Types of car insurance coverages in Canada

Since you can’t legally operate a car without insurance in Canada —driving is an inherently risky activity — auto insurance policies are tightly regulated and standardized.

However, the provinces get to determine what constitutes mandatory and optional coverage.

The maximum amount an insurer will pay to an insurance policyholder varies in each province and territory.

Broadly speaking, liability and accident coverage is mandatory in most provinces, while insurance that covers damage to the body of the car and personal effects is optional (with some exceptions).

Insurance endorsements are a kind of optional coverage. They’re policy change forms that alter standard policies in ways that optional products don’t. Endorsements can enhance or reduce your existing coverage.

See the mandatory coverage for your province here.

Mandatory insurance

• Third-party liability: This benefit covers you from claims from a third party when you have an at-fault accident. It protects you if you cause damage to someone else’s property, bodily injury or death.
• Direct compensation property damage: This covers damage to your vehicle if the other person was responsible for the accident. Your car insurance company compensates you.
• Uninsured automobile protection: Provides extra coverage if you’re in a collision with a driver that does not have third-party liability coverage.
• Accident benefits: Protects you from injury in a collision, whether you are the driver, a passenger, pedestrian or cyclist.

Optional insurance

• Collision: This coverage protects your vehicle against damage from a collision with another car. Your insurer will pay to repair or replace your vehicle if you are at fault
• Comprehensive:  Covers damage to your vehicle that wasn’t caused by a collision, like theft, hail, vandalism, and more.
• Specified perils: This coverage protects against damages caused by named perils, such as theft, attempted theft, explosions and natural disasters like fire or lightning. Only risks specified in the policy are covered.
• All-perils: This coverage is a combination of both collision and comprehensive insurance. All-perils coverage protects your vehicle from all causes of loss except those directly mentioned as exclusions in your policy. It also provides additional protection if your car is stolen or damaged by another driver.

Endorsements  

• Suspension of coverage: This allows you to suspend your insurance coverage for 30 days or more during periods when you aren’t using the car.
• Transportation replacement: Provides compensation to pay for other means of transportation if your car is unusable due to a covered risk.
• Liability for damage to non-owned automobile(s): Covers damage caused to a rented or leased car.
• Accident forgiveness: Ensures your premium will not increase after your first at-fault collision for as long as you remain with the same insurer.
• Waiver of depreciation: Ensures your insurance company won’t factor in depreciation when settling a claim; you will receive the amount you initially paid for the car.
• Family protection coverage: Ensures your costs are covered if you and your family are involved in an accident with a driver with less liability insurance than you. This endorsement will cover the remainder.
• Limited glass: For a lower premium, you can limit or exclude any coverage for glass damage that might’ve been in your policy.
• Fire and theft deductible: Adds a deductible (an amount you must pay before your insurance company chips in funds) for a theft or fire damage claim.