Over 3 million insurance quotes
Compare Quotes from 30+ Car Insurance Providers and Save
Compare Quotes from 30+ Car Insurance Providers and Save

Top 5 Car Insurance Questions Answered

August 21, 2012

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?

  2. 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.

  3. How Does Accident Forgiveness Work?

  4. 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.

  5. When Does My Deductible Apply?

  6. 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.

  7. What is No-Fault Insurance?

  8. 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.

  9. How Does the Insurance Company Value My Car?

  10. 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.

  • Anthony Chan

    1. What coverage do I have to carry – first of all, if it is a loan(finance)/leased vehicle, the Lessor/finance company will require MORE than the legal limit of liability. Rarely would those companies only require you to carry the Minimum Legal limits of Liability e.g. $200,000 in Ontario. Secondly, they will also require that you must NOT exceed a certain deductible amount on the Collision/comprehensive coverage, e.g. $1,000 is usually the Max. deductible they will agree.

    2. Accident Forgiveness – NOT everyone is ELIGIBLE for this option, even if you want to pay to buy the option. Every insurer has their own underwriting rule as to the critieria for allowing such option. e.g. you must be continuously insured for at leat 10 years with no prior claim.

    3. There should be 3 possible deductible NOT only 2 in Ontario. Most people will have $0 deductible under the Direct Compensation Physical Damage section (DCPD) but in fact, insureds can opt to increase the deductible for DCPD, so as to save premium.

    Collision Deductible is applicable to the % you are at fault at the collision, while DCPD deductible is applicable to the % you are NOT at fault at the collision.

    If you are at fault at a collision, the deductible will apply and you have to pay for this deductible, e.g. if the repair cost is $5,000 and you have $1,000 deductible, you have to pay for the first $1,000 and insurer only pays for the balance $4,000. Dont understand why the article says that you dont usually have to come up with that amount of money (deductible) yourself? Although some bodyshops will tell the insureds that they wont charge them for the deductible amount, in order to attract insureds to do the repairs at their shops -may be this is what the article means!

    4. No Fault Insurance – It is more confusing and complicated than what the article suggested as the first paragraph basically is referring that to the collsion/vehicle damage in which if you have a collision and even if you are NOT at fault, you will claim your own insurance company for the repairs of your own vehicle and wont be allowed to sue the other at fault party and the insurer is also not allowed to subrogate against the at fault party’s insurance company, to facilitate the claim process. In doing so, if you are not at fault for the collision, it will usually not affect your insurance premium upon your renewal.

    However, this is NOT a True “No Fault” Insurance. A True “No Fault” Insurance means that, the Insured can claim against your own insurance company IRRESPECTIVE whether you are at fault or NOT. Therefore, the only true No Fault insurance is the Accident Benefits (AB) section of the auto insurance, in which the person injured can claim his/her own insurance company for AB benefits Irrespective of who is at fault.

    In the vehicle collision/vehicle damage case, the insured can only claim their own insurance company if they are NOT at fault, even if they have NOT puchased the Collsion Damage coverage. But if the Insured is 100% at fault at the collision, and the Insured has NOT purchased the Collision Damage coverage, the Insurer will NOT be paying for the repair costsof the vehicle of the at fault insured – so, it is NOT a True NO FAULT Insurance. As a matter of fact, if you have NOT purchased the collision coverage, the insurer will only pay you to the Extent (%) that you are NOT at fault unlike a True NO Fault insurance, in which the insurer still has to pay the SAME benefits to the insured irrespective of fault (basically same Accident benefits apply to everyone)

    5. How insurance value my car – first of all, the 24 months waiver of depreciation endorsement is the most common, because some insurance companies are offering more than 24 months, e.g. 30 months or more..! So, it would be wise to check other insurers to ascertain whether they can offer a longer waiver of depreciation period.

    Secondly, there are conditions for this endorsement to be eligible – e.g. not only the car must be new, the insured has to be the Original (first) owner of the vehicle, in order to be eligible. So, the car must be bought new from the dealer and you have to be the First/original owner in order to be eligible for this endorsement – although some insurers may allow this endorsement if the new car is a demo car (frm the dealer) which the dealer is the first owner and the insured is the second owner, but it is subject to further limitations such as no. of kms (mileage) on the demo car, in order to be allowed.

  • Gordon Steadman

    Top 4 Insurance Questions Unanswered

    1. In Ontario, why are insurance companies allowed to ask how long you have been at your current insurance company? (Clearly this question is only being asked to discourage people from shopping around for the best rate. There is no other possible use for this question)

    2. Why are insurance companies asking how many kilometres you drive per year? (I went from working and driving 25,000 kilometres per year, to retired where I drive 6,000 kilometres per year, and did not get even one single dollar reduced from my premium. A reduction of driving of over 75%!)

    3. In Ontario, why are we paying about 40% of our premium to cover lost wages when as a retired person, we are not entitled to any lost income because we do not have an income? (This question even baffles the insurance brokers and agents. I have asked several insurance agents this question and not one has had an answer, they just say it’s the law in Ontario. Surely if insurance was on the up and up, some smart insurers would be significantly lowering the premiums of retired people to get as much business as possible – knowing full well they will never have to pay out for lost wages.)

    4. Why is the government of Ontario continuing to cowtow to insurance companies and using their outlandish claims of insurance fraud as justification for runaway insurance costs to consumers, when they should be setting up a watchdog organization to investigate the overwhelming number of consumer complaints? (Insurance fraud is a serious crime – if and when it is committed. It is when one or more drivers, usually in collusion with rehabilitation clinics, stage fake accidents to make criminal claims against insurance companies. Insurance companies use it as a reason for us in Ontario paying, double, sometimes triple the insurance we would otherwise pay. If this crime was so rampant, it only makes sense that police departments would be doing major investigations much like they do to rid our streets of illegal drugs. The police are not doing this. They report that they get very few complaints of insurance fraud. They also report that when they do get a call, it is because an insurance company has already solved solved the case, they are called to lay the criminal charges. Who is telling the truth here? The police, or the insurance companies?)

  • Mohd

    Another great idea. We currently don’t have a deicutdble account and to be honest, I’m really not even sure what our deicutdbles are on our car insurance and our house insurance. Those are the only two we have deicutdbles on (that I can think of). just checking our policies right now car insurance deicutdble totals $2000, house insurance deicutdble totals $1500. Something to work towards! Thanks for the tip.