Is It Time to Drop Your Collision and Comprehensive Coverage?

Understanding your optional insurance coverage can save you money.

Auto insurance coverage is mandatory across Canada. The amount and type of coverage, however, varies by province and territory.

In Ontario, third-party liability, accident benefits, uninsured automobile coverage, and property coverage, are all required.

These insurance coverages typically handle insured damages for drivers who are injured or have injured someone else, their passengers, and property in the event of an accident. But they don’t cover weather-related damages or your vehicle.

Optional Insurance Coverage

To protect your vehicle from other perils, you may have collision and comprehensive coverages, which are optional.

Comprehensive coverage typically includes:

  • Weather-related damage (hail, wind and debris, fallen tree)
  • Fire or natural disaster
  • Theft
  • Vandalism
  • Collision with an animal (deer, etc.)

Collision coverage typically includes:

  • Collision with another vehicle
  • Collision with an object (fence, tree, guardrail)
  • Single vehicle accident (rollover)

These coverages are typically recommended for newer vehicles because of their cost, while some leased vehicles are required to have them by their leasing company. However, as your vehicle gets closer to the end of its lifespan, you may want to consider dropping comprehensive and collision coverage.

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Things to Consider

Before you call up your insurance provider and outright cancel, you may want to determine if this is the best choice for you.

The value of your vehicle

First, determine how much your vehicle is worth. Your car’s age, make, model, accident history, and kilometres, can all factor into its value. If you have a high-value vehicle, these optional coverages can help cover the unexpected costs of repairing or replacing it.

Your driving history

If you have an older vehicle and a squeaky-clean driving record you may decide to forgo these optional coverages. But if you have been in an accident or two, you may want to have this safety net.

Where you’re located

Some locations have higher rates of theft or crime. If you live in an area known for car thefts, you may want to retain your coverage. This may also be the case if you have a long commute. Being on the road longer increases your risk of being involved in an accident.

Your deductible

Your deductible will determine how much money you may receive from your insurance provider in the event of an accident. If you have a $500 deductible and a $1,300 car, the most you will see from your insurance company will be $800 if you make a claim.

Additionally, you may want to consider the premiums you pay annually. These optional coverages are generally broken down in your insurance contract, so you will be able to see how much you pay for both collision and comprehensive coverage.

If you are paying $200 year-over-year for these coverages, you could be putting that aside in a “new car fund” instead. You may want to consider if having these coverages is financially smart for you.

Your emergency fund

If paying out of pocket would cause you to lose sleep, then you may want to keep your coverage. But if you have enough money in your emergency fund to cover the cost of replacing your car, then you may decide to drop your collision and comprehensive.

The value of your car will only decrease with time, so the amount of money that could be paid out from your insurance company will also lower.

Your comfort level

Lastly, consider your own comfort level. If you are secure with taking on the risk of not having these coverages, it may end up saving you money in the long run. However, if you have doubts or want the additional safety net, your premiums and deductible are a small price to pay to put your mind at ease.

Speak with Your Provider

If you are uncertain about how your deductible works or if you have any questions, your auto insurance provider should be there to help. Consider all your options and determine which one suits your needs.

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