Determining how much Auto Insurance Coverage you Need


 Determining how much Auto Insurance Coverage you Need

Are you thinking about whether or not you need auto insurance in Ontario? This blog post will assist you in determining how much coverage is right for your situation. It will also help to provide advice on what type of impact liability coverage can have on your insurance premiums.

Whether or not you have protection against the price of repairing someone else's car, this blog post can provide advice to help lower your bills by finding the right levels of coverages for you. 

The heart of auto insurance is a demand-based system: as many people stop buying, the cost goes up and it becomes more difficult for new companies to enter into the market - this leads to a higher premium. The insurance system is designed so that the more people who buy policies, the lower the price will go. Insurance companies are trying to gauge how much risk they are exposed to by insuring drivers in Ontario. They have a number of data points at their disposal and their goal is to find the right mix of factors that will lower this risk.

Your driving record: This factor is one of the most important for determining how much you should pay for car insurance. The fewer accidents you have, especially at-fault accidents, the lower your premium will be; this is simply because insurance companies can verify your past history with ICBC using your license plate and vehicle information.

Claim history: The longer you have made claims, the higher your car insurance premium should be. This is because it indicates that you are a more risky driver. Why? Because insurance companies want to know that you cannot afford to pay for a claim on your own - it is only fair that they keep their costs down by covering this risk through increased premiums for more people who buy liability policies.

Your driving record: The less at-fault accidents you have, the lower your premium will be - because of the reason above.

Your age: The older you are, the more likely you are to be involved in an accident so you will have more claims on your insurance record. Individuals aged 18-24 usually pay a lower premium because they have fewer at-fault and other claims to their name.

The amount of coverage you need: This is determined by adding up the cost of covering the risk per accident. For example, if it costs $2,000 to repair a vehicle and the car has 45 accidents during its lifetime, then it would cost $24,000 to cover this risk over its lifetime - a very high price. Moving forward from that example we can do some math on what size coverage should be required based on this figure.

$2,000 + $2,000 + $2,000 + $2,000 + $2,000 + $2,000 =$14,000

If it costs $14,000 to cover the risk for each accident and your car has 45 accidents during its lifetime then you need a sum coverage of just over 14 x 45 = 690. So if you have 690 to cover the risk for each accident on your car insurance policy you will have enough coverage to cover the cost for all of these losses.

The cost of coverage: Liability coverage is usually the largest section of a comprehensive car insurance policy. Liability insurance policy covers you if you cause bodily harm to someone else or damage to their property. It is important for safety reasons and for legal requirements in Ontario. For example, if you cause an accident but your injuries are worse than those of the other driver, then liability coverage will protect against any claims that may arise from your injuries. Before buying liability coverage, check with your bank about any auto loans or make sure there is enough equity in your vehicle so that it can be covered by a lender.

Other than liability coverage, other types of liability coverage can be purchased in Ontario. They are:
- Property Damage Liability (PDL) - This type of coverage is similar to what many other provinces have called "Comprehensive" and covers the cost of repairing or replacing your vehicle in the event that you cause damages to another person's property.
- Collision - Both PDL and Collision cover the cost of repairing your car, but not for personal injuries. Unlike Personal Injury Protection (PIP) which pays for all injuries or damages in the accident with no deductible, collision and PDL only pay for damage to your car, not for injuries.

- Accident Benefits - In addition to the coverage above, Accident Benefits pays the cost of medical and rehabilitation services for injuries, up to $1 million. These benefits are provided regardless of fault in the accident. This is called "No Fault" coverage in many other provinces. It is important for safety reasons and for legal requirements in Ontario. [ARTICLE END]

Auto Insurance is designed to protect you from loss should an accident occur, but it can also provide a lucrative form of investment that allows you to benefit from paying premiums over time. What you need to know about investing in your policy.

When did it become legal to invest in your auto insurance? The time before you even bought a car or truck was the perfect time to invest in your insurance. If you're going to be doing that much road-tripping with your new ride, then you'll need comprehensive and collision coverage alike. It's also worth remembering that the annual vehicle registration fee is tax deductible, which means that if you pay for an extra year of coverage, the savings will ultimately be passed on to you.

The term "collision" appears here as a form of collision insurance for cars.


While there isn't a lot of money to be made by investing in your car insurance, that said, it's definitely worth doing for peace-of-mind purposes. There may even be some opportunities to make a profit. If you're already paying for your insurance, it's pretty obviously a good idea to at least consider investing in the policy - you won't lose out on anything if you do.

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