plan and income replacement benefits to help you get by when you’re unable to work. Additional benefits are available in some provinces. …others are optional. In addition to the coverages you are required to purchase, many optional coverages are available to choose from. Collision coverage, as the name implies, covers costs associated with repairing or replacing your vehicle following a collision or overturning. Comprehensive coverage is similar – it covers non collision related damage to your vehicle such as vandalism, theft, fire, hail, flood, glass breakage, falling objects, or when you hit an animal. There are many other types of optional coverages out there, so make sure you know what’s available where you live. Many factors affect your rates. The coverages and deductible you choose have a major impact on how much you’ll pay for insurance. Three other important factors are: the driver, region and vehicle. The provinces and territories regulate auto insurance rates and determine which factors insurers are not allowed to use in setting rates. Depending on the province, factors such as driving experience, past accidents, age, gender and marital status may impact your rates, as will the number of drivers using the vehicle. The region you live in is also factored in, based on things like theft statistics in the area, the frequency and severity of accidents there, and the cost of repairs. The car you drive is another factor because some models get stolen more often than others, some have better safety features, and some are more expensive to repair. To see how vehicles compare in terms of insurance costs, check How Cars Measure Up at ibc.ca. Companies offer a variety of discounts for things like buying your home, life and auto insurance with the same insurer; completing a recognized driver’s education course; or installing approved anti-theft devices. Some also offer firstaccident forgiveness which can ensure that your first accident will not affect your rates. So ask around, and make sure you’re getting the breaks you’re entitled to.
What happens when I make a claim? If you need to make a claim, your insurance company will appoint a claims representative or “adjuster” who will act as your contact throughout the process. For more information, see our Insurance 101 article about claims. Understanding the basics of auto insurance can help you get the most for your money. So take some time to review your coverages and if you have questions, contact your Licensed Insurance Representative. This information is brought to you by The CUMIS Insurance Home and Auto Program.