If you own a car, you'll probably pay
tens of thousands of dollars for car insurance over your
While much of that cost is unavoidable
because insurance is required by law, you may be able to
save a significant amount, as well as ensuring you have
the right coverage for your needs, by understanding the
three different components of an car insurance policy:
- Collision and Comprehensive
- Accident and Medical Benefits
Third-Party Liability Coverage
If you injure somebody
or damage another vehicle with your car, liability
coverage protects you from having to pay any related
costs incurred by the other party if you are found to be
liable. Your insurance company will cover you up to the
maximum amount of your policy. It also usually covers
other people who are driving your car, and may also
cover you when driving another vehicle.
The provinces set out minimum levels of
third-party liability required by drivers. These
minimums are typically very low — often in the
hundreds, or even tens of thousands of dollars. If you
have a serious accident, this may be nowhere near the
amount you may be liable for. A good rule of thumb is to
have at least $1 million of coverage.
Uninsured or Underinsured Motorist
If somebody injures you or damages your
car and is liable for the costs but doesn't have
liability insurance, this coverage will allow you to
collect for lost wages, as well as medical expenses
related to the accident.
Collision and Comprehensive
There are two parts to this coverage
that protects you financially if your car is damaged.
- Collision Insurance. This covers the cost of
repairing your vehicle if it is in a collision.
This is one of the areas where people often
overpay for coverage. The most you can get under
this part of your policy is the book value of your
vehicle, even if it is a complete write-off. The
book value means what you could get for it on the
As a result, if you're driving an old clunker
worth a few hundred dollars, there may be no point
in paying for this coverage.
- Comprehensive Coverage. As the name suggests,
this covers you for the many perils that can
befall your precious automobile other than those
caused by a collision. These range from fire and
theft right down to cracks in your windshield
caused by flying stones.
This is also an area where you can save
significantly on your insurance bill. As long as
you can afford it if your car is damaged, take a
high deductible, say, $500. And if your car is
soon going off to the scrap heap, you may want to
skip this coverage completely.
Accident and Medical Benefits
This coverage will take care of any
medical expenses (above and beyond what your provincial
health plan covers) if you are injured in an accident.
It will also give you a small disability income if you
unable to work due to your injuries, plus pay out a
small amount in case of death. This coverage is usually