Buying car insurance can be a complicated process. There are many options to consider, and even when it comes to the coverage required by law, you still have to decide if you’d like to increase your limits. Finding the car insurance that suits you is not as difficult as it seems; it simply requires an understanding of the choices available to drivers and how they apply to your case in particular.
Liability: Legal Minimums and Beyond
Every province has a legal minimum that you must carry to satisfy your financial obligations as a driver. That’s the best place to start when it comes to choosing your car insurance. The legal minimum means you can be on the road, but it doesn’t always mean you’re covered as you should be.
For many people, it’s a good idea to consider increasing your third party liability limits beyond the legal minimum. It doesn’t usually cost much to go up a level or two, and if you are involved in a serious accident it can mean the difference between being fully covered and facing a financial nightmare in which you have to pay thousands out of pocket.
Increasing your liability limits is the first optional item you should consider when you are purchasing car insurance. You can then consider the optional coverage choices.
This is usually the right time to choose uninsured/underinsured motorist coverage as well. This coverage protects you when the other driver doesn’t have insurance or doesn’t have enough to cover the claim. Discuss the right limits here with your insurance professional.
Comprehensive and Collision
While described as optional, these two aren’t always optional for every driver. If you have a loan on your car, you will likely be required by your lender to carry these. If you don’t have a loan, you don’t have to carry either one, but if you’re involved in an at-fault accident, or if your car is stolen or damaged through vandalism, you’re out of luck.
Most people choose to carry these two options. The next decision is to select a deductible. Remember that a higher deductible can save you on your auto insurance. A low deductible might be nice if you have an accident or other claim - but every year you don’t have one costs you more in premiums.
Additional Optional Coverage
With the basics out of the way, there are many other optional coverages you might select to add to your policy. Which you choose depends on your situation.
If you depend on your car to get around and don’t have a second car available, you will probably want to add loss of use coverage. This coverage provides you with a rental car while your car is being repaired under a covered claim.
If you drive rental cars a lot due to travel for business or pleasure, you should add rental car coverage as well. This will allow you to extend your insurance policy to cover the rental car you are driving, which can save you from overpaying for the coverage offered by the rental car company.
When you buy a new car, you lose some value in depreciation right away. That means that if your car is a write-off, you normally won’t receive enough back from insurance to get another new car. If you add waiver of depreciation to your policy, however, the insurance company will pay out the cost of the car new rather than the depreciated value if the accident happens within a set time period, usually the first two years.
Another option that is becoming popular among insurance companies is accident forgiveness. This coverage allows you to have a "freebie" accident. Your first at-fault accident won’t be charged against your premiums. There are some exceptions to this, so make sure you understand them before you choose to purchase this option.
Roadside assistance is another additional coverage. It provides assistance for a break-down, pays for towing, and can even help you get your keys out when you’ve locked them in the car. If you already carry roadside assistance, such as that provided from a car dealership or through CAA, you may not need this coverage.
When you are selecting the options to add to your policy, the most important question to ask is how this coverage applies to you. How likely are you to need it? Is it worth paying for even on the off chance that you will need it? When it comes to the major coverage choices like higher liability and comprehensive and collision, the answer is usually yes. It’s well worth having these major coverages even though you don’t expect to need them. The consequence could be serious.
When it comes to other optional coverages, what you need is personal. Look at your needs and how much it will cost to add it, discuss it with your insurance professional, and then put together the policy that makes the most sense for you.