How collision insurance works

Collision insurance is optional in most Canadian provinces. Saskatchewan and Manitoba are the only two provinces to mandate both collision and comprehensive auto insurance. Collision is also required if you lease or finance a car. 

“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.”

What does collision insurance cover?

Collision insurance covers damage to your vehicle when you hit another car or another person’s property. If you rear-end a car while driving to work or hit a trailer on your way to the cottage, collision has you covered. The same applies if you were to run into a sign in a business’ parking lot, causing damage to your vehicle.

Whereas collision insurance covers the damage to your own vehicle, other forms of coverage insure third-party damages, injuries and death. In insurance, a third party refers to someone who is not part of a contract between the first party (the person insured) and the second party (the insurance company).

For accidents in which 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 Alberta, Ontario, New Brunswick, Nova Scotia, Prince Edward Island and Quebec.

What’s the difference between collision and comprehensive coverage?

Both collision and comprehensive insurance are optional coverages, except in Manitoba and Saskatchewan, where they are mandatory. When deciding whether or not to add these coverages to your policy, it’s important to know their differences. 

As explained above, collision insurance covers damage to your vehicle when you’re at fault for an accident. Comprehensive insurance covers non-collision-related incidents that have caused damage to your vehicle, such as hail and wind storms, fires and thefts. Collision and comprehensive coverages are designed to complement each other, but you can opt for one or the other, or both, depending on your needs.

Do you need collision insurance?

Listen up, commuters and cottagers. While collision insurance coverage is not mandatory in Canada—unless you live in Saskatchewan or Manitoba or are leasing or financing your car—it’s a recommended add-on if you drive long distances between home and work (or between home and the cottage), frequent major highways or simply want the comfort of knowing your car is covered if you’re ever involved in a collision. 

When deciding whether you need this type of coverage, consider the value of your vehicle and the size of your collision deductible. Think of it this way: If you’re driving a brand new vehicle that cost you $20,000, you would likely feel comfortable paying a deductible of $1,000 to have it replaced. However, if you’re driving an old car whose value is roughly the same as the deductible—and especially if you plan to upgrade your ride in the near future—paying extra for collision is likely not in your best interest. 

“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,” Karageorgos says.

What happens if you don’t have collision insurance?

If you’re at fault for an accident and don’t have collision insurance, you will have to pay out of pocket for any damages to your vehicle, Karageorgos says. You’ll be financially responsible for repairs, which can, of course, add up quickly. By opting into collision coverage, however, you’ll only have to pay the deductible. Any damage to the other party’s vehicle or property should already be covered under your mandatory third-party liability insurance.

Depending on the nature of the accident and who’s at fault, your vehicle may be covered by other types of coverage. For example, if you’re not at fault for the accident, damage to your vehicle should be covered by the other driver’s third-party liability coverage. If you live in a province with DCPD, you would be compensated directly by your insurance company (without having to deal with the other person’s provider). 

The average cost of collision insurance in Canada 

Every insurance company is different. So you will need to answer some questions, and ask some, too, to understand how your premium has been calculated. The cost of collision coverage will depend on factors such as the make and model of your vehicle, your driving record and where you live and work. Generally speaking, collision is estimated to add between 10% and 20% to the cost of your policy, depending on your insurer. 

One way insurers determine the cost of your premium is through the Canadian Loss Experience Automobile Rating (CLEAR), a system based on insurance claims data collected by multiple insurance companies in Canada. With CLEAR, vehicle makes and models are assigned a series of scores, based on factors such as their safety features, repair costs and likelihood of being stolen. These scores reflect the relative risk of insuring that specific vehicle, which providers use to help calculate what your premium should be. Looking up the CLEAR scores for your vehicle can give you a sense of how it ranks compared to other vehicles, says Karageorgos, as well as how that’s going to influence the cost of collision insurance.  

How can you make collision insurance cheaper?

There are few ways to do this. “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 bring down your premium. Where you live also plays a role. For example, living in a densely populated area with more cars on the road and higher speed limits can raise the cost of collision insurance.

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 the amount of coverage you need. Typically, deductibles for collision insurance are $500 or $1,000—the higher the deductible, the lower your rate. 

Taking the following steps 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 
• Buying a cheaper car
• Moving to a neighbourhood where cars are less expensive to insure

If you are driving less since the pandemic began, these additional tips can help you temporarily lower the cost of your auto insurance. 

Everything you need to make a claim

To make a collision claim, your first step should be to call your insurance provider. Be prepared to submit the following information, if available: 

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

Your insurance provider will guide you on how to best file the claim. Usually, an insurance adjuster—an insurance company representative tasked with investigating your claim—is assigned to your case. They will review the information you have provided regarding the accident, as well as the cost estimates for your car. It’s important to know that it’s the adjuster, not the police, who determines who is at fault for the accident. If your claim is approved, the funds should be released to you following payment of the deductible. 

Final thoughts

Paying for collision coverage is recommended for drivers who don’t already have it as part of their standard or mandated auto insurance policy. The extra coverage will result in higher insurance premiums, but it could save you from significant car repair or replacement costs following an accident. Just be sure that your car is worth repairing—for some drivers, it may make more sense to put the savings from lower insurance premiums towards their next car purchase.

More on auto insurance:

• How much is insurance for a new driver?
• How much does it cost to insure an electric car?
• Everything you need to know about your car insurance deductible
• Can you get affordable car insurance after a DUI?