Mandatory vs. Optional Auto Insurance in Alberta
Driving is risky.
Every time you get behind the wheel, there is a chance you could injure yourself or someone else (a passenger, pedestrian or another driver) or cause damage to a third-party property.
That’s why auto insurance is mandatory in every province and territory in Canada (note: mandatory coverages vary by jurisdiction).
Bear in mind, however, the insurance required by law does not cover all hazards that may impact you and your vehicle. That’s why additional coverages are also available.
In this post, we’ll review mandatory auto insurance coverages as well as the optional coverages you may want to consider.
Mandatory Auto Insurance in Alberta
Did you know Canadian provinces first enacted mandatory auto insurance coverage in the 1920’s?
Mandatory auto insurance was introduced and has evolved to ensure there is a minimum level of financial restitution available should a collision result in injury, death or property damage.
In Alberta, it is mandatory for drivers to have two forms of auto coverage:
- Third-party liability insurance
- Accident benefits insurance
Driving without these coverages can result in heavy fines as well as the suspension of your license.
But what do they cover?
Third-Party Liability Auto Insurance
Third-party liability auto insurance can provide financial protection if you injure another person or cause damage to a third-party property.
For example, if you are at-fault in a rear-end collision, third-party liability auto insurance can cover:
- damages to the vehicle you struck (note: third-party liability auto insurance does not cover damages to your own vehicle); and,
- any third-party bodily injury or death that you are liable for.
The Government of Alberta requires a minimum limit of $200,000 in third-party liability insurance.
This limit is quite low and may not completely cover the true cost of a collision. You will personally be responsible to cover any expenses that go over and above your policy limit.
It should come as no surprise then that, according to the Alberta Automobile Insurance Rate Board, 98 per cent of drivers are insured for at least $1 million in third-party liability auto insurance.
Accident Benefits Auto Insurance
Accident benefits auto insurance provides financial protection if you’re injured in a collision, regardless of who is at fault.
Coverages can include:
- your medical and rehabilitation expenses;
- income replacement if you’re unable to work due to your injuries;
- funeral expenses if you pass away, and,
- compensation for your surviving family members if you pass away.
Optional Auto Insurance in Alberta
As you can see, mandatory auto insurance in Alberta is focused on providing financial compensation for physical injuries and third-party property damage.
You may want to consider optional auto insurance coverages to ensure you have protection should your personal vehicle be damaged. Coverages could include:
- Collision coverage
- Comprehensive coverage
Vehicle repairs and replacement can be expensive. Having collision coverage can protect you from having to entirely cover these expenses out of pocket if you’re involved in an accident.
This covers more than just collisions with other vehicles, but also objects (such as guardrails, animals and trees), single vehicle rollovers, and hit and runs.
There are many hazards that can damage your vehicle—not just collisions.
Comprehensive coverage can help cover repair or replacement costs if your vehicle is damaged by hazards such as:
- Vandalism and theft
- Falling objects
Other Optional Auto Coverages
Many insurers also offer what are called endorsements, which are additional coverages you can add to your policy.
Some common auto insurance endorsements you may want to consider include:
- Loss of use coverage, which helps to cover rental car expenses while your car is being repaired.
- Rental car insurance, which provides collision and comprehensive coverage when using a rental car. You may want to consider adding this endorsement to your policy, instead of opting for the insurance that rental car agencies offer, if you frequently use rental cars in Canada and the United States.
- Collision forgiveness, which will keep your auto insurance premium from increasing upon your first at-fault crash.
- Glass coverage, which can help cover costs to repair or replace windshields and windows that are damaged by something besides an accident or other insured hazard.
Using Your Personal Vehicle for Business Purposes
If you use your vehicle for work purposes (beyond commuting to and from the office) you will likely need commercial auto insurance, even if the vehicle is registered in your name and not your company’s name.
Common business usages include:
- Delivering goods, materials or merchandise.
- Transporting tools or equipment used in a professional manner.
- Driving to visit clients or worksites.
- Driving clients or customers.
Not sure if you need commercial or business vehicle insurance? Contact one of our brokers, who will be able to advise on whether you need this coverage.