8 Types of Vehicle Insurance and Their Coverage Details

Auto insurance is mandatory. Vehicle insurance protects you from potential financial losses should the car be involved in an accident or is stolen. To be insured, there are monthly premiums to pay, which are based on factors such as the levels of crime in your area and the type of car you have.

The right vehicle insurance coverage is usually a trade-off between the premiums you are most comfortable paying and the risks your car is likely to be exposed to. While a policya with the lowest premiums may be attractive, should a situation arise when you need it to come to your aid, it may leave you out in the cold.

In all likelihood, you will get what you pay for, which won’t be much if the cheapest insurance policy is what you’ve got. With a good auto insurance policy, you won’t have to make out-of-pocket payments should you have to file a claim.

Below are eight types of vehicle insurance to consider:

1. Third-party Liability Insurance Coverage

This is the most common type of auto insurance in Canada. It protects the policyholder from having to pay for damages they inflict on another person’s property. Should your vehicle be at fault and someone dies as a result of an accident you’ve caused, the third-party liability insurance will protect you.

While the minimum coverage depends on the province you live in, it should at least cover the medical bills of those injured in a vehicle accident in which the car at fault is registered in your name. A third-party liability coverage policy is, for this reason, a mandatory requirement in Canada.

2. Collision Insurance Coverage

The collision insurance policy not only protects you from liabilities of a third party, but it also comes to your aid should you hit an object other than another car. This could be a guardrail or an embankment. This type of vehicle insurance can also protect you in case of an accident where the other driver is uninsured. Since it’s a broader type of insurance coverage, it protects you from more than your liability.

3. Comprehensive Vehicle Insurance Coverage

This insurance coverage gives you the most comprehensive coverage and the broadest possible protection. It covers medical costs and damages arising from the collision. But that’s not all. In case of losses and damages caused by floods or theft, this comprehensive vehicle policy will cover you.

The only downside is that it’s not cheap. It comes at a pretty cost, much more than the two others described above. However, you get to sleep easy knowing that whatever happens, you are comprehensively covered.

4. Specified Perils Insurance

This type of vehicle insurance coverage protects you from certain specified damages to your car. Among specified perils you may want to cover your vehicle against include attempted or outright theft, and damages caused by the weather such as earthquakes, windstorms, rising water, fire, hail, and lightning. It also insures your vehicle should it be damaged as a result of riots or an explosion.

In case your car is stolen and later recovered with considerable damages, the specified perils cover will pay for the repairs. The range of perils covered by this policy is wide; the only caveat being that it’s only good for perils specified in the policy.

5. All Perils Insurance

This coverage includes all the protection you get from a comprehensive and collision policy expect for anything directly mentioned as an exclusion in the policy. With all-perils coverage, you’re also protected if your car is damaged or stolen when someone else is driving it.

6. Gap Insurance

Gap stands for guaranteed auto protection. It’s an optional policy that may be beneficial to some but to others, perhaps not. It covers you should your vehicle get totalled or stolen. Also known as Gap protection, it covers the shortfall (known as the gap) between what you owe and the value of your car. For instance, if your remaining auto loan is higher than the current market value of your vehicle, gap protection will kick in to settle the shortfall.

This coverage is often recommended by dealers to entice you to buy a new car. As such, you can only get a gap insurance policy from auto loan lenders and car dealerships.

7. Emergency Road Service Insurance

An otherwise perfect day can be disrupted by a car breakdown. No matter how well serviced your vehicle is, there are times when it just refuses to cooperate. A vehicle breakdown can be frustrating, especially in bad weather. At such times, you need expert help, fast. This is where an emergency road service insurance policy comes in. It covers whatever expenses are reasonably needed to get your car back on the road as quickly as possible.

Among expenses covered by an emergency road service insurance policy include towing your vehicle to a nearby garage or repair location, and an hour’s worth of labour (mechanical) at the site of the breakdown. Also covered are towing costs to the repair location if the vehicle has completely stalled. Other costs include tire change, delivery of battery, oil or gas, or anything needed to get the vehicle moving again.

8. Uninsured Motorist Insurance Coverage

This insurance protects you in case you’re involved in an accident with an uninsured or a hit-and-run motorist. Although vehicle insurance is mandatory in Canada, some drivers still choose to drive an uninsured vehicle. To protect you, your policy, by default, includes uninsured motorist coverage. The only problem is that the policy may not adequately cover you and your family.

For more comprehensive protection, you may have to add a family protection plan, which, in most cases, comes with up to $1 million coverage. Otherwise, the usual uninsured motorist coverage has a limit of $200,000, which may not be enough to fully cover a claim. The good news is that family protection coverage only marginally affects your premiums since it’s quite affordable.