Top 5 Car Insurance Questions Answered

By InsuranceHotline.com Team
Top view of tablet pc, magnifying glass, pen, notebook, glasses and a cup of coffee with Q&A written on wooden table

Most people have a lot of questions about car insurance, and the same ones tend to come up regularly. Getting the right answers to these questions can make all the difference when it comes to successfully shopping for the best rate and the right coverage. Get the answers to the top car insurance questions and make your hunt for the right coverage easier and faster.

  1. What Coverage do I Have to Carry?

There are two possible requirements for your car insurance needs. The first is the legal minimum for third party liability as required by your home province. The second applies to those who have a loan on your car. Most lenders will require you to carry additional coverage that will protect their investment in the car. They generally require that you carry comprehensive and collision coverage in addition to the legal minimum for liability.

Each province determines what the minimum amount of required coverage is, so be sure to check the laws in your province of residence. If you move to a new province, you may have to change your limits to match the new one.

While the requirements of your loan are not legal ones in the same sense, they are a part of your loan agreement and your lender can take action if you don’t carry the required limits.

  1. How Does Accident Forgiveness Work?

Accident forgiveness is a popular feature that is available from many insurance companies. It allows you to avoid an increase in car insurance rates when you have your first at-fault accident. There are some important facts about this coverage however that consumers should know.

First, accident forgiveness must be added to your policy and isn’t automatic in most cases. You will likely pay an additional premium for this option. Second, accident forgiveness doesn’t always apply. Each insurance company has exclusions and limitations on their accident forgiveness plan.

Finally, it’s important to note that accident forgiveness won’t follow you if you change insurance companies. It applies only to the company you were with when you had the accident. You could be charge for the accident by the new company.

  1. When Does My Deductible Apply?

A deductible is an amount of money for which you are responsible in a claim. If you carry comprehensive and collision you will have two possible deductibles for each area of coverage. They may be the same amount or different.

The deductible is applied in almost all comprehensive claims situations. When it comes to collisions, your deductible will only apply in the event that you are found to be at fault and maybe if your vehicle is hit by an unidentified third party. The deductible is usually taken out of the amount that the insurance company pays for the claim. You won’t usually have to come up with that amount of money yourself.

Higher deductibles can mean lower auto insurance rates, while lower deductibles usually carry higher rates. Increasing your deductible is a good way to save money if you are comfortable paying a bit more in the event of a claim.

  1. What is No-Fault Insurance?

The name of this system of car insurance is somewhat misleading, making it one of the most common areas of confusion. No-fault insurance is a system that seeks to reduce the amount of time it takes to process and pay out on claims by having each insurance company pay the claim for their own insured person rather than seeking damages from the at-fault driver’s company.

Even in a no-fault insurance system, one driver may be found at fault and there may be an increase in insurance rates. It does not mean that no one is at fault for the accident, only that who is at fault has no bearing on which insurance company pays the claim.

  1. How Does the Insurance Company Value My Car?

One of the biggest concerns drivers have after an accident is how much they will get for their car when it is a total loss. Insurance companies use a valuation system that will determine the depreciated value of a car and thus how much they should pay out for the vehicle.

For those who drive a new car, there is an option called waiver of depreciation that allows you to get the brand-new value of your car rather than a depreciated amount if it is a total loss within two years of buying it new. This is an option you must add prior to having an accident; you can’t request it after the fact. If you do not carry this option, you will receive the depreciated value as calculated by the insurance company.