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7 car insurance mistakes (and how to fix them)

While paying for the cheapest car insurance you can find may suit your budget, there’s a difference between frugal and cheap. Getting cheap insurance could be an expensive proposition if you need to use your insurance following an accident, whether you’re at fault or not.

We put this list of car insurance mistakes together to inform and advise on how to find the best car insurance for you.

#1 – Accepting standard and basic

According to the FSRAO, Accident Benefits (AB) and Third-Party Liability (TPL) account for 52.6% of claims costs. Many insurance companies, by default, give you the standard and basic coverage, which can fall short of expectations when you need it most.

Accident benefits

Accident benefits pays for your rehabilitation, income replacement, or attendant care after an injury. There are minor injuries like whiplash to a “catastrophic” life-altering injury of the brain or paralysis. The standard for minor injuries for car insurance in Ontario is $65,000, but you can increase it to $130,000 or up to $1,000,000. For catastrophic, or “normal life put on hold for a while,” you can increase the benefit to $2,000,000.

OHIP doesn’t pay for casts, crutches, splints, dental care, or physiotherapy. If the standard $65,000 is enough for you, what about the other people driving in your car with you? That also falls to your insurance.

You may have disability insurance through work to supplement your income if you need to take time off. If not, the standard accident benefits coverage in Ontario can replace your income up to $400. However, by upgrading your coverage, you can get up to $1,000 per week.

There are more differences in coverage for funerals, attendant care, and the ability to sue for pain and suffering. Discuss your options with your car insurance broker to fit your unique situation.

Third-Party Liability

TPL covers the costs if you injure someone or their property. The minimum across most of Canada is $200,000. Most insurers will, by default, set TPL coverage to $1,000,000.

OPCF-44R, or family protection coverage, is an endorsement (insurance add-on) that extends your third-party liability to eligible members of your family.

However, you might consider increasing it to $2,000,000.

Here’s why:

If you’re in a catastrophic accident, you can only access the other driver’s third-party liability limit (which could be $200,000). With OPCF-44R, you can recoup any overages up to your set limit. For example, If you have $500,000 to claim, you can get $200,000 from the at-fault driver and go to your insurance company for the remaining $300,000 using OPCF-44R.

#2 – Auto-renewing

Ever ask yourself, “Is car insurance supposed to increase every year?” Like clockwork, you get an insurance slip in the mail detailing your coverage and your new rate. You typically have 4-6 weeks from the receipt of your letter before locking in for another year.

Our piece of advice: don’t let it auto-renew.

I know insurance can seem confusing. Here’s an easy primer. Accident benefits and third-party liability (discussed above) are mandatory. So is uninsured auto (covering you if the other driver doesn’t have insurance).

Optional coverage includes collision (protects your car after a crash) and comprehensive (protects your car while it’s parked (e.g., falling trees, vandalism, etc.).

You can then add-on province-specific endorsements.  In Ontario, OPCF27 means using your existing insurance when renting a car to avoid rental car insurance prices. Another popular choice, OPCF 39, waives your first accident from affecting your driving history.

As your car ages, it depreciates, and you can modify coverage to reflect the changes. If you went without an infraction, or if you’re driving less, you should pay less. Car insurance companies raise rates based on how many claims were submitted in the previous year for all drivers, not just your driving. So, if it was a bad year, you could be paying for the mistakes of others.

You can compare car insurance online in 5 minutes by entering a few simple details. As the lizard says, “5 minutes could save you 15% or more on car insurance.”

The average cost of car insurance in Ontario is $1,505, and 15% of that is $225. Hello debt repayment, a weekend away, or Netflix subscription. Making money is just as much about saving money as it is about increasing your income.

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#3 – Driving for Uber or delivering food

Side hustles are a great way to earn extra income, but it’s not as simple as downloading an app and driving.

While Uber and Lyft provide insurance, you could be voiding your insurance if you haven’t told your insurance company.

Insurance companies charge you a premium based on risk. If you’re now performing commercial activities with your vehicle, it increases your risk profile, thus costing you more.

However, informing them is only one part. Your insurance provider may not insure any side hustle endeavours at all. Only a select few providers (e.g., Intact, Economical) offer insurance for Skip the Dishes or even pizza delivery.

So, before you start delivering food or ridesharing, speak with your provider. If they cancel your insurance because you didn’t tell them, it could negatively impact your rates for years.

#4 – A change to your driving habits.

Driving habits falls a little bit under #2 – auto-renewing and #3 – driving for Uber. If you’re auto-renewing, you may not have updated how many kilometres you drive in a year. But things change.

A new job that requires you to drive further or moving to a new house allowing you to walk to work means you need to update your insurance. Driving more means an increase to your premium; driving less reduces it.

Not informing your insurer of changes to your driving activity can lead to negative repercussions.

#5 – Car insurance payments

There are many ways to pay for car insurance – online, direct withdrawal, or credit card. But did you know you can pay monthly, quarterly, or annually?

Paying monthly typically comes with an extra charge of 1–3% on top of your premium. Do you have to pay for car insurance every month? Not only will paying annually erase those fees, but there may be a discount as well.

Whatever you do, don’t miss your payment, it can have negative consequences. If your car insurance is too expensive, asking for discounts is one way you could save money on your car insurance premiums.

#6 – Not asking for discounts

Ok, maybe you can’t afford to pay your premium annually, but there are many ways to save on car insurance. Asking about car insurance discounts is easy, don’t let your anxiety act up. It’s an expected request.

Ask your insurer about loyalty discounts (especially if you’ve been auto-renewing), or group and alumni discounts through your union or educational institution. Did you put on winter tires? That’s a 3-5% discount. Bundling your auto and home insurance together could result in a 15% discount. So, ask for discounts.

#7 – Occasional driver insurance

Your insurance protects you and your vehicle, but what happens if you lend your car out?

Ultimately, you’re responsible if they get into an accident, and your insurance rates could skyrocket, so be extra cautious when loaning your car to a friend.  Ensure they have a valid driver’s license, permission from you, and remind them what constitutes distracted or impaired driving.

You don’t need to add visiting out-of-town relatives, neighbours, or siblings occasionally running errands. However, if they’re using it regularly (1-2 times/week), you should add them as secondary drivers to your policy.

Adding a secondary driver may increase your premium, especially if they are high-risk or young students. Still, it’s worth it to be transparent and honest with your insurance company.

The bottom line

Set a calendar reminder to remind yourself every year to compare quotes and call your insurance provider. Be honest and ask for discounts based on changes to your situation. If your car is older, you might think about dropping collision coverage. But if it’s brand new – ask how much extra a replacement cost policy would be (instead of the actual cash value).

It takes less than an hour to review your policy once a year but could be the best hourly pay you receive every year. Stop making car insurance mistakes, take control of your finances.