When was the last time you considered whether you might have too much or too little insurance on your vehicle?
It turns out there are a lot of Canadians out there who don’t know what they don’t know. A survey conducted by insurance rate comparison website RatesDotCa found that the majority of respondents failed a car insurance literacy quiz on subjects such as what different types of coverage will pay for, whether insurance can be suspended or reduced if your driving habits change, and even whether a car’s colour affects the cost of its policy. (38 per cent of the survey’s respondents believe this to be true, but it isn’t.)
“I think this low level of car insurance knowledge is a potential red flag,” said Liam Lahey, insurance editor for RatesDotCa. “It may indicate that drivers are either at risk for overpaying on their premiums or worse, they may be underinsured.”
Take this, for example: most drivers 42 per cent of the survey’s respondents believe that comprehensive coverage means their car insurance policy covers them under every circumstance. The name may suggest as much, but this isn’t the case.
“It covers you for damages resulting from certain risks such as theft, vandalism, and falling or flying objects,” Lahey said. “It does not cover you for damages resulting from a collision. … Collision coverage is the coverage that will pay for damages to your vehicle if it’s involved in an accident with another car, or if you hit a streetlight or a road sign or another stationary object, and you are at fault for that accident.”
And here’s another one: 25 per cent of respondents didn’t think it was possible to review or temporarily suspend a car insurance policy if they suddenly start driving a lot less or not at all, such as in situations like being forced to work from home due to COVID-19.
“Regardless of the pandemic, you can always ask your insurer to remove your road coverage on your vehicle,” Lahey explained. “However, if you do go that route, you cannot drive that car under any circumstance until the coverage is reinstated. … You’ll want to keep something like comprehensive on your car, which as we discussed covers it for theft, vandalism, damage from natural disasters, because some insurance companies require you to have continuous coverage.”
If you are still driving but only occasionally – say, to the grocery store and back as opposed to 45 minutes each way to work – then Lahey suggests calling your insurance agent or broker and having your classification changed from commuter to pleasure driver.
“[This will] lower your annual kilometre count to save you some money because you’re driving less,” he said.
And while you’re on the phone, you may find you can lower your premiums even more by asking whether your insurance provider offers any discounts for things like using an anti-theft device, installing winter tires, or through group rates from your employer or an association.
Usage-based pricing is another option in some parts of Canada. There are two types available: pay-as-you-go, where you pay based on the amount you drive and is ideal for people who drive less than 9,000 km per year, Lahey said; and pay-how-you-drive, which tracks your driving behaviours and offers a discount for good behaviour such as obeying the speed limit and applying gentle acceleration and braking. Both systems require use of a mobile app.
It’s also possible to be underinsured. Third-party liability is the portion of your policy that covers you if you’re threatened with legal action due to causing physical injury or damage to property.
“Depending on your driving record, how much you drive, how far you drive, how often you drive, and where you drive, the broker [may] recommend that you up your coverage,” Lahey said.
If you live in a province where insurance is not under government mandate, you have the right to switch your policy to another provider, even if you’re not at the end of your term.
“You can shop around and cancel your policy should you find another one that suits your needs and budget better,” Lahey said. “If you cancel your policy mid-term, the insurer may charge a cancellation penalty or administrative fee. The cost of cancelling could be as low as a few dollars, or it could be a percentage of your overall premium. Therefore you need to ensure it makes financial sense to cancel.”
Lahey also recommended submitting a cancellation letter, even if the insurance provider doesn’t ask for one.
“It’s worthwhile to do so anyway and get them to confirm it in writing or by email so you have a record of the date that you asked for your policy to be cancelled,” he said.
Most importantly, don’t be afraid to get informed, ask questions, and make changes that suit your own interests.
“Auto insurance can be confusing,” Lahey said. “An auto insurance policy is not exactly the most exciting thing to read. If [people are] not absolutely sure about what their auto insurance policy covers them for, they should give their broker or insurance agent a call and ask for a review of their policy. That’s what those folks are there for.”