What Every Ontarian Should Know About Car Insurance Policies

By Lesley Green
A multi-generational family in the kitchen preparing dinner.

Car insurance policies can be confusing, but it's important to fully understand your auto insurance policy and feel comfortable you have the appropriate and necessary coverage to protect you in the case of an accident or injury. There are many components to your car insurance in Ontario, and we’ll explain each – with as little insurance jargon as possible -- to provide clarity on the terms you need to know.

Third-party liability coverage

Third-party liability (or TPL) is a required coverage in Ontario. It’s required everywhere in Canada. It provides coverage if you’re sued and found legally responsible for a collision that damages another person’s property or causes their injury or death. It’s mandatory coverage because it’s all too easy for an auto collision to result in financial harm that far exceeds what people can afford to pay on their own.

In Ontario, the minimum amount of TPL your policy must have is $200,000; however, most people carry either $1 million or $2 million in coverage. The reason a higher limit is encouraged is because your liability insurance covers more than just the lawyer’s fees to defend you. It will have to cover the costs the court says you are responsible for paying to the individual who sued you successfully. These costs can run the gamut but could include medical expenses, funeral expenses, and lost wages, to name just a few (very expensive) examples.

Statutory accident benefits coverage

Accident benefits provide coverage if you are injured in an auto accident, no matter who caused the collision. It is required coverage, although you can opt to increase your policy’s limits.

Your policy’s accident benefits are made up of many components, and the coverage is a robust package that includes things like:

  • Medical, rehabilitation, and attendant care benefits – These benefits cover expenses from things like physiotherapy and chiropractic services to hiring someone to help you bathe, groom, dress, or prepare your meals.
  • Income replacement benefits – These are payments to offset a portion of the loss of your income while you recover from the injuries you sustained.
  • Caregiver benefits – If you are catastrophically injured, this is coverage aimed to help with your expenses if you need to hire someone to care for dependents who usually rely on you for their day-to-day needs.
  • Funeral expense and death benefits – These benefits go towards paying your final arrangements should you succumb to your injuries and provide a lump-sum payment to members of your immediate family (spouse and dependents).

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Direct compensation-property damage coverage (DC-PD)

DC-PD is another required coverage that all Ontario drivers must have as part of their policy. It provides coverage for damages to your vehicle when someone else is wholly at fault for causing a collision. Usually, DC-PD claims don’t require you to pay a deductible.

For DC-PD to apply, there are a few conditions that must be met:

  • The collision happened in Ontario.
  • There was at least one other vehicle involved in the collision.
  • At least one of the vehicles involved (other than your own) is covered by an Ontario insurer.

If one of these conditions is not met, you’ll have to rely on your collision coverage (if you have it) to pay for the repairs needed. In this case, it is likely you’d have to pay the deductible.

Uninsured automobile coverage

Uninsured automobile coverage protects you from uninsured drivers. It is a required component of your auto insurance coverage in Ontario. If an uninsured driver causes injury or death to you or damages your vehicle, this coverage will provide you with financial compensation. It also provides coverage if you are the victim of a hit-and-run and you’re injured or killed from the collision. The minimum coverage is $200,000, but you can increase this limit to as much as $2 million.

Optional additional coverage:

The standard Ontario auto insurance policy includes TPL, accident benefits, DC-PD, and protection if you’re involved in a collision with someone uninsured. However, there are additional optional coverages that you can tack on to your policy as well.

Collision coverage (also known as upset coverage)

Collision coverage pays for repairs to your vehicle after you’ve been involved in an accident. It sounds a whole lot like DC-PD, doesn’t it? It’s similar, except with DC-PD, you are 100% not at fault for causing the collision. If your claim is submitted through this coverage, you will have been found to be at least partially at fault. Collision coverage is optional and comes with a deductible. A collision insurance claim may result in an increase in your premium.

Comprehensive coverage

Comprehensive coverage pays for the loss of your vehicle or repairs to it for reasons that don’t involve a collision. Comprehensive coverage would kick in for things like if your vehicle is stolen, vandalized, or if a tree branch fell on it during a storm. It’s optional to purchase and usually has a deductible. An insurance claim through your comprehensive coverage typically does not affect your premiums at renewal.

Specified perils coverage

Specified perils coverage is similar to comprehensive coverage in that it does not cover repairs for collision-related damages. Where it differs, however, is it doesn’t cover as many risks as comprehensive coverage. Instead, it covers only those that are listed (i.e. specified) in the policy wording. That usually includes damages caused by fire, theft, and certain types of weather damage.

All perils coverage

All perils coverage is a combination of both collision coverage and comprehensive. It covers everything these two do, plus a few extras (like someone in your home stealing your vehicle). The damages it doesn’t cover will be listed specifically in the policy; everything else is fair game.

Optional policy endorsements:

There are basics to your Ontario auto insurance policy that you can’t change. But there are customizations (called endorsements or riders by industry people) you can make to fit your needs better. We’ve highlighted here some of the most popular endorsements.

Liability for damage to non-owned automobiles (OPCF 27)

If you rent a lot of vehicles, this endorsement will extend the physical damages coverage (your collision and comprehensive) you have on your personal auto insurance policy to the car you’re renting or borrowing. It’s important to note that this coverage only applies to rentals in Canada or the United States.

Waiver of depreciation (OPCF 43)

A waiver of depreciation will maintain the value of your new vehicle should the car’s worth come into question. Common scenarios when your vehicle’s value comes into play include if your car is a write-off from a collision or stolen and never recovered.

This endorsement is often a good idea for new car buyers because it removes the insurer’s right to deduct depreciation when settling a claim. However, this endorsement is only available for a limited time, usually 24 to 36 months after the vehicle’s purchase date.