Car insurance can be confusing, most notably because there are so many different types of coverage available in Canada. If you’re wondering about all the different varieties of car insurance available to you, you’re in the right place.
On this page, we’ll break down 14 of the most common car insurance coverages.
While there are many types of car insurance coverage out there, they mostly fall into three broad categories: coverage for damage to the insured vehicle, coverage for the driver’s liability, and medical or loss of use benefits.
Let’s start with the coverages available to protect the insured vehicle against physical damage.
Perhaps the first thing that comes to mind when you think of insuring a vehicle is collision coverage. Collision coverage will pay to repair damage that a vehicle sustains when it impacts another vehicle, an object, or the ground. Collision coverage applies when the insured driver is at fault for the collision. Otherwise, the at-fault drivers (or their insurance) will pay.
Collision coverage is optional in most provinces, but mandatory in Manitoba and Saskatchewan. However, if you lease or finance the vehicle, collision coverage is always required by the lender or lessor.
Collision coverage is only for damage to the insured vehicle. Damage to third-party property may fall under another car insurance coverage. Third-party property is anything that falls outside the agreement between an insurance policyholder (the first party) and their insurer (the second party).
Comprehensive car insurance covers damage to the insured vehicle from things that are not collisions.
As the name implies, comprehensive coverage is quite broad. It covers losses stemming from fires, hailstorms, theft, vandalism, wild animals, and lots of things in between. If you have both collision and comprehensive coverage for your vehicle, it will have protection against most forms of accidental damage likely to come its way.
Much like collision coverage, comprehensive coverage is usually optional. However, it’s still mandatory in Saskatchewan and Manitoba, and for anyone who is leasing or financing their car.
All perils coverage (sometimes called all risks coverage or full coverage) is the broadest form of coverage available for vehicles. It combines collision and comprehensive coverages, with a few additional perils.
For example, all perils coverage typically adds broader protection for theft. Under all perils coverage, your vehicle would be protected if it were to be stolen by an employee, a repairperson, or someone who lives in your home; these situations are normally excluded from regular comprehensive coverage.
All perils coverage is the most expensive protection available for vehicles, but it’s also the broadest.
Specified perils coverage (sometimes called named perils) is like a stripped-down version of comprehensive coverage. It covers the same types of losses as comprehensive, but only those specifically listed on the policy.
A peril is the insurance name for something that causes a loss. So, while comprehensive coverage covers damage from fire, theft, hail, and any other non-collision peril, specified perils might only cover fire and theft. The precise selections available vary between insurance providers and provinces.
By choosing only certain perils to cover, a driver can save money on their car insurance policy. Specified perils coverage can be useful if you’re worried about theft, but not hail or fire or wild animals (for example).
Direct compensation property damage (DCPD) exists in many provinces, particularly the ones that do not have public auto insurance (you’ll see why). In the provinces that have DCPD systems, it is mandatory.
DCPD is a form of collision insurance. Under DCPD, you will deal only with your own insurance provider after collisions that are not your fault. Regardless of how many vehicles were involved in the collision, your insurance provider will handle your claim — you won’t deal with the other drivers or their providers.
However, if you are at fault, DCPD does not apply. For that reason, drivers with DCPD coverage still need regular collision coverage to be protected for accidents for which they are even partially at fault. If you are partially at fault, the claim will end up split between the two coverages proportionally.
It’s also important to note that DCPD does not apply to hit-and-run collisions. Even though you may not be at fault, you’ll need regular collision coverage to protect your vehicle from hit-and-runs.
DCPD doesn’t apply in provinces with public auto insurance, like BC, because everyone has the same insurance provider anyway. Quebec’s hybrid system of public and private insurance has similarities to DCPD but uses the term Direct Compensation Agreement instead.
Gap insurance (sometimes called guaranteed auto protection) is a coverage designed for new vehicles. It covers the difference in value between the vehicle’s depreciated value and what you still owe on the vehicle.
For example: If you buy a $25,000 vehicle with a $3,000 down payment, you owe $22,000 on it. However, it’s depreciated value may be as low as $20,000 the very moment you drive it off the lot. Standard car insurance only covers the vehicle up to its depreciated value (a.k.a. actual cash value).
If the vehicle is stolen the next day and never recovered, your standard car0 insurance would only cover the cash value (in this case $20,000). But, you still owe the lender $2,000 more — gap insurance exists to bridge this very gap.
Gap insurance is usually for vehicles less than about 2 years old. After you’ve paid off some of the amount owning, there’s no more gap to cover, since you’ll normally be paying off the debt faster than the value depreciates. Gap insurance is particularly useful for high-value vehicles, or when you’ve made a very small down payment.
Some providers offer products like new vehicle protection, which includes some form of gap insurance. This isn’t widely available, because few customers need or choose to purchase it.
If someone strikes your vehicle and disappears, it’s known as a hit and run.
If you have collision coverage, damage from a hit and run will be covered. However, you’ll be responsible for paying any deductible attached to that coverage. If the offending driver is later identified, your insurer may later reimburse the deductible, as the at-fault driver (and their insurance) should end up covering the costs.
For situations where the at-fault driver is never found, though, you can sometimes buy hit and run coverage. The coverage takes different forms depending on the provider. For instance, you may be able to buy hit and run coverage without regular collision coverage, or your hit and run coverage may waive the deductible for such claims.
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Moving on from coverages for the vehicle itself, it’s time for arguably the most important car insurance coverage: liability.
When you’re found legally at-fault for something, you’re said to be liable. Liability insurance helps cover legal costs and damages when you’re liable for a vehicle accident. Liability coverage is mandatory in all provinces.
Liability can extend to much more than just the vehicles damaged in a collision. As a driver, you can be liable for injury to other drivers, passengers, pedestrians, or damage to property (like vehicles, buildings, or lamp posts). Liability coverage is usually separated into bodily injury and property damage:
Liability coverage functions slightly differently in each province, but it’s mandatory for all drivers at all times, all across Canada. In most provinces, the minimum required is $200,000. However, the majority of drivers carry at least $1 million, and experts often recommend $2 million.
If you’re at fault for an accident and the damages are greater than your liability limit, the extra amounts have to come out of your pocket. For that reason, you should purchase as much liability coverage as you can reasonably afford.
The final category of car insurance coverages is for those that don’t quite fall within liability or physical damage coverages.
Accident benefits is a phrase that refers to many closely related coverages in car insurance.
Generally speaking, accident benefits offer compensation for drivers, passengers, cyclists, or pedestrians injured in an accident. Accident benefits is a mandatory coverage.
In most cases, accident benefits are available to anyone injured in an accident — regardless of fault.
Benefits vary from province to province, but several are standard on most policies (the details and limits also vary):
In addition to these standard accident benefits, endorsements are usually available to enhance the benefits. For example, you may be able to add benefits that pay for caregivers or housekeepers during the injured person’s recovery time.
If your vehicle is damaged or destroyed, there will be a period during which you have no vehicle. Accordingly, you’re bound to run up some extra costs during that time.
Loss of use coverages are designed to help compensate you for extra expenses you incur while your vehicle is in the repair shop. They also apply while your insurer is assessing your coverage; there can be a short gap between the accident and when the insurer issues payment for a write-off, for instance.
Typically, loss of use coverage will reimburse you for things like rental cars, public transportation, or taxis that you need to make use of while you’re without your car. The coverage is usually optional.
It’s important to note that loss of use coverage, if you have it, only applies to losses that your policy covers. For example, if you don’t have collision coverage, you can’t access any loss of use benefits following a collision. Think of loss of use as an enhancement to other coverages like collision or comprehensive — not a coverage of its own.
While we’ve already covered pretty much all of the car insurance types most people need, there are a few types for specific niches that you might want to know about.
If you rent a vehicle, do you need to buy additional insurance?
Sometimes, your personal car insurance policy will extend some coverage to your rental car. For instance, Ontario drivers can buy a rental vehicle insurance endorsement that extends coverage to vehicles they don’t own.
As well, some credit cards cover damage to rental vehicles as long as the rental is charged to that card. However, these do not typically include liability coverage, and some exclude the daily “lost rental revenue” that the rental car company could hypothetically still charge back to you while the rental car is off the road and being repaired.
Most providers in Canada offer some form of rental vehicle coverage, either as a standard inclusion or an optional add-on. Check your policy or ask your provider if you’re unsure.
While most luxury vehicles don’t require special insurance, owners of such vehicles may want some additional protection. Some providers offer special coverage for luxury vehicles. This coverage often includes, for example, a guarantee that parts will be replaced with genuine manufacturer parts where possible.
Classic or collector cars don’t necessarily need their own insurance, but classic car owners certainly have unique needs that are better served by a dedicated classic car policy. Many such owners only drive their cars seasonally, which means they can save money with a policy designed for such infrequent use.
Some providers offer policies tailored to collector cars that assume the vehicles aren’t driven regularly. They may also insure the vehicle for a specific, agreed-upon value, rather than having an adjuster determine the cash value following an accident. Appraisals and inspections are more likely to be required up-front when obtaining a dedicated classic car policy, and some of these providers can help you arrange these services from a network of trusted providers.
Roadside assistance coverage is available from many providers. This coverage helps cover costs for miscellaneous roadside emergency services, like towing, changing flats, or delivering fuel to a stranded vehicle.
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About the expert: Daniel Mirkovic
A co-founder of Square One with 25 years of experience in the insurance industry, Daniel was previously vice president of the insurance and travel divisions at the British Columbia Automobile Association. Daniel has a bachelor of commerce and a Master of Business Administration (MBA) from the Sauder School of Business at the University of British Columbia. He holds a Canadian Accredited Insurance Broker (CAIB) designation and a general insurance license level 3 in BC, Alberta, Saskatchewan, Manitoba and Ontario.
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