Basic Canadian Auto Insurance Terms

Insurance terms can be very confusing. Use this guide to help you understand the basics:

Accident benefits: This coverage provides compensation, regardless of fault, if you, your passengers, or pedestrians suffer injury or death in an automobile collision. Accident benefits coverage is compulsory in all provinces except Newfoundland and Labrador. (In Quebec, this is provided by government; see below.)

Bodily Injury: This coverage provides up to $200,000 if you are injured or killed through the fault of a motorist who has no insurance, or by an unidentified vehicle. You receive payment under this protection through the Uninsured Automobile coverage in your policy -- unless the Canadian province, territory or U.S. state where you were injured has a special fund from which to claim. You will be reimbursed for the money you would otherwise be entitled to receive from the uninsured/unidentified motorist.

 Bodily Injury - Quebec:

The automobile insurance system in Quebec has two main parts: bodily injury, which is covered by a public plan administered by the Société de l'assurance automobile du Québec (SAAQ), and damage to property, which is covered by private insurers. SAAQ will compensate Quebec residents for bodily injury arising from an automobile accident anywhere in the world, regardless of fault, just as if the accident had happened in Quebec. Such an accident may involve any vehicle. After six months' absence from Quebec, however, other coverage is required. The SAAQ plan also covers non-residents to the extent they were not at fault. Private insurers in Quebec offer "Endorsement 34" to supplement the SAAQ no-fault bodily injury compensation plan; it covers, to varying degrees, the named insured and his or her spouse and dependent children.

Comprehensive Coverage:  Comprehensive coverage protects your car against loss or damage other than the collision coverage. This would include falling or flying objects, missiles and vandalism.  As for collision coverage, there is usually a deductible amount for this coverage . This amount is either paid by you toward the cost of repairs or is deducted from the claims settlement.

Coverage limits: These are dollar limits will often apply if the certain articles are stolen inside your vehicle such as: bicycles; jewellery and gems; watches; furs; coin, stamp and card collections; and manuscripts. Many insurers no longer limit coverage of silverware. Check your policy fro complete details.

Damage to your vehicle: Available coverage varies widely, from none in Alberta, to $25,000 in Ontario, $50,000 in Quebec (see below), and as much as $200,000 in provinces such as Manitoba. Some jurisdictions require that the uninsured motorist be identified. See a qualified broker, agent or insurance company service representative for more information.

Deductible:  The amount of money that is not covered by the insurance policy.  You may see this in Auto, Home or Medical Policies.  Typically the deductible is shown as a fixed amount such as $500,  $1,000 or $2,000.  The total cost of the insurance or Premium will depend on the deductible that you choose.  The higher the deductible, the lower the premium and vice versa.

For Example: You have a car insurance policy with a $500 deductible.  You are involved in a car accident that will cost $2,000 to fix.  The Deductible means that you have to pay the first $500, then the insurance company pays the rest or $1,500.  If the damage is less than $500, then you have to pay the full cost.

"Direct compensation -- property damage": In Quebec and Ontario, your own insurer compensates you for the share of the damage caused to your vehicle (including contents) and for your loss of use of your car, for which another driver would be legally responsible. You deal with your own, not the other person's, insurer; this speeds up the payment process. If another identified motorist is responsible for the collision, you can collect from your own insurer regardless of whether or not you have purchased physical damage coverage on your own car. There are rules, however, for Direct Compensation to apply. The collision must occur in your home province; there must be at least one other identified vehicle involved in the crash causing the loss; and that other vehicle must also be insured by an insurer licensed in your province. If these conditions can't be fulfilled, then you'll have to rely on your collision insurance (if you have it), whether or not you are at fault.

First party insurance: This provides Physical Damage coverage (for collision, re, theft, etc.) for your own vehicle. Loss or damage from mechanical breakdown, normal wear and tear, rust, corrosion, and so on is not covered.

How much car insurance coverage does the law say I must have?  You must carry at least $200,000 in Third Party Liability insurance everywhere in Canada except in Quebec, where the minimum limit is $50,000. (Quebec residents who travel outside their province are strongly advised to carry higher limits, however.)  You must buy accident benefits coverage everywhere in Canada except in Newfoundland. In Quebec, insurance premiums for bodily injury are collected together with vehicle registration and driver licence fees and fuel tax; the premium payments are then transferred to SAAQ. In Manitoba and Saskatchewan you must also buy first-party All Perils insurance.

Loss of use: This coverage pays a specified daily amount subject to an overall limit for rental of a vehicle while yours is being repaired. This can be used for car rental, taxis or public transportation. If you have All Perils, Comprehensive, or Specified Perils coverage, your policy automatically gives a certain amount of Loss of Use coverage if your vehicle is stolen.

Negligence: To be negligent is to fail to do what a reasonable and prudent person would do (or to do what such a person would not do); this can result in property damage, injury or death.

Premium:  The amount of money that you pay to the insurance company in return for covering a risk for a pre-determined period of time.

Riders: These are supplemental (or additional) insurance policies that can cover risks that are not fully protected under the main insurance policy.   These "riders" or "floater" policies provide all-risk coverage for specific items - often fragile and/or valuable - subject to certain exclusions. Coverage can be world-wide and there's usually no deductible.

Risk:  a chance event that is unexpected and accidental as you, far as the policy holder is concerned. For example, if your dog's tail sweeps an ornament off a table and onto the floor where it breaks, that is due to a "risk"; the ornament would not otherwise have broken. The gradual wearing out of clothes, however, or the rotting of fruit, are quite natural and expected... and therefore are not insurable "risks".

Third party liability insurance: Third party liability (known as Civil Liability in Quebec) insurance covers you if your vehicle injures someone else or damages his or her property... and you are held legally liable. Should a claim against you be more than your level of coverage, you can be held personally responsible for the balance. For this reason, most drivers purchase more than the minimum coverage required by law: $50,000 in Quebec, $200,000 elsewhere.

Uninsured Automobile Protection: Uninsured automobile protection is available to everyone in Canada. It protects victims of bodily injury or property damage caused by an uninsured motorist or an unidentified third party.

Uninsured Motorist - Quebec 

In Quebec, the Fonds d'indemnisation administered by SAAQ compensates victims of bodily injury or property damage caused by an uninsured motorist or an unidentified third party. There is a $50,000 limit for property damage claims.

Note:  These descriptions are for information purposes only.  InsQuote.ca accepts no liability for these descriptions.   Insurance Policies can be complex and vary in the terms and conditions that will apply to your individual situation.  Speak to your insurance professional for complete details on your particular policy.

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