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How Well Do You Know Your Auto Insurance Policy?

Aug. 18, 2021
5 mins
A man sits at a table holding a tablet device and a coffee cup

Canadian drivers do not fully understand their car insurance policies, putting them at risk of overpaying for premiums or being underinsured, according to a RATESDOTCA survey from September 2020.

The majority of the drivers surveyed report making incorrect assumptions about their coverage.

Key findings from the data suggest:

  • 42% of respondents incorrectly believe that comprehensive vehicle insurance covers everything.
  • Seven in 10 drivers (68%) think insurers base premiums on the number of demerit points a driver has. This belief is false.
  • 38% believe the colour of the vehicle they own influences their premiums, although it does not.
  • More than half (57%) know they can switch auto insurance providers before their renewal date. However, a large population (43%) is still unaware.

While auto insurance can be confusing, there are resources available to help break down common misconceptions. Understanding your auto insurance policy can help you find any gaps in your coverage and potential discounts.

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Shifting to learn more about auto insurance

There are many free resources available online for Canadians to learn more about auto insurance, the types of coverages available, and how premiums are determined, including:

Taking the time to understand car insurance may be about as fun as vacuuming a carpet – necessary but tedious. However, having the proper knowledge can help ensure you have the protection you need.

What is included in basic auto insurance coverage in Ontario?

There are four mandatory auto insurance coverages every driver in Ontario requires:

  • Third-party liability coverage. Provides you with protection if you are at fault for an accident resulting in personal injury, death, or property damage. The minimum amount of third-party liability coverage is $200,000, but a majority of Ontarians choose up to $1 million worth of liability coverage.
  • Direct compensation-property damage. Your insurer will pay for damages to your vehicle or its contents­ if you are not at fault for an accident in Ontario.
  • Uninsured automobile. This coverage will take care of any medical costs to you and your family and damages to your vehicle if you get into an accident with an uninsured driver who is at fault.
  • Accident benefits. Whether you are at fault for an accident or not, accident benefits pay for medical expenses for you and your passengers. You can choose various levels of accident benefits coverage for income replacement, medical and dependent care, as well as death and funeral benefits.

There are also optional enhancements you may wish to add to your policy to up your protection, including:

  • Comprehensive coverage. This value-add protection safeguards your vehicle against damages unrelated to an accident such as theft, vandalism, or natural disasters.
  • Collision coverage. This option will help cover the cost of damages to your vehicle if it is involved in an accident with another car or a streetlight, road sign, or any other stationary object.

What is included in basic auto insurance coverage in Alberta?

In Alberta, there are two mandatory auto insurance coverages every driver must have:

  • Third-party liability coverage. As in Ontario, third-party liability protects you if you are at fault for an accident and someone is injured, killed, or suffers property damage because of driver negligence. The minimum amount of third-party liability coverage is $200,000, but many Albertans opt for more liability coverage.
  • Accident benefits. Accident benefits cover you and your passengers if you are injured or killed in a collision. The minimum amount of coverage is $50,000 per person, but you can up the limits to suit your needs.

Additional coverage you can add to your auto policy includes:

  • Comprehensive coverage. This type of coverage will reimburse you for damages to your vehicle caused by things like theft, vandalism, or fire.
  • Collision coverage. This option will pay for damages to your vehicle if it is involved in an accident with another car or an object like a streetlight.

Ways to help lower your auto premium

Drivers can get lower car insurance rates by taking advantage of the discounts insurers offer. Here are four additional ways motorists can help keep their premiums low and stay safe:

  • Drive according to road conditions. Whether in the winter or summer: wet, slick roads can compromise your vehicle’s ability to grip the road and operate safely. It is best to know the road conditions before you drive. Also, have winter tires installed on your vehicle from November to April. Many insurers will provide you with a discount if you do.
  • Drive defensively. Stick to driving the speed limit, do not tailgate or cut off other vehicles when changing lanes, and always signal when turning or changing lanes. Consider signing up for a usage-based insurance program. It can provide monthly premium discounts based on safe driving habits.
  • Forget about your phone. Switch to “airplane mode” on your smartphone and focus on driving. Distracted driving is a serious road safety threat. If you are convicted for distracted driving, the penalties can be severe in both Ontario and Alberta. A distracted driving conviction will increase your car insurance by 15% to 25%, and it will remain on your driving record for three years.
  • Do not drive while impaired or fatigued. Never gamble with your life or others’ lives by driving impaired. Similarly, steer clear from driving while physically or mentally fatigued, as it too can compromise your ability to drive safely.

The RATESDOTCA editorial team are experienced writers focused on sharing stories and bringing you the latest news in insurance and personal finance. Our goal is to provide Canadians with the information and resources they need to make better insurance and financial decisions.

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