Collision insurance: How it all works

What is collision insurance? 

Collision insurance works in addition to other auto insurances mandated by most provinces in Canada, including third-party liability insurance, statutory accident benefits coverage, uninsured automobile coverage and direct compensation-property damage coverage. Collision insurance is an optional insurance, and it covers costs related to the repair or replacement of your vehicle if you are involved in an accident. 

“If you’ve been involved in a crash, you’re deemed to be fully at fault, and you don’t have collision coverage, the damage to your vehicle wouldn’t be paid for by your insurance company,” says Pete Karageorgos, director of consumer and industry relations at the Insurance Bureau of Canada (IBC). “You would have to pay out of pocket.”

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What is covered by collision insurance?

Collision insurance covers damage to your vehicle when you hit another car or something else. For example, you rear-end a car while driving to work, you hit a trailer on the way to the cottage or, as a result of a collision, run into a store sign, causing damage to your car. For all of these situations, you would be covered with collision.

As collision insurance covers the damage on your vehicle itself, other forms of coverage work in conjunction to cover third-party damages and third-party injuries or death, including the people inside your vehicle. In cases where you’re not at fault, direct compensation property damage (DCPD) coverage would kick in to cover repairs. However, DCPD is not available in every Canadian province and territory—only in Ontario, Quebec, New Brunswick, Nova Scotia and Prince Edward Island.

Collision vs comprehensive

As you decide whether or not to purchase optional collision and/or comprehensive insurance, it’s important to know a few key differences. While collision insurance covers damage to your vehicle related to accidents, comprehensive covers non-collision-related factors that can also cause damage to your vehicle including hail events, storm damage, fires and even thefts. Both work together, but you can opt to add one or the other if you need.

Do I need collision insurance?

Listen up, commuters and cottagers. While collision insurance coverage is not mandatory in Canada, it is recommended for protection if you commute and drive long distances between home and work, the cottage, frequent major highways, cities or require peace-of-mind protection should you be involved in a collision. 

What happens if you don’t have collision insurance?

Like Karageorgos says, you will pay out of pocket for any damages if you are in an accident without collision insurance. But know that you may be required to have collision. Sometimes, it is a requirement for auto lease policies and car financing and loans. Be sure to check for any coverage obligations so you don’t void any contracts. If you opt out of collision coverage, you’ll be financially responsible for repairs on your vehicle, which can, of course, add up quickly. 

The cost of collision insurance in Canada 

Every insurance company is different. So you will need to answer some questions, and ask some too. The make and model of your vehicle will play a role, and your history as a driver and where you live or work will also push your quote up or down. But. generally speaking, it can cost between 10% and 20% of your existing policy, depending on your insurer. 

IBC’s website has a section of downloadable spreadsheets called “How cars measure up.” It details insurance claims data sorted by year and model, collected across multiple insurance companies in Canada. Using yellow, green and red as claim-cost indicators, you should be able to get a quick sense of how the car model ranks. “Multiple green highlights can potentially add up to less expensive insurance premiums,” says Karageorgos. The more green you see with the car you have or are looking to buy, the better. 

Karageorgos adds: “Sometimes if you have an older vehicle that doesn’t have a lot of value in it left, you potentially could save some money on your insurance premiums by eliminating comprehensive and collision coverage. The other thing you could do is increase your deductibles—that’s another way to save.”

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How can I make my collision insurance cheaper?

A few factors can change your rate. “The most direct and basic one is your driving record,” says Karageorgos. If you are the only person driving the vehicle, having a clean driving record, no tickets and no prior claims, can help. Where you live is also a factor. “Urban centres and cities, and where people drive more and where speed limits are sometimes are higher.”

You can get a better deal on your insurance by bundling your home coverage with your auto coverage, as well as adjusting your deductible to reflect how much coverage is right for you. Typically, deductibles for collision insurance are $500 or $1,000—the higher the deductible, the lower your rate. 

Adjusting the following can help you pay less for collision insurance: 

• Bundling home and auto insurance
• Adjusting your driving patterns to minimize usage (fewer kilometres to work can lower your rate)
• Improving your driving record
• Raising your deductible 
• Granting access to your credit score, and improving your credit score
• Buying a cheaper car
• Moving to a less-expensive-to-insure neighbourhood

If you have found that the pandemic has you driving less, these tips can help you lower the cost of your auto insurance.

Everything you need to make a claim

The best place to start for a collision claim is to give your insurance provider a call. Be prepared to submit the below information, if available: 

• Collision/accident reports
• Photos and/or video of the damage
• Contact information
• Names and/or licence plate numbers, and insurance policy numbers of those involved
• Date and time of collision 
• Hospital or injury reports 
• Passenger information 
• Police reports 

It’s worth knowing that determining the fault of an accident is done by the insurance adjuster, not the police. Your insurance provider will guide you on the decision process on how to best file the claim. An adjuster is usually assigned to your case, and you should be prepared to get estimates for your car. If approved, once you pay the deductible, the funds are released to pay for repairs or damages.