How much auto insurance do I really need?

Auto Insurance

When you hear the phrase “less is more”, you probably don’t think of this as advice for auto insurance. After all, it’s always best to get as much coverage as you can afford, right? Not necessarily. There are times when you can scale back on some optional coverages. Let’s break down some things you might need, depending on what’s financially best for you, your family and your vehicle.

What is collision and comprehensive coverage?

The most common form of physical damage insurance coverage is collision and comprehensive. You may be aware that it can account for a big part of your premium. This is due to the amount it costs to repair or replace your vehicle if it was damaged by an insured event.

When is it a good idea to have physical damage coverage?

  • You’re leasing or financing your car. It’s almost always required that you have physical damage coverage as part of your auto insurance policy, so make sure you do! Your vehicle could even be taken from you if you don’t have physical damage coverage.
  • Your car is worth more than the cost of the coverage. Paying for physical damage coverage might seem expensive, but think about how much more you could be left to pay without it. While you might save on your premium if you opt to go without physical damage coverage, it could result in a huge bill after an accident.

You might want to remove physical damage coverage if…

  • You have an older car. If your car is getting older, it’s wise to do some math before adding this coverage. Determine the annual cost of your premium with physical damage coverage, and remember to add your deductible too (as you’d be responsible to pay this in a claim). If the cost is higher than your car’s value, you’d be paying more for insurance than your car is worth.
  • Your car is in poor condition. If maintaining your car is already putting a hole in your pocket from visits to the mechanic, consider the value of the car – it might be costing more to keep it running than it’s worth. Having physical damage coverage will only become another expense.

What is waiver of depreciation?

The waiver of depreciation coverage is optional for newer cars only. Your vehicle will be protected up to its full value at new, without any deductions for its limited use.

You should have this coverage if…

  • You have a brand new car. New cars are an expensive purchase, and quickly lose their value. If your car is damaged in an accident, this coverage would make sure your car is repaired with new parts, or a replaced with brand new car (that’s similar to your own).
  • If you’re paying off a loan on your new ride. You’re responsible for paying the outstanding amount on your loan, even if your vehicle is stolen or totalled. Without this coverage, you’d only receive the car’s value at the time of the claim, leaving you potentially out-of-pocket thousands of dollars.

Damage to non-owned vehicles and transportation replacement.

This coverage helps to make sure you’re never left without transportation. You’ll be provided with a rental car in the event of a claim. Plus, you’ll be covered by your auto insurance if you drive a borrowed or rented car that’s similar to your own.

When rental coverage is a good idea.

  • You’d be at a loss without your car. If your vehicle is your only way of getting around, travel after an accident could be a big headache. The convenience of a rental vehicle could be worth the extra premium for you so you can stick to your regular routine.
  • When you rent vehicles for leisure, or borrow someone else’s car. If you like to travel in Canada or the U.S., it can be convenient to rent or borrow another car. You can always get insurance from the rental company, but it’s more cost effective to be protected by your own insurer.

You may not need rental coverage if…

  • You don’t rely on your vehicle. If you have more than one car, or you use public transit, you probably won’t benefit from this coverage.
  • You opt out of physical damage coverage. If your car isn’t covered by physical damage coverage, you wouldn’t be eligible for rental coverage.

What is “glass restriction” or “restricting glass”?

Glass restriction (also called restricting glass) isn’t an additional coverage, it’s actually taking some away. Adding this restriction means glass is only covered for damages that resulted from a specific list of events, such as fire, windstorm and hail. There’s no coverage for glass damage (including chips or cracks) caused by rocks or other debris.

Consider glass restriction if…

  • It’s more expensive in your area. If you live somewhere prone to frequent hail and extreme cold – such as Alberta – glass coverage can be pricy. If you also have an older car with a basic windshield, it might be more economical to pay out-of-pocket.

You may not need glass restriction if…

  • Glass coverage is cost effective. In most provinces, glass coverage isn’t an expensive addition. Plus, glass breakage can be caused by many insured events such as falling branches or gravel causing a cracked windshield.
  • You have a high-end windshield. The cost of replacing a windshield can vary a lot between vehicles. Ones with added features such as rain sensors and fog sensors can be costly. Consider the price you’d pay to replace it and the cost of glass coverage to see if it’s right for you.

Live in Ontario? You have options with your Accident Benefits.

In Ontario, you can choose to increase individual accident benefit limits. Be sure to review the benefits and limits to make sure you’d be covered to best suit you and your family. Here’s two main benefits to get you started:

  • Income replacement. If you need to take time off work after an accident, the last thing you want worry about is bills pilling up. This benefit is already included with a base limit of $400 a week (up to 70% of your income). If your paycheque brings in a higher amount than this, it’s worth looking into the increased options to keep your income steady.
  • Dependent care. If you’re injured in an accident and have kids, you might appreciate a helping hand. If you need childcare for an extensive period of time, this benefit could be worth adding.

Coverage your car’s always wanted at a competitive price.