It’s hard to know what to buy when shopping for auto insurance in Canada. On one hand, you want to be covered as much as possible to protect your investment in case of incidents. However, you don’t necessarily want to pay hundreds of dollars a month for that privilege.
Thankfully, auto coverage is a very versatile type of insurance. Policies can be customized to fit the needs of the consumer.
Basic auto coverage
Basic auto insurance in Canada can be split into two categories: liability insurance and collision coverage. Liability insurance is mandatory in every province in Canada with some provinces offering nationalized basic auto coverage. Liability insurance covers injuries and damages to other people in the event of a collision. So, if you recently purchased a new car, having liability insurance won’t help you if you back into a tree. Accidents to other people – their cars or bodies – is covered up to the amount of your liability. Any excess is paid for by you.
Let’s go back to that new car. Say you’ve just purchased a really fun convertible and you can’t wait to take it out on the road. You’re driving along the highway and, oops, you find yourself in a fender bender. If you’ve opted to only purchase liability insurance, you’re now in a bit of a jam. Sure the damages to the other car will be paid for by your insurer, but what about your nice new car? Unfortunately, you’re completely responsible for fixing your car without collision insurance.
Many people opt to get collision insurance only on vehicles that are not easily replaceable or that are expensive. For consumers looking for lower monthly payments, choosing liability-only insurance is a great choice. Just remember to have cash or credit set aside to pay for damages in the event of a collision.
Another type of auto insurance in Canada that’s good to have is comprehensive coverage. So far, we’ve examined two types of insurance that are useful in the event of a collision. Comprehensive coverage, on the other hand, covers damages that happen independent of collisions. This insurance add-on is pricey, but provides peace of mind to drivers hoping to insure against any possible problem.
Today, comprehensive coverage covers things like windshield damage, flood damage, fire, falling objects, hail storms and earthquakes. Depending on your location, insurance companies might not offer all of these options. (Earthquake insurance is an additional add-on in earthquake-prone zones, as is flood damage in flood zones.) If you live in Alberta and want to protect your windshield, extra windshield insurance is available, albeit at a very high rate.
While comprehensive auto coverage may be for some drivers, people with large emergency funds or inexpensive vehicles might by-pass it entirely. There’s little point in paying a huge premium each month for coverage on a one-in-a-million event. Frugal people thinking of lowering their premiums might find their deductible much higher than the cost of the non-collision damage itself.
Like all forms of insurance in Canada, choosing the right policy is a highly individualized process. By weighing the pros and cons of each form of insurance, you can accurately determine how much coverage you need – either basic auto coverage or comprehensive coverage.