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The car insurance contract

A car insurance contract is simpler to understand than you might think. The insurance contract generally consists of three sections: civil liability, property damage and personal injury, and additional coverage.

Civil Liability
In Canada, all drivers are required to obtain a car insurance policy in their province of residence for damages caused to other parties.  The minimum amount this insurance must be for varies from province to province, and ranges from $50,000 to $500,000. It is the only insurance that is mandatory in a car insurance contract. Our section on car insurance in Canada provides more detailed information on the minimum insurance required in your province.

Property Damage or Personal injury
Damage to your vehicle – These provisions apply if you are responsible for the accident, if your vehicle was not in operation or if no other vehicle was involved. This coverage protects you against fire, flood, theft, damage resulting from a collision, etc. You can opt for coverage for specific types of damage, or for all-risk insurance, which coverages the whole of any kind of damage to your car.

Personal injury and medical costs – This coverage does not apply if your province has a public insurance system in place. It allows for compensation for medical costs, hospitalization, medication, etc.

Additional Coverage
Insurance companies offer a comprehensive range of optional insurance coverage plans to extend your coverage according to your needs. Within the insurance contract, these are known as endorsements. The most common endorsements in a car insurance contract include:

Replacement cost endorsement – This endorsement guarantees that new parts will be used when replacing damaged parts at no charge, if your vehicle can be repaired. If the vehicle is declared a total loss, the endorsement allows you to claim an indemnity for the full value of your car. A separate version of the replacement cost endorsement allows you to replace your damaged car (if declared a total loss) with a similar new-car model.

Coverage for a rental vehicle – If you are involved in an accident with a car you do not own (i.e. is rented), this endorsement covers any damages.

Depreciation coverage – The actual purchase value of your car will be taken into account if it requires replacement of any parts.

Car insurance policies can vary significantly from province to another, but keep in mind that every province generally disposes of a standard car insurance contract that conforms to provincial law. Contact your insurer if you would like to obtain a copy of the standard contract for your province, and don’t hesitate to ask them questions!