UNDERSTANDING YOUR AUTO INSURANCE
What is liability insurance?
Liability insurance covers the cost of damages (for accident benefits, medical costs, lawsuits and awards) in the event of personal injury or death from an accident involving the insured party. In other words, you are financially protected if you are held liable for an injury or loss by others arising from the operation of your vehicle.
What is no-fault insurance?
Many provinces in Canada now have some level of no-fault insurance in which each person’s own insurance company pays for injury or damage up to a certain limit. This applies regardless of whether or not the insured person was at fault. In Quebec and Manitoba, for example, there is a pure no-fault. In Ontario, however, there is a threshold system in which the no-fault clause only applies up to a certain threshold of liability. So if you are involved in an accident and become injured, your own insurance covers the associated costs of treatment, living expenses, loss of work and pain and suffering.
How much is enough?
Liability insurance is mandatory, but you can adjust the level to make sure your needs are met. Ask us for more information about liability insurance and how to obtain the right level of coverage.
When to consider extra coverage
The recommended level of liability insurance coverage is usually about $1 million. There are some situations in which you might want to increase your liability limit depending on the use of your vehicle. For example, if you drive on a regular basis into the U.S., where liability settlements are generally higher than in Canada, you might want to consider higher coverage. If you carpool to work or drive groups of children in your car to school or after-school events, you might want to increase your coverage to reflect the higher risks to which you are exposed.
What do you need to get an insurance quote?
The more information, the better.
Whether you are transferring your insurance from another province, seeking to change insurers or owning a car for the first time, the process of getting an insurance quote can be daunting. In general, the more the insurer knows about you and your driving record, the better off you will be, even if your record is less than perfect. Full disclosure at the beginning will save any risk of misrepresentation if you do need to make a claim in the future.
This is an area where your broker can be of particular assistance, helping you to navigate the terrain. There are three main categories of information required:
1. Information about you
- Names of the drivers of the vehicle to be insured must be provided. This usually includes all licensed members of your household, since it is assumed that they will use the car. Provide their names as shown on their licence, the number of years licensed and the percentage of time they will use the vehicle.
- Driving records of all applicants will be screened to identify applicants with undesirable driving records. This will include driving convictions in the last three years and accident claims in the last six years.
- Insurance history for the preceding three to six years must be provided, including any cancelled, declined or refused insurance.
- Licence history of all listed drivers must be provided for the preceding six years, including suspensions, cancellations or lapses.
- In provinces that have public insurance, all required information is already captured by the government.
2. Information about the vehicle
Full information about the make, model and year are required as well as the Vehicle Identification Number
or VIN. Also include the details of a lease if you have one, the purchase value, whether the vehicle is new or used, and the value of any modifications to the vehicle. If any other party has a financial interest in the vehicle, this should be recorded so they are protected in the event of a loss.
3. Information about your coverage requirements
Finally, you will need to provide information about how the vehicle will be used. Is it for pleasure or business? If it is for commuting, what is the daily estimated distance? What will the annual distance be? If the vehicle is for business use, will you be carrying paying passengers, renting the car out to others or transporting any goods?
You will also need to indicate your choices regarding your coverage, for example, your preferred deductible, liability limit and coverage for any special situations, including storing the car or driving in the U.S.