Types of auto insurance

When it comes to car insurance, there really is no one-size-fits-all solution. Just like there are different models of vehicles on the roads, there are also different types of car insurance policies you can purchase as a motorist, allowing you to customize your overall portfolio to meet your needs and budget.

Whether you're a first-time driver or a seasoned motorist who is up for a renewal, you may be wondering what the different types of auto insurance are. Stick around to learn the ins and outs of car insurance below.

Mandatory car insurance coverage

All Canadians who operate a vehicle are required by law to have a basic car insurance policy, regardless of how often they're behind the wheel or what they use their car for. While provinces and territories have different insurance minimums, here's a closer look at the mandatory insurance coverage you'll need to purchase:

Third-party liability insurance coverage

Third-party liability coverage provides the policyholder legal protection if you injure someone else or cause property damage to another person’s property while operating your vehicle.

For example, if you're in a car accident and hurt another driver or drive into your neighbour's fence and cause damage, liability insurance covers all medical costs associated with bodily injuries, funeral expenses, repairs of damaged vehicles or property, and legal fees up to your policy limit, regardless whether you are found at-fault or not.

Accident benefits coverage

Accident benefits coverage can help pay for any loss of income or medical bills that may not be covered by health insurance if you, a pedestrian, other drivers, or passengers in your vehicle suffer a bodily injury as the result of a car accident. Accident benefits include coverage for things like prescription medications, physical therapy, or rehabilitation.

Direct compensation property damage (DCPD)

Direct compensation property damage coverage protects an insured vehicle and its contents against property damage, as long as you are found not the at-fault driver for the damage that occurred. Rather than going through the other driver's insurance company, direct compensation auto insurance allows you to receive compensation for repairs and replacements of your car from your own insurance company. Ultimately, this car insurance policy is meant to speed up and simplify the overall claims process for drivers.

Uninsured motorist coverage

If you were to get into a car accident with another driver that is either uninsured or underinsured, uninsured motorist car insurance coverage would protect you and any passengers in your vehicle by paying for repairs or replacements of your own vehicle, lost wages, medical expenses, and more. Uninsured motorist insurance will also provide coverage in the event that the other driver flees the scene of the accident.

Optional coverage

Beyond the minimum amount for mandatory coverage, there are optional coverages that drivers should consider for their portfolio for added peace of mind and protection:

Comprehensive coverage

Comprehensive coverage is the first type of car insurance that should be considered. Essentially, comprehensive insurance will offer the policyholder protection against various non-collision insurance risks.

For example, comprehensive insurance typically includes reimbursements for physical damage caused by theft or attempted theft, lightning, vandalism, flooding, hurricanes, fires, riots, explosions, falling objects, severe weather, falling or forced landing of an aircraft, and more. Depending on your insurance company, you may be able to choose what additional types of perils you wish to add, such as earthquakes.

Collision coverage

Collision coverage provides the insured vehicle and motorists protection in the event you get into an accident with another car or object on the road, no matter who or what is found to be at fault for the accident. Collision insurance will pay for the cost of repairs or the replacement of your vehicle.

Note that if you have a car loan or lease your vehicle from a dealership, collision coverage and comprehensive coverages are typically required by your lender or car dealership as a condition of your agreement.

Accident forgiveness coverage

Accident forgiveness is a type of car insurance that is meant for first-time drivers or inexperienced drivers on the road. Under this car insurance policy, you will not be found responsible for your first at fault accident.

Generally speaking, when you are involved in a car accident, you can expect your insurance company to increase your premium when you renew your policy. But with accident forgiveness, you'll be protected from increased car insurance premiums for the first collision.

Specified perils coverage

Specified perils coverage goes beyond comprehensive coverage, offering further protection against certain types of insurance perils that may not be listed under your current insurance policy. Common perils include damage caused by animal impacts, hail, riots, and more.

Roadside assistance coverage

Lastly, roadside assistance is an insurance policy that can help you in the event your vehicle breaks down while driving or you need other types of assistance. This insurance policy typically includes the cost of towing, battery jump, flat tire change, fuel delivery, and help if you lock your keys in your car.

While additional insurance is a great way to ensure you are comprehensively protected while on and off the road, just note that these coverages will cost you more each month.

What are the three types of auto insurance in Ontario?

In Ontario, there are three different kinds of auto insurance coverage , namely third party liability coverage, collision coverage, and comprehensive coverage. We will explain each type of coverage below:

• While liability coverage is meant to protect drivers from legal responsibility in the event they cause bodily harm to another person or property damage. Essentially, this policy will cover medical expenses, income replacement, lawyer fees, funeral expenses, and other costs associated with an insurance claim.
• Further, comprehensive coverage is meant to protect the insured driver in the event their car is damaged by non-accident damage. For example, if a tree falls on your vehicle, is involved in a theft, gets vandalized, or experiences other types of harm. It will pay for repairs or replacements of your car if it's determined to be a total loss.
• Lastly, collision coverage is meant to offer protection to drivers if they get involved in a collision with another car or object on the road. Again, this covers the cost of repairs or replacements that are needed, regardless of who is at fault.

What category of car insurance is best?

The best car insurance types really depend on what you're looking for in terms of coverage, the kind of car you drive, your driving habits, and more. The best thing you can do if you're looking for insurance is to reach out to different insurance companies to see what they offer.

Alternatively, you can work with an insurance broker like the ones from BrokerLink, who can help you shop around for the best coverage based on your needs. By doing so, you can rest assured knowing that you have an insurance policy that will work in your favour should you need to file an insurance claim in the future.

How much insurance do I need in Canada?

Again, how much insurance you require depends on your unique circumstances. At a minimum, drivers in Canada need to purchase liability insurance with a minimum of between $200,000 and $500,000, depending on the province or territory they live in. Beyond this, liability insurance can go up to $1 million or even $2 million in coverage as well.

When choosing coverage limits, think about the type of car you drive, the risks you may face, and how much you can afford. In the event of a claim where you're found at fault, you'll need to have a policy that covers all of the associated expenses that may come up throughout the process.

Ultimately, without insurance, you could be at serious financial risk if something happens. Therefore, the key here is to find a balance between having comprehensive protection while keeping your insurance costs as low as possible. If you need help with your insurance contact your provider directly, or work with a broker from BrokerLink.

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Are there different types of car insurance based on the type of car I drive?

If you own a specific type of vehicle, you may appreciate the fact that there are different kinds of insurance policies available that you may find tailored to your unique needs more so than other policies:

Electric car insurance

Electric car insurance is designed with the needs of electric vehicles (EVs) in mind. Because electric vehicles are more popular amongst Canadians, this type of insurance was designed to suit the unique needs electric cars face.

While this insurance will still encompass mandatory coverage policies, depending on the insurance provider you use, it can also include policies that protect your battery, your charging station, and more. And the good news is, because you drive an electric vehicle, you'll likely qualify for an insurance discount, which can help you save on your premium.

Classic car insurance

The purpose of classic car insurance is to safeguard owners of vintage, collector, and classic cars from monetary losses. Your antique car is an investment that has to be protected, regardless of whether you drive it for fun on the weekends or keep it stored on your property to look at.

Too many drivers make the mistake of insuring their classic car with a standard auto insurance policy. However, standard auto insurance, most of the time, won't encompass the unique needs of your vehicle and how you store it. However, classic car owners can have peace of mind knowing that this insurance will cover damages to your vintage vehicle and offer other benefits depending on the unique aspects of your policy.

Convertible car insurance

Because convertibles are unlike other vehicles, a specific type of insurance is needed. For example, whether you own a soft top or hard top convertible and whether your convertible is classified as a “high performance vehicle” or a “sports car” can both impact your car insurance rate and needs. With convertible car insurance, your dream car will be comprehensively protected while on the road and when it's parked.

How are car insurance premiums calculated?

If you've purchased car insurance coverage before, you'll know that providers use different variables to determine your risk level, which translates into how much you'll pay for your insurance for the year. While each insurance provider may use a different scaling system to determine costs, here is a closer look at some of the variables they will use when assessing your risk:

Where you live

Car insurance premiums vary substantially based on where you live. For example, urban areas tend to have higher premiums compared to those who live in rural areas. This is because cities often have more traffic and higher crime rates, which puts drivers at more risk.

Age

Because young drivers have less experience behind the wheel, insurance companies tend to deem them a higher risk to insure than those who are older. Don't sweat it, though; your rates will generally decrease as you age and gain more driving experience. Remember to keep a clean driving history as well!

Gender

Statistically, men are more of an insurance risk than female drivers, which can play a role in how much you are quoted when purchasing auto coverage.

Make and model of vehicle

The make and model of the car you drive will also determine how much you pay for coverage. Luxury cars and sports cars have higher repair costs and a greater likelihood of theft, which insurance companies will see as being at more risk than average cars with security features.

Driving record

Being a safe driver and having a clean driving record can help you out significantly when buying car insurance. Drivers with a history of car accidents, traffic violations, or other convictions can expect to pay a more expensive premium because they are at a higher risk of insurance compared to those with no violations on their record.

Annual mileage

How far do you drive each day? The more you drive, the higher chance you'll be involved in an accident. So, having a higher annual mileage can lead to more expensive insurance than those who don't drive very often.

Your deductible

Having a higher deductible can lower your car rates compared to having a lower deductible. With a higher deductible, you'll be responsible for paying more of the initial cost before your insurance kicks in.

How you use your vehicle

How you use your car affects your insurance rates. Vehicles used for business or longer commutes often have higher premiums due to how much time you'll be spending on the road and the associated risks.

How can I save money on auto insurance rates?

At BrokerLink, we believe that all types of car insurance should be affordable. However, this isn't always the case. Luckily, we've put together some of our best-kept tips and tricks that you can put to good use the next time you're in the market for a car insurance renewal:

Bundle your auto insurance with other coverages

The majority of auto insurance providers will lower your premium as a gesture of appreciation for purchasing different coverage options from them. Therefore, the next time your insurance is up for renewal, check with your provider about bundling your policies if you have health insurance, home insurance, or other kinds of coverage already.

Increase your deductible payment

The deductible is the amount you're in charge of paying when filing an insurance claim with your insurance company before your provider will pay for the rest of the damages or replacements. By increasing your deductible, there is a chance that you could lower your overall insurance policy premium.

Be careful though. Increasing your deductible isn't for everyone, and you should only consider this option if you can comfortably afford to do so, should you ever need to file a claim. Generally, deductibles in Canada will range anywhere from $500 to $1000. So, find the right balance between your deductible and premium savings if you can.

Ask about discounts for insurance coverage

Did you know that insurance companies offer a variety of discounts to motorists looking for coverage? Common discounts on coverage include completing a safe driving course, being a member of a professional organization, having snow tires on your car, installing additional safety features on your car, and more. So, don't be hesitant to ask your provider the next time you're buying insurance. You'd be surprised at how many discounts you could qualify for!

Pay for you car insurance annually

If you can afford to do so, consider paying for your coverage upfront, rather than monthly. When paying for your car insurance on a monthly basis, you may be charged an extra administration fee that doesn't apply to those who pay for their car insurance coverages on an annual basis.

Work with an insurance broker

Working with an insurance broker instead of an insurance company directly is another great way to save money on your insurance rates. Unlike agents, brokers don't work for one specific company, rather they work independently and have access to different providers across the country.

This means that you can shop around for different types of car insurance from different providers, compare quotes, and find the most affordable rate. Brokers work for you, so you can be confident that they are giving you unbiased advice when it comes to what policies may work best for you.

Install snow tires and security features

Our last tip to help you save on your own insurance is to install snow tires and security features on your vehicle. Your insurance company could also offer you a discount if your car has safety features like dash cams, anti-burglary alarms, and other technologies that make driving safer.

Further, installing snow tires on your own vehicle may result in a 5% reduction in your auto insurance cost. Driving in the winter can be dangerous, but snow tires can help you drive safely and lower your chances of getting into an accident when it's slippery and freezing outside.

What kind of car insurance do I need in Canada?

The kind of auto insurance policy you need as a Canadian driver includes liability insurance, uninsured motorist protection, direct compensation, and accident benefits. Beyond these optional coverages, there are other options that you can add to these mandatory policies. Additional insurance is meant to provide Canadians the opportunity to customize their protection based on their unique needs and lifestyles.

So, the kind of insurance you require really comes down to your risk tolerance, the type of car you drive, your financial situation, and more. The best thing you can do is reach out to your insurance company or broker. They can help you determine your insurance needs before customizing a unique insurance plan that works for you.

Get quality car insurance with BrokerLink, today!

BrokerLink is a leading brokerage in Canada with locations across the country. We work closely with customers to ensure they get car insurance policies tailored to their unique needs and budget.

If we're in your neighbourhood, come on into one of our offices to work with an experienced broker in person. If you can't make it in, feel free to give us a call during regular business hours. Alternatively, you can use our online auto insurance quote tool to get competitive insurance quotes from the comfort of your own home or wherever you may be!

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