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Do You Have Enough Car Insurance?

Most Canadians aren't aware of how much coverage they actually have, so how could we expect them to know if they are under insured.

If you are in a car accident, how much does your car insurance cover? In all provinces and territories, you must have insurance to drive. They all have similar minimums of coverage. Is it enough? Do you ever drive tired? Do you ever look at your phone, ya know, to see who’s calling? Do you drive hungover? Do you have enough car insurance for those times when you might not be your perfect self?

Knowing that you have to buy car insurance doesn’t help you figure out what and how much coverage you need to buy. It’s easy to say, “well, I’m a safe driver, I don’t get into accidents”. I could regale you with horror stories, one-in-a-million type chances, but insurance is a “what if” scenario based on your risk tolerance and budget. Let’s take a quick look.

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Most Canadian auto insurers mandate at least $200,000 in third-party liability. This protects you, financially speaking, if you are deemed liable (if a claim is made against you). It covers the other person’s car, their property, their injuries, or death. Let’s practice a little empathy – do you think you’d need more than $200,000 if you were in an accident where the other person was at fault? If you need a new car, a temporary car, possible hospital time, loss of income, months of rehab, and legal fees – would you feel good accessing $200,000? Remember, you could claim for more. Their insurance minimum is their decision. If you wanted or needed more, it’s on the individual to pay by other means (e.g. selling their house).

You can increase your third-party liability insurance to $5 million for a slightly higher monthly premium.  The higher your coverage, the lower your risk. If you are at fault, know it’s the job of the claimant’s lawyers to find out what assets you have. How much they choose to pursue has little to do with your car insurance policy and everything to do with what they need to recover back to a normal full life.

Another example – If you’re paying the minimum coverage and not sure what your auto insurance covers it’s possible you’re not paying for either collision insurance and/or comprehensive insurance. Though they are often conflated, they are not one and the same. Collision helps pay to repair or replace your vehicle if you’re in an accident. Comprehensive is coverage for your car when it is not in an accident. It covers things like theft, vandalism, and natural disasters – everything from a hurricane to a tree falling on it. Collision and comprehensive car insurance are only mandatory in Alberta and Saskatchewan. Are you comfortable not having this coverage? Any big, weary trees living (or dying) near your parking spot?

There are many coverages that are basic and standard. Auto insurance companies will often allow you to pay a little more for an exponential increase in coverage. You need to shop around for auto insurance quotes to make sure you have the coverage you need. Take Accident Benefits (SABS) as yet another instance – it is required by law in every province and territory. Car insurance accident benefits cover things like medical, rehab, attendant care, and income replacement to name a few. For non-catastrophic injuries in Ontario, for example, you’re covered up to $65,000 but you can opt for up to $130,000. Income replacement, under these benefits, covers 70% of your total income, up to $400 per week. You can increase your premium to receive $1000 per week for income replacement. Of course, by opting for more than the minimum coverage, you will end up paying a higher premium. It also gives you more protection in case you need it.

Welcome to insurance. It’s impossible to know what you need until you need it. It’s the purchase you never want to use. You don’t want to be in an accident that causes bodily injury or property damage, but if you are, what does your car insurance cover? Is it worth saving the extra $20-$30 per month to leave yourself exposed? Or would you sleep better in full pyjamas, sheet, duvet, and quilt? Do you think you’ll take public transit to work today or will you be calling your insurance broker to get new car insurance quotes?