What is auto insurance?
Simply stated, car insurance protects you against the financial losses you would suffer if you were involved in an automobile accident. Your insurance company pays for these losses out of the pool of insurance premiums it collects from its thousands of customers. If you have no car insurance, you risk losing your savings, your home and your personal assets every time you get behind the wheel of your car.
What types of car insurance coverage are available?
The financial protection offered through car insurance covers many areas:
It protects you against claims if you’re responsible for an accident causing injury or death to another person. Similarly, you are protected in the event you damage someone else’s car or property (this is known as Third Party Liability). It can protect you, your family and your passengers against financial losses caused by injury in an automobile accident and it can provide financial compensation for dependents in the event of your death (this is known as Accident Benefits). It can also protect you against the cost of damage to your car from a collision or other causes (this is known as Collision or Comprehensive).
Brokers can advise you on the best protection for your personal needs at a fair price. Also, when purchasing a new car, it is advisable to investigate the cost of insurance in advance. You’ll find that the cost varies according to the price and type of car, and this may have a bearing on your purchase decision.
How is my coverage guaranteed?
Once you’ve decided what coverage you want, an insurance contract is established between you and your insurance company. The terms of this contract are set out in your policy, which is approved by the provincial government acting through the Superintendent of Insurance. Each policy, therefore, is designed to meet the needs and desires of the individual car owner. The Superintendent of Insurance monitors the actions of insurance companies to protect your interests.
Do I have to buy car insurance?
Yes. By law, anyone who owns a motor vehicle and drives on public roads anywhere in Canada is required to have certain basic coverage. You have to purchase Accident Benefits insurance, Uninsured Automobile coverage and at least $200,000 worth of Third Party Liability insurance.
There is one exception. In Newfoundland and Labrador, Accident Benefits insurance is not compulsory, but we strongly recommend you avail of this coverage.
What is ‘Third Party Liability’ insurance?
Third Party Liability insurance covers you if your car injures someone else or damages his or her property. Should a claim against you be more than your level of coverage, you can be held personally responsible for the balance. For this reason, most drivers purchase more than the minimum $200,000 coverage required by law.
What are ‘Accident Benefits’?
Accident Benefits coverage is compulsory in all provinces except Newfoundland and Labrador. It provides compensation if you, your passengers, or pedestrians suffer injury or death in an automobile accident. The compensation is paid regardless of who is at fault in the accident. The following are the categories of compensation provided by Accident Benefits. The amounts paid in each category vary from province to province.
Medical: reimbursement for the cost of medical treatment not covered by any medical, surgical, dental or hospital plan or law.
Funeral: payment towards funeral expenses of those killed in a car accident.
Death: a lump sum payment following the death of an insured person; the amount will depend on the age, marital status and the number of dependents of the deceased.
Total disability: a limited weekly payment to employed individuals totally disabled in a car accident.
What is ‘Uninsured Automobile’ coverage?
Uninsured automobile coverage provides compensation up to $200,000 if you are injured or killed through the fault of a motorist who has no insurance. Except for New Brunswick, this coverage is part of Accident Benefits. You receive payment under this coverage unless the province or territory where you were injured has a special fund from which to claim. You will be reimbursed for the money you would otherwise be entitled to receive from the uninsured motorist. New Brunswick does not have such a fund, so victims of uninsured motorists in that province look to their own insurer for reimbursement under the Uninsured Automobile coverage. There your recovery is based on the amount you would be entitled to receive from the uninsured motorist in a lawsuit.
What coverage is available to pay for damage to my car?
Coverage for damage to your own vehicle is optional. Various categories are available (All Perils, Collision, Comprehensive and Specified Perils) to cover incidents such as collision, vandalism, fire and theft.
–Loss or damage from mechanical breakdown, normal wear and tear, rust, corrosion, etc., is not covered.
Are there any other coverages I can buy with my car insurance?
A number of other options are available which tailor your policy to your particular needs. These include coverage to a stated dollar limit in the event your car is so badly damaged that it cannot be repaired; protection against depreciation in the first two years of owning a new vehicle; and protection in the event that the person responsible for your accident doesn’t carry adequate Third Party Liability insurance. You should discuss your insurance needs with your broker to obtain a more complete explanation of these options and ensure you are adequately protected.
What is a deductible?
The deductible is the portion you agree to pay on any damage to your car before your insurance comes into effect. A common collision deductible, for example, is $250. This means that you would pay the first $250 of any repair bill and your insurance company would pay the balance. Any damage that cost less than $250 would therefore be your own responsibility. There is no deductible in the case of fire or theft of the entire vehicle.
Does the deductible always apply?
Yes, the deductible applies to any damage claim you make on your policy, even if the accident was not your fault. In such cases your insurance company may try to recover the money it has paid, as well as your deductible, from the person responsible for the accident.
What do I do if I have a claim?
Contact you broker as soon as possible to advise that you’ve had a loss. In cases of injury in a car accident, or if theft or break-in is involved, the police must be told as well. Once your insurance company has been advised, a claims specialist called an adjuster will be assigned to look after your claim. The amount you receive for your claim will depend on the type of coverage you bought.
What is the role of the claims adjuster?
The adjuster’s job is to determine the facts relating to the claim and the extent to which the claim is covered by insurance. The adjuster also attempts to reach an agreement with the other people involved regarding the amount of their loss and extent of their responsibility. Your insurance company pays for the adjuster.
How long after an accident can I make a claim?
Although it is recommended you notify your insurer as soon as possible if you’re making a claim, your policy states that a written declaration must be made within 90 days of the loss or damage. If you don’t make your claim within the 90 days, the insurance company may not be legally bound to honour your claim. In practice, however, most companies will honour a claim made within one year if there is a plausible reason for the delay.
If you’re making a claim against another driver, you should notify his or her insurance company as quickly as possible. Under some circumstances, and in some provinces, the claim against the other driver must be started within one year; in others, within two years.
Note: It is recommended that you notify the other driver’s insurance company of the claim yourself. Do not assume that the other driver has done so.
How are claims settled?
The vast majority of claims are resolved amicably through negotiation. A car insurance policy is a legal contract between you and your insurance company. As with any contract, the courts have the final decision in any disagreement between you and your company, or in any dispute between you and another person involved in the same accident. In such cases, the court decides who is responsible and may also decide the extent of damages to be paid.
What will my insurance pay for if my vehicle is damaged in an accident? If you have collision coverage, your insurance company will pay for the repair, replacement or actual cash value of your car at the time of the accident. Of course, you will be responsible for the deductible. If your car can be repaired, your insurer is responsible to pay for repairs to the damaged area only. If the repair cost is close to or more than the actual cash value of the car, the company may decide to write-off the vehicle instead of repairing it and pay you the cash value. When your car is being repaired, you may wish to get additional work completed which is not a direct result of the accident. This is permissible, but the extra repairs would be at your expense.
What happens if my vehicle is damaged in an accident but I don’t have collision coverage?
If the accident were the other driver’s fault, you could claim payment of your damages from the guilty driver. If it were your fault, you would personally be responsible for your damages.
What will my insurance company pay for if I damage someone else’s property?
If you are responsible for the accident your insurance company will pay for damage to the other driver’s car. It will also pay for repairs to any other property damaged by your car, such as fences, poles or buildings.
What payments are made in an injury claim?
Payments for any injury to you, your passengers or a pedestrian fall into two basic categories:
Compensation for specific costs or losses (known as special damages), such as medical bills, lost wages, ambulance and hospital expenses, funeral costs; Compensation that must be estimated (known as general damages), such as for future disability and expenses, pain and inconvenience and reduced life expectancy.
Will my insurance company help me if I’m involved in legal action after an accident?
If someone claims you are at fault in an accident and sues you, your insurance company will provide lawyers to defend you and will pay the legal costs.
Can fault in a car accident be shared?
Yes. The circumstances of an accident may show that more than one driver was negligent. Each driver’s insurance company may then become involved in the settlement based on the degree of responsibility attributed to each person. If there is a dispute about responsibility, court action may be required to resolve it.
What factors affect the cost of my car insurance?
Insurance companies consider a number of aspects when calculating an individual’s premium. The key ones are: type and age of car; whether you use your car for pleasure or business;annual mileage and territory of use; your driving record; your insurance claims record; and other drivers in the household who use your car.
How does the type of car I drive affect the cost of my insurance?
The type of car you drive generally does not affect the premium you pay for Third Party Liability insurance.
It does, however, affect the cost of coverage for physical damage to your car. Insurance companies rate cars according to their safety record and the cost to repair or replace them. Collision and Comprehensive insurance varies according to these ratings. Some companies also charge more to insure certain types of high-powered cars or those which have been increased in value by customizing.
How important is my claims record in the cost of my car insurance?
You may receive a discount on your premium for each year that you remain ‘claims-free’, to a maximum of 5 or 6 years. The method and amount of discount varies from company to company. Some companies will ‘forgive’ a minor claim and not change your no-claim status. If you are at fault in an accident, your premium may return to the company’s standard rate until you build up a claim-free record again. If you change insurance companies, your premiums will likely reflect your claims record with your previous insurer. You should also be aware that your premium could increase if another driver is a fault in an accident while driving your vehicle with your permission.
How does my driving record affect the cost of my car insurance?
Your record of moving traffic violations could be an indication of how responsible you are as a driver and therefore how likely you are to be involved in an accident. Most companies take this into account when calculating your premium. If your insurance covers other people who drive your car, their records may also be considered when your premium is calculated.
How do companies sell car insurance?
Car insurance is offered to the public in two ways. The first is through brokers, who may represent several insurance companies. The second is through agents or sales representatives, who sell on behalf of one company directly to the consumer.
What is the role of the broker in dealing with car insurance companies?
Acting as an intermediary between the customer and the insurance company, the broker provides the following services:
Advice on the type and amount of insurance you should buy. All of the paperwork in setting up or renewing a policy, e.g. change of vehicle, additional coverages, change of usage. Assistance at the time of making a claim. Brokers can help to speed up the settlement of the claim. They are not, however, allowed to give legal advice.
How do I know if I’m getting the best price for my car insurance coverage?
Insurance companies are highly competitive in the price and service they provide. Many types of sales and service improvements have been developed by individual companies to meet the needs of Canadian motorists. These variables are reflected in the premiums charged. You should talk to your insurance broker to ensure you are receiving the best combination of coverage, service and price for your individual needs.
Why do car insurance premiums vary from one province to another?
Car insurance premiums vary according to your likelihood of being involved in an accident. Factor such as geography, climate, and traffic congestion affect the frequency and cost of claims. And the cost of claims, more than anything else, is what determines your premium.
What happens if my insurance company goes bankrupt?
Everyone insured by a private insurance company in Canada is protected by a special fund administered by the Property & Casualty Insurance Compensation Corporation. It is financed by the general Insurance industry to protect policyholders.
If a property and casualty insurance company (which includes car insurers) becomes insolvent, this special fund ensures that all pending claims are paid, up to a ceiling of $2000,000 or the limit of the policy, whichever is lower. The deductible is either $500 or the usual deductible for the policy, whichever is greater.
You are therefore guaranteed financial protection, even in the unlikely event that your insurance company goes bankrupt.
It is important to realize that insurance companies in Canada have a high degree of stability and operate within stringent government guidelines. These include a requirement to maintain substantial capital and to hold strong financial reserves.
Government Automobile Reform Legislation
What are the penalties if I don’t have insurance?
The law requires you to pay for any damages for which you are held legally responsible in an accident. If you are not insured and cannot pay, special funds administered by the government or the insurance industry are used to reimburse the person who made the claim against you. Your driver’s license may then be suspended until you arrange to repay the fund. You will also be charged by the police for failing to have insurance. The penalty may include severe fines. When you purchase car insurance, you receive a Canada Inter-Province Motor Vehicle Liability Insurance Card (known as your insurance pink slip). You should keep this in your car at all times and produce it when requested by a police officer. It is honoured as proof of insurance in Canada.
If my car is damaged and in the shop, will my insurance pay for a rental car?
Not necessarily, it depends on what type of coverage you have. If you rely on your car for daily commuting, you should consider including the cost of renting a car as part of your coverage.
What other types of coverage do general insurance companies offer?
Most insurance companies offer full insurance protection for your home, personal belongings and business. If you require additional insurance, you should review your needs with your broker.
How important is responsibility or fault in a car accident?
Payments under Collision, Comprehensive and Accident Benefits coverage are made regardless of fault.
However, responsibility is of prime importance under Third Party Liability coverage. In these claims, the person held responsible for an accident may be required to pay for damages to the other driver’s car, for other property damaged in the accident, and for any injury claims resulting from it. For this reason you should ensure you have adequate Third Party coverage. Drivers who are at fault in an accident may also face higher insurance costs by losing their claim-free driving record.