We often have customers call us when purchasing a new car to ask for a “full coverage insurance quote”. But what does the term full coverage insurance actually mean? Well, it definitely doesn’t mean that your policy covers everything and it won’t be the cheapest option available for auto insurance.
What does “full coverage” insurance include?
We think the term full coverage insurance is a little misleading. For this reason, our brokers don’t really like using it. From our experience, what drivers are actually referring to when they’re looking for an insurance quote with full coverage, is a policy that provides them with the basic mandatory car insurance coverage, plus physical damage coverage. However, this is just scratching the surface of car insurance coverage options. There are many other valuable options a driver can include on their policy depending on their needs. These options often cause insurance policy premiums to increase. However, its best to ensure that you have a policy that will give you the best protection for your specific needs.
What is physical damage coverage?
Physical damage refers to a group of two separate coverage options; collision and comprehensive. Also referred to as “all perils” coverage when grouped together.
Collision insurance covers the cost to repair or replace your vehicle if you are in an accident where you are determined to be at-fault. This is not a mandatory coverage. However, there is one circumstance when you will be required to include collision coverage on your car insurance policy. When you lease or finance a vehicle collision coverage is required. In this case, you do not technically own the vehicle you’re insuring. In most cases, the lender will include minimum insurance requirements in their finance terms which will include collision coverage.
If your vehicle is not leased or financed, then it is completely up to you whether or not you choose to include collision coverage on your policy. Consider the age and value of your vehicle before you decide to go without collision on your car insurance policy.
Comprehensive insurance covers damage to your vehicle that is not a result of a collision. The three most common examples are fire, theft, and vandalism. Similar to collision, if you’re financing or leasing your car, then your lender will most likely want you to carry comprehensive coverage.
Coverage you’re missing
There are many additional car insurance coverage options outside of the ones typically referred to in a ‘full coverage’ insurance policy. Ultimately, the options you choose should be based on your individual needs and budget. Here are the three most popular add-ons for car insurance policies in Ontario:
If you have a clean driving record, accident forgiveness is a smart option. This optional coverage is designed to “forgive” your first at-fault accident. This means that your premium will not increase as a result of just one accident.
Insurance pro tip
Accident forgiveness does not mean that the accident never happened. All claims you’re involved in will show on your insurance history. However, the company that you purchased the accident forgiveness insurance from will not rate you for the accident. Keep in mind that if you change insurance companies, your new company will be able to see that you were involved in an at-fault accident. The new company will consider this as an at-fault when rating your policy.
Loss of Use (also called OPCF 20)
This covers the cost of a rental car while yours is being repaired or replaced as a result of an insurance claim. Loss of use coverage does have a dollar limit, so make sure you discuss this with your broker.
Waiver of Depreciation (also called OPCF 43)
This coverage is available to anyone who purchases a brand new vehicle. It protects you from losing value in your new car as a result of depreciation. As you know, a cars value goes down as soon as you drive it away from the dealership. So, if you have an insurance claim that results in a total loss of your new vehicle within the first couple years, you could end up owing more money than you actually get back in an insurance payout.
However, if you have waiver of depreciation coverage on your policy, you’ll get back the entire value of your brand new vehicle, without any deductions for depreciation. With most companies, you’ll have the option to add this coverage to your policy between 24 to 60 months from the purchase date of your new vehicle.
Full coverage insurance can mean different things depending on who you ask. Usually, drivers are looking for a policy that includes physical damage coverage. However, there is other optional coverage available to you that may also be valuable depending on your situation. Remember, full coverage does not mean fully covered.
It is always best to review your car insurance policy with your insurance broker to help determine what coverage options and limits fit your specific needs.