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 choosing the right car insurance broker 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 three areas of auto coverage: 

  • Third-party liability insurance 
  • Accident benefits insurance 
  • Direct compensation property damage 

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. It also helps cover your legal expenses if you’re sued after an accident. 

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. We recommend having $2,000,000 of coverage. 

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. 

Direct Compensation Property Damage 

The Government of Alberta introduced mandatory direct compensation property (DCPD) damage on Jan. 1, 2022 (the coverage was automatically added to all auto insurance policies). DCPD will see your own insurer cover vehicle damages if you’re involved in a collision that another driver is responsible for—either fully or partially. So, here is how DCPD works if you’re involved in a crash: 

  • When you’re not at-fault for the collision: DCPD will cover the costs to repair or replace your vehicle as well as vehicle contents. 
  • When you’re partially at-fault for the collision: DCPD will partially cover the costs to repair or replace your vehicle and vehicle contents. You will have to pay the remaining balance out of pocket, or this expenses could be covered if you have opted to include collision coverage as part of your auto insurance policy. 
  • When you’re fully at-fault for the collision: DCPD will not cover the costs to repair or replace your vehicle. In this instance, you will need to have collision coverage to have such expenses covered. 

Read our blog to learn more about direct compensation for property damage in Alberta. 

Optional Auto Insurance in Alberta

As you can see, mandatory auto insurance in Alberta is focused on providing financial compensation for physical injuries and property damage when you’re not at fault.

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

Collision 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.

Comprehensive Coverage

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:

  • Hail
  • Fire
  • 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.

Want to know all about Auto insurance quotes? don’t miss our full guide for Auto insurance.


Contact your Rogers Insurance Professional to get a quote today.


Additional Reading

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