Raise your hand if you’ve ever opened up your auto insurance policy documents, grabbed your liability certificate to put in your vehicle, took a quick peek at your billing schedule and filed the rest of the document without a second glance? You’re not alone; this is common among many. But we’re here today to teach you about all of the complicated terms you see on your policy, so grab your documents and follow along (a note before we begin – your policy will most likely describe a hazard as a peril). You may even learn about coverages that you didn’t even know existed.
There are several items that fall under “road coverages” (commonly known as PLPD or one-way insurance), which are required in order to drive your vehicle in the province of Ontario.
Third-party liability: in an accident where you are found legally responsible with injuring another person or damaging their property, liability insurance pays the cost of your legal defense, as well as the cost of any damages. The minimum coverage amount required is $200,000, but there is the option to increase the limit (at an additional cost). The majority of people are covered for $1,000,000, but more and more we’re seeing people purchase $2,000,000 (which is the recommended amount).
Direct compensation-property damage: this covers damage to your vehicle or its contents if someone else is responsible for an accident, as well as if you need a rental vehicle because yours is unable to be driven. There are conditions to this coverage, though, such as the accident would need to have taken place in Ontario, with at least one other vehicle, the other driver needs to be identified, and at least one of the other vehicles involved needs to be insured through a company licensed to provide insurance in Ontario.
Accident benefits: these cover you if you’re injured as a result of an accident, regardless of who is at fault. They include extra medical care, rehabilitation and attendant care, costs to cover additional help if your caregiver is injured in an accident, costs of funeral expenses and death benefits if someone dies in an accident, and income replacement benefits (whether you are self-employed or traditionally employed). The option also exists to increase the limits for all of these coverages (also at an additional cost).
Uninsured automobile: this protects you and your family if you are injured or killed by a hit-and-run driver or by an uninsured motorist. It also covers damage to your vehicle caused by an identified uninsured driver.
The below categories are referred to as “physical damage” coverages. Though they are listed as optional, there are some circumstances in which they are not optional; the most common being if your vehicle is leased or financed (the coverage is required by the leasing/financing company). They are broken down into two categories: hazards while your vehicle is parked (comprehensive or specified perils – you can purchase one or the other, but not both) and hazards while your vehicle is in motion (collision).
Comprehensive: This coverage reimburses you for damage to your own car from causes other than collision or rolling your vehicle. This pays for losses due to hazards like hail, flood, theft, fire, glass breakage, falling objects, missiles, explosions, earthquakes, windstorms, vandalism or malicious mischief, riot or civil commotion, and collision with a bird or an animal. When you look at a policy’s comprehensive coverage, check for exclusions or limitations. If you have a special audio system installed in your car, for example, you should make sure your policy would cover the cost of the equipment if it were damaged or stolen.
Collision: this covers you for losses if you are involved in an at fault accident (because remember, if you’re not at fault, you’d be covered under your direct compensation-property damage – unless the person who caused the damage can’t be identified). That being said, there are some situations that you may assume would fall under the definition of a collision, but would actually be covered under a different type of coverage (or not covered at all), so please contact your broker for more information.
All perils: this covers everything in the comprehensive and collision categories (for this reason, there’s no need to purchase collision and comprehensive separately), as well as if a person who lives in your household (that is also insured through your policy) steals your vehicle. Along the same lines, you will also be covered if an employee who drives/uses or services/repairs your vehicle, steals it.
All of the above are subject to a deductible; the amount will be indicated on your policy documents. Your deductibles are your out-of-pocket costs towards the repair of your vehicle (and the insurance company would pay for the balance). The most popular choices for deductibles are $500 and $1000, however this number can increase based on specific circumstances (for example, a higher-priced vehicle may require a higher deductible).
There are also a few other optional coverages that are available to be purchased, based on individual needs and eligibility, with the most popular being rental vehicle coverage, waiver of depreciation and accident waiver.
As insurance brokers, we strive on making sure that our clients fully understand their insurance policy documents. If you come across wordings or a coverage that you still don’t understand in your policy documents, please feel free to reach out to InsuranceHero.ca and we will be more than happy to provide additional details. We’re always here to answer any questions that you may have.