Different Coverage for Different Drivers: Understanding Canadian Auto Insurance

Canadian auto insurance policies feature three basic types of coverage. Two of these coverages are required by law in virtually all provinces and territories. The required minimum dollar limits vary among jurisdictions.

Mandatory Coverage Types

The main purpose of mandatory coverage is reimbursement for various expenses that result from accidents in which you are at fault.

Liability Insurance

This type of coverage extends to third-party damage claims which arise from accidents caused by you. Liability insurance typically covers the cost of legal judgments or out-of-court settlement of damage claims against you. Attorney fees for your legal defence are also included.

Common incidents that trigger liability claims are injuries sustained by passengers in your vehicle in accidents where you are found to be at fault. If you skid off an icy road and strike an expensive fence, pedestrian, or brand-new Mercedes convertible, liability coverage reimburses the property owner or pedestrian on your behalf.

Accident Benefits/Bodily Injury (AB/BI)

This coverage reimburses expenses that you incur in an auto-related accident. Typical claims include lost income and medical bills. Doctor’s visits, ambulance and hospital fees, and surgery are eligible for reimbursement. All provinces except Newfoundland and Labrador require this coverage.

AB/BI coverage does not include damage to your car. It does provide reimbursement for other eligible expenses whether you or someone else is at fault, however.

Optional Coverage Types

Although not required by law, optional coverages can benefit you in many ways. The additional protection is often worth the extra expense.

Collision Insurance

This coverage protects you against damage to your car resulting from collisions of any type. Covered incidents include minor fender benders and catastrophic impacts that totally destroy your vehicle.

Comprehensive Insurance

Comprehensive insurance covers vehicle damage resulting from causes other than collision. Fallen trees, sleet damage from storms, parking lot sideswipes, fires, theft, and vandalism are included. If you have an outstanding lien on your vehicle, the lien holder will require you to maintain comprehensive and collision coverages until your balance is paid off.

If your car does not have a lien, you may still opt for the extra protection. The determining factors as to whether you should purchase optional coverage are your car’s age and value. If you drive a late-model vehicle worth a substantial sum, the additional cost for comprehensive and collision coverages is minuscule compared to your potential loss.

If, on the other hand, you drive an older model “clunker” worth less than $1000, you likely want to omit optional coverage. The additional premiums will eventually total more than your maximum potential loss. Instead, invest the amount of the additional premium in a high-yield financial instrument of some sort. If you do sustain the total or partial loss of your car, you are still covered – with interest.