Understanding Collision Insurance in Ontario

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What is collision insurance?

Purchasing insurance on a car involves factoring in certain unforeseen risks. Collision insurance insures your car against the risk of an unexpected collision. Collision coverage in a form of car insurance you can add to your insurance policy. Collision insurance is optional in every Canadian province except in Manitoba and Saskatchewan where it is obligatory. If you are involved in a collision, collision coverage works to cover the costs of the damage to your vehicle. This could include collisions with another vehicle or a stationary object such as a particularly nasty pothole, a tree, or lamppost. 

There is a key difference between collisions involving another vehicle and those involving objects. While collision coverage encompasses accidents involving moving vehicles, the same does not go for objects. In a collision with another vehicle, both parties will likely be in motion, unless your car is struck by another vehicle while it is parked. Yet, in a collision with any object that is not another car, the object in question must be stationary at the time of impact for collision insurance to step in. For instance, if you are driving along one evening in low visibility, you may not see a curve in the road coming up. You miss the turn and collide with a small tree that causes damages to your vehicle’s windshield and front fender. The car insurance company would then cover the cost of any repairs. If the repairs required your car to stay in the shop for an extended period of time, some forms of collision insurance policies would also cover the cost of a temporary vehicle.

How much does collision insurance cost?

It’s difficult to offer estimates for collision insurance costs because, like all forms of car insurance, they vary hugely from one institution to the next. Generally speaking, drivers with a clean driving record should estimate the cost to be at least 10% of their existing car insurance policy. Those with a history of driving infractions pose a higher risk to any insurance company and so should estimate their collision coverage to be anywhere from 20% to 30% of their existing insurance policy. So, if your insurance premium is $125 a month, it may go up to $137.5 for those with a clean license, and up to $162.5 for those with a poor driving record. 

Note: Always remember the cost of your deductible. Regardless of the kind of incident that causes damages to your car, you will always have to pay the amount of your deductible before collision coverage steps in. The lower the cost of your deductible, the more you will have to pay for collision coverage. If you can afford to pay a higher deductible, you will save on the premium.

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At fault vs. not at fault

Collision coverage will cover the damages to your car regardless of whether or not you were at fault for the incident. So, whether you are the victim of a hit and run or you yourself lose control of your vehicle and collide with a fire hydrant, your collision insurance would cover the cost of a new fender. 

If you are involved in an accident, never admit fault.

  • Always stop your vehicle, report the incident to the relevant authorities (the police if the incident causes substantial damage; your insurance company if the damages are minimal and you can still drive your vehicle).
  • Always obtain the insurance details of the other party if the incident involves another driver and do not promise to repay any damages, even if you suspect you are responsible for the accident.
  • Never accept an unofficial settlement and never agree to overlook an incident, even if it seems minimal. This is because not all damage to your vehicle is visible. Your car may have sustained internal damage that causes problems in the future. If you do not contact the insurer in a timely fashion, you will be considered responsible for such damages. It is also a good idea to record the incident for insurance purposes, especially if you suspect you are not at fault. 

If an incident is particularly murky, the car insurer company may send a claims adjuster to review the situation and investigate the probable circumstances of an accident. Claims adjusters are responsible for estimating the cost of damages in any given situation as well as attributing responsibility for the incident to the appropriate party. In order to do this, claims adjusters interview witnesses (driver(s) as well as any bystanders), inspecting the vehicle(s) in question, and consulting police and/or hospital records.

Should I purchase collision insurance?

Collision coverage may not be for everyone. To understand whether or not the cost of collision insurance is worth it for you, let’s have a look at some of the variables to consider:

Leasing, Renting or Financing a car: If you are leasing or renting a vehicles you will most likely require collision coverage. This is to insure the lender will not have to pay out of pocket should you encounter an unexpected collision. Similarly, if you are financial your car purchase with a loan, you will most likely be required to purchase collision insurance to reassure the lender that you are a responsible driver.

The Value of Your Car: Collision insurance can be pretty pricey. It is one of the most expensive insurance add-ons for customers in provinces where it is not strictly required. This is why the value of your car is of the utmost importance. If you are driving a new car, especially if it’s one that requires specialised parts, you may be grateful for collision insurance. If you drive a $40000 vehicle and find yourself needing repairs costing $10000 as a result of a collision, collision coverage will save you a huge amount. Logically, if you drive an inexpensive car, you will be less likely to encounter such extensive damage to your vehicle. In the event that the combined cost of your deductible and the collision coverage outweigh the cost of potential repairs, it may save you money to pay for repairs yourself rather than purchase the insurance. In short, collision insurance is best suited to new car owners.

Risk of Unpredicted Collisions: This one is truly case by case. If you live in an area that is particularly badly afflicted by poor roads and generally perilous driving conditions such as low visibility, you are more likely to incur damages to your car as a result of a collision.

Your Financial Situation: This one is pretty obvious. If you are driving a car you love and can afford it, you may as well go ahead and purchase collision insurance. But, if you find yourself struggling financially, think about whether you would benefit most from insuring your car against collisions or if it would make more sense to simply release your damaged vehicle and use any money you get from it (by selling it or from an insurance payout) to buy a new car. The key to remember is that you spread the cost of collision insurance out over the course of several months. If you choose to risk not purchasing collision insurance, repairs will cost one large sum up front. You may find one of these options less of a financial strain than the other, depending on the state of your vehicle.

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What does collision insurance not cover?

Let’s have a look at what is not covered by collision insurance. As mentioned above, collision insurance only covers damage to your vehicle caused by stationary objects. Trees are a convenient example, so let’s use another. If your car hit a tree while you were driving, incurring damages to your vehicle, collision insurance would cover the damages. However, if your car is parked and the same tree fell on top of your vehicle, causing similar damages, collision insurance would no longer cover the cost of the repairs. The easy way to remember whether your collision insurance will help you in a collision with an object is to determine whether or not the object was stationary. Pretty simple! 

Further, collision insurance does not cover personal injury costs as a result of a collision. If you strike a stationary object or are involved in an accident with another vehicle and are injured as a result of the impact, you will be covered by mandatory insurance all drivers are required to purchase. If the accident is your fault, third party liability insurance will require cover the damages caused to the other person’s body and/or property. And vice versa, if you are not at-fault, the other person’s insurance policy will cover the costs of your medical bills.

What is the difference between comprehensive coverage and collision coverage?

Collision and comprehensive insurance are often misunderstood. Both comprehensive and collision coverage work to minimize the cost of repairing your vehicle. Both comprehensive and collision coverage can address accidents brought on by collisions. So what is the difference between comprehensive and collision coverage? 

We now know under what circumstances collision insurance covers damage to your car. Harking back once more to that pesky tree that fell on your vehicle and causes damages not covered by collision insurance. This is where comprehensive coverage would take over. Comprehensive insurance coverage accounts for any damages caused to your vehicle by unexpected collisions with objects in motion, except for other cars. This includes things like falling trees and objects that might fly off a truck bed or a nearby construction site. 

Collision car insurance does not cover damages caused by inclement weather such as hail storms or tornadoes; it does not cover damages as a result of vandalism or theft. In these instances, comprehensive coverage would take the lead and protect you financially. For clarity, here is a little break down of what each kind of insurance coverage does and what the overlap is. 

Collision insurance protects you from: 

    • Collisions involving stationary objects 
    • Collisions involving other vehicles, whether they are moving or stationary 

Comprehensive insurance takes over for: 

    • Collisions where your car is stationary and the object is moving 
    • Damages unrelated to collisions such as theft, vandalism, and weather damages

In rare cases, both forms of car insurance work together. For instance, in the unlikely event that you are driving and a falling tree branch lands on your vehicle, causing you to vear off the road into a lamppost, you insurance company would invoke both collision coverage and comprehensive insurance to cover the total cost of the damages. Some mandatory insurance policies will include collision coverage as part of the policies even in provinces where it is not required. Speak to your provider for a detailed understanding of what your basic policy includes.

What happens if I don't have collision insurance?

Let’s say you decide to forego the expense of collision insurance and become involved in an accident that causes damages to the body of your vehicle. Let’s look at a variety of scenarios:

You are at-fault in a collision involving another driver: You will have to pay up front for all damages to your vehicle. Your third party liability insurance will cover the damages to the other person’s vehicle and/or any bodily injury.

You are at-fault in a collision involving a static object: Once again, you will pay out of pocket for the damages to your vehicle. If the object is a person’s private property, such as a fence, wall, or building, your third party liability insurance will cover the costs of the damages.

You are not at-fault in a collision with another driver: You will be covered by the other driver’s third party liability insurance. If you live in Ontario, you will be covered by Direct Compensation Property Damage (DCPD), a mandatory component of auto insurance that accounts for accidents in which you are not at-fault. If you are involved in an accident in Alberta and suffer physical injury, you are entitled to Accident Benefits Coverage (ABC). ABC will cover all medical expenses that are directly related to the incident regardless of whether you are at fault.

You are not at-fault in a collision with a static object: These events aren’t likely. The only reason this may occur (as far as I can tell) would be a manufacturing error in the vehicle (faulty brakes for example) which would most likely result in a substantial pay out from the manufacturer.

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