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Collision car insurance in Canada: the basics.

In Canada, optional forms of car insurance can be added to your base policy (which is made up of liability and accident benefits) to increase your coverage. Collision insurance is one such product.

Collision auto insurance provides compensation if your car is damaged or totalled in a collision with another car or object. Collision coverage can’t be purchased on its own — you have to go through the provider of your basic car insurance policy (except in B.C., which has a hybrid private-public system).

Keep reading to learn more about collision insurance and when you might — or might not — need it.

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What is collision coverage?

Collision auto insurance coverage is optional insurance coverage in most Canadian provinces that you can add to your base policy. Purchasing collision will increase your premium.

Saskatchewan and Manitoba are exceptions. In these provinces, collision insurance is included in a standard policy. Both provinces have a public auto insurance system.

What does collision insurance cover?

A lot of people assume that by buying basic car insurance you’re entitled to compensation from your insurance company when you get into an accident that damages your car.

It’s not that cut and dry. Third-party liability coverage, which is what’s offered in a basic auto insurance policy, goes towards paying for loss or damage of your car if you’re not at fault for causing the accident.

If you are at-fault for a collision, you will have to pay to repair or replace your car out of your own pocket — unless you’ve purchased collision insurance in advance.

Similarly, basic auto insurance won’t cover you if your car is damaged in a hit and run (also known as an “unidentified third party” in insurance lingo). Coverage for these types of incidents is only offered through collision insurance. (In Manitoba, Saskatchewan and B.C., however, everyone automatically has insurance coverage for hit and run scenarios — regardless of whether you even own a car.)

Here are some of the instances in which collision insurance has you covered:

  • Your car collides with an object and is subsequently damaged (a guard rail or even an animal).
  • You’re involved in a single-vehicle rollover (from ice or snow).
  • You cause an accident and your car is damaged.

If you are found to be partially at fault for an accident, your third party liability coverage will cover a portion of the costs (without paying a deductible) with your collision coverage paying for the remainder (you will be charged a deductible).

What happens if I get into a car accident without collision coverage?

It depends on whether you are at fault for causing the accident and where that accident occurs.

In provinces with a no-fault auto insurance system:

If you are not at-fault, then direct compensation for property damage coverage (DCPD) will ensure that you get compensation from your insurance company to cover the damage to your vehicle. DCPD coverage is already included in third party liability coverage. In order to receive your DCPD benefit, both drivers involved in the accident (that means the at-fault driver) must have basic car insurance.

If you are involved in an accident with an uninsured driver or are involved in a hit and run, your car insurance company won’t give you money to repair or replace your car (you will still be able to access your medical benefits, however). You’re on your own to fix your vehicle or find one to replace it.

In provinces with a tort-based auto insurance system:

In tort-based systems, the not at fault portion is paid by the at-fault party's insurer, not your own.

Is collision insurance required in Canada?

In most of Canada, collision, unlike liability or accident benefits, is not a mandatory coverage.

Manitoba and Saskatchewan are exceptions. Both provinces have fully public car insurance systems. The provincial auto insurance providers have decided to include collision coverage in a basic policy.

B.C. has a hybrid system. While basic auto insurance is offered through the province's public car insurance system, collision coverage in B.C. is optional. To get help repairing or replacing your car, you will need to buy collision insurance from your Autoplan broker.

Do I need collision insurance?

Collision coverage pays for damage caused to your car. Unless you live in a province with fully a public car insurance system (Manitoba or Saskatchewan), you have the choice to either purchase or not purchase collision insurance. It’s hard to say definitively that you don’t need collision insurance. There are two camps: yes and maybe.

You definitely need collision insurance:

  • If you’re leasing or financing a car with a loan. Dealerships and lenders usually have collision insurance as a requirement.

You may need collision insurance:

  • If you’re driving a current model year car that’s too expensive to replace out-of-pocket.
  • If you don’t have enough savings to replace your car (in which case the insurance settlement will come in handy).
  • If you’re planning to buy a new car eventually and you’d like to trade in your current one because you think it will still have value.

Should I have collision insurance on an old car?

Most of the time, the answer to this question is: no. However, you need to consider your own unique circumstance. Depending on the facts of your situation, it may be a good idea to get collision insurance, even if your car is old (by that we mean cars that are older than five years).

Here are some things to consider before deciding to forgo collision insurance:

  • What is the resale value of your car according to the Kelley Blue Book? The Blue Book is published by an automotive research company and shows what car owners can expect to receive for their car when trading it in at a dealership.
  • Based on that information, would you be able to replace your car out of pocket, if it was declared a total loss?
  • How much would it cost to add collision insurance to your base insurance policy? How much would your car insurance policy cost without collision coverage?
  • Would you want collision car insurance coverage that offers actual cash value (the value of your car minus depreciation) or the full replacement value (you’ll receive the amount you originally paid for your car when you bought it)? Replacement value costs more.
  • If you bought collision car insurance, what would the deductible be (this the amount you’d be expected to pay before the insurance company will pay the rest)?
  • How important is a car to your lifestyle? Is it a must-have or can you get by on public transit for a little while?

Your insurance agent or broker will be able to help you sort through these questions and arrive at a decision about which form of collision insurance best suits your needs.

How much does collision insurance cost?

The size of the deductible on your collision coverage will influence the cost (the deductible is the amount you pay towards the cost of repairing or replacing a car before the insurance company will release the remainder of the money owed to you).

The type of car you’re insuring will also impact the cost of your collision endorsement. Generally speaking, the more expensive your car is to replace, the more it will cost to insure it.

Another thing that will influence the cost is whether you choose an endorsement that covers the full replacement cost or the actual cash value of the vehicle. Here’s a breakdown of both options:

Replacement cost insurance

This type of collision endorsement covers the cost of restoring the car to its original condition or the cost of replacing the car of a similar kind and quality. There’s no deduction for depreciation.

  • Pro: You’re guaranteed compensation to adequately repair or replace your car.
  • Con: This type of endorsement costs more than one that offers only the actual cash value of the car you’re looking to replace or repair.

Actual cash value insurance

If you purchase this endorsement type, the insurance company will factor in depreciation. You will receive compensation based on the value of your car the day it was involved in a collision.

  • Pro: This type of collision insurance is cheaper than one that fully funds the replacement cost.
  • Con: The actual cash value may not be enough to replace your car and you will be on the hook to pay the difference.

How do I compare collision insurance rates?

One important thing to remember is that in most provinces, you can’t purchase collision insurance coverage without a basic car insurance policy and it must be from the same provider as your basic policy (B.C. is the exception, but LowestRates.ca does not offer a comparison service for drivers in that province). You have the option of adding collision insurance to your quote if you apply for one on our site.

Alexandra Bosanac

Alexandra Bosanac

About the Author

Alexandra Bosanac is the Core Content Manager for LowestRates.ca. Her reporting has appeared in Canadian Business, the Toronto Star, the National Post, and the CBC.

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