How Does Car Insurance Work and Do I Need a Car Insurance Broker?

How Does Car Insurance Work and Do I Need a Car Insurance Broker?

If you own a car or other vehicle in Canada, you need to purchase car insurance. Car insurance is meant to protect you if you are involved in an accident. This includes repairing your car if it is damaged in an accident, or any liability claims if you are being held responsible for an accident causing damage to another person’s vehicle or injury to others.

If you are a new driver, looking over auto insurance policies can be overwhelming or intimidating. Legal jargon found in the policies can be hard to understand, but this article will cover the basics of auto insurance and whether you need a car insurance broker.

Understanding how car insurance works is important to make sure you have the right type of coverage and are protected when you are behind the wheel. Different insurance policies have different types of coverage and pricing.

Without car insurance, you would need to pay for costly claims and repairs out of pocket. This can put your financial assets at risk.

Car insurance policy can cover:

  • The driver
  • Passengers
  • And other people who are involved

Depending on what province you live in, injured passengers or any others involved in the accident who have their own insurance must make a claim under their insurance policy first.

It is the law in Canada, and in every province, that all vehicle owners need to have insurance in order to drive a vehicle. And if you are caught driving without insurance, you can face penalties such as having your license suspended, your vehicle confiscated and/or you will face a hefty fine. For example, in Ontario, these fines can reach up to $25,000 or more. If you are charged with a fine on the lower end, your insurance premiums will increase dramatically in the future.

What Do Car Insurance Policies Cover?

Coverage refers to the maximum amount of money your insurance company will pay you if you make a claim for a loss or event that is covered by your policy. Mandatory coverage is what all Canadian insurance policies must cover, these include:

Liability Insurance

This type of insurance is usually the minimum insurance required in most provinces. Liability insurance covers the payment for damages to someone else’s vehicle or other people caused by your vehicle. If the cost of the losses or the damage exceeds your liability limit, you will have to pay the balance of the settlement out of pocket. However, liability insurance does not cover repair costs to your own vehicle, so you need to consider getting additional insurance in order to cover those costs.

Accident Benefits Or Bodily Injury Insurance

This insurance covers the cost of your own personal medical expenses and loss of income when you are in a car accident.

Additional Insurance Coverage

Your car insurance policy might also provide additional coverage other than liability and accidental benefits insurance. There are optional coverages you can add to your policy that will increase your coverage for an additional cost.

These include:

Collision Insurance

This insurance will cover the costs of repairing or replacing your car if you hit another car or object, even if you or the other person was at fault. This type of coverage is sometimes provided with your mandatory insurance coverage, so be sure to ask your insurance company what coverage is included in your policy. If your vehicle was damaged beyond repair, this insurance will also cover the cost of a replacement.

Comprehensive Insurance

Comprehensive insurance will cover the costs of repairing or replacing your vehicle due to other types of damage or loss that isn’t involved with an accident. This can include vandalism, theft or damage from natural disasters, and other hazards. This will cover you even when your car is parked and unattended.

Optional Insurance Coverage Or Endorsements

You may add optional insurance or endorsements to your policy in order to enhance your coverage.

Below are some of the most popular options for endorsements:

Loss of vehicle use – this is coverage for renting a car or needing to use alternative modes of transportation while your car is being repaired.

Damage to a non-owned vehicle – in case you cause damage to a rental vehicle.

Depreciation waiver – this is usually recommended if you have a brand new car. This will ensure that you receive the full value of your car after a write-off.

Family protection – this will insure you if you get into an accident with someone who doesn’t have insurance, or if they have less coverage than you and not enough to cover your claim.

Collision forgiveness – this keeps your insurance premium from increasing following the first accident for which you are at fault.

What Isn’t Covered By Insurance?

Most standard car insurance policies do not cover the loss of personal items, like clothing or electronics from your car. However, your home or tenant insurance will usually cover these losses.

How Much Coverage Is Necessary?

The minimum amount of coverage might not be enough for you, so you will need to decide how much coverage you’ll need. When making the decision you should consider the value of your car and the financial consequences of an accident.

Shop Around For Insurance

Premiums vary from one insurance company to the next, so it is important that you shop around and get quotes from multiple insurance companies in order to find the policies with the lower insurance premiums and the best coverage.

If you are shopping for a car, be sure to check how much it would be to have it insured, as rates differ between different vehicles. You can get this rating information from your insurance broker or agent.

How To Settle A Claim

If you are involved in a car accident, you will need to first notify the police and stay at the scene. Take note of the location, time, weather and any visible damage. Also record the other driver’s information, like their name, address, insurance company name and policy number. If there are any witnesses, collect their contact information as well. Take pictures of the damage to your vehicle and any others involved and take pictures of the surrounding area, noting any property damage, if any. Lastly, report the accident to your auto insurance company.

Author Bio:

Rhett Desormeaux is a content writer currently working with BreezeMaxWeb. He’s a passionate writer and loves studying ancient history, especially Bronze Age civilizations.