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There were almost 80,000 personal injury collisions in 2021, according to the most recent data by Transport Canada’s National Collision Database (NCDB). That number includes 1,768 fatalities. Almost 25% of those collisions were due to speeding, 20% were due to distraction and 19% were due to impairment. (Keep in mind there can be double counting as there are multiple contributing factors reported for most collisions.)
And then there are the unreported accidents, like your minor fender benders in grocery store parking lots and drivers who accidentally back into a pole.
All this to say, car accidents are pretty common. If you want car insurance coverage to replace or repair your car after a car accident, you’re going to need collision insurance. In most provinces, this coverage type is optional—but without it, you could be stuck paying thousands of dollars out of pocket.
What Is Collision Insurance?
Collision insurance pays to replace or repair your car after a car accident, minus your deductible. Similar to comprehensive insurance, it’s typically an optional coverage (except in Saskatchewan and Manitoba where it’s mandatory), meaning you will have to pay extra to add collision insurance to your auto insurance policy. However, if you don’t have collision insurance and you have an accident with another car or object, you’d likely have to pay for the damages yourself out of pocket.
If you have a car loan or lease, your lender or leasing company will most likely require you to have collision insurance.
What Does Collision Insurance Cover?
Collision insurance covers car repair bills if your car is damaged in an accident or pays to replace your car if its totalled in an accident, such as:
- A car crash with another vehicle.
- A car crash with an object, such as a fence, pole or guardrail.
- Another car crashes into your vehicle, such as a hit and run.
- Your car rolls over.
With collision coverage your insurer pays to replace or repair your vehicle regardless of who caused the collision.
What Collision Insurance Doesn’t Cover
Collision insurance does not cover:
- Damage to another person’s car.
- Injuries
- Weather-related damage to your car, such as hail or flood damage.
- Car theft
- Repairs to an object you crash into, such as a fence or pole.
If you want coverage to repair or replace your car for problems such as car theft, flood, fire, hail, falling objects (like a tree branch) and collisions with animals, you’ll need to buy comprehensive insurance. Comprehensive insurance is usually sold with collision insurance and typically required if you have a car loan or lease.
How Does Collision Insurance Work?
Here are some scenarios to illustrate how and when collision insurance overage kicks in:
- You’re at fault for an accident and you have collision insurance. You pay the deductible according to the percentage you’re considered at fault, according to Fault Determination Rules. Typically you can be found between 0% and 100% at fault. Your insurance company pays for the damages.
- You’re not at fault for an accident and you have collision insurance. You’re completely covered and your insurance company pays for the damages.
- You’re at fault for an accident and you don’t have collision insurance. You will be responsible for all related expenses for your car. (Your third-party liability covers the other person and their car.)
- You’re not at fault for an accident and you have no collision insurance. You’re covered by the other driver’s third-party liability insurance, or Direct Compensation Property Damage (DCPD) coverage if you live in Ontario, Alberta, Nova Scotia, PEI, Newfoundland, New Brunswick or Quebec.
- You’re in a hit-and-run accident and the unidentified driver flees the scene. If you have collision insurance, the damages are covered.
How Does the Collision Insurance Deductible Work?
Your car insurance deductible applies to collision insurance claims. The insurance deductible is the amount that is deducted from an insurance claims cheque or the amount you need to pay out of pocket. For example, if you have a $500 deductible and your car repair bills after a car accident are $3,000, you will get reimbursed for $2,500 ($3,000 – $500 = $2,500).
When you buy collision insurance, you’ll be able to choose your deductible amount. Deductible amounts can range from $100 to $1,000 or higher, with $500 being a fairly common choice. If you choose a higher deductible, you’ll usually pay less in car insurance rates. That’s because your insurer will pay less if you file a collision insurance claim.
How Much Does Collision Insurance Cost?
The average annual cost for collision insurance in 2020 was $178.72, according to the Insurance Bureau of Canada’s (IBC) “2022 Facts of the Property and Casualty Insurance Industry in Canada” report. This is in addition to your mandatory third-party liability and accident benefits coverage.
Do You Need Collision Insurance?
If you own your car, collision insurance is an optional coverage, meaning you don’t have to buy it if you don’t want it, unless you live in Saskatchewan or Manitoba. If you have a car loan or lease, you will likely be required to buy collision insurance. That’s because your lender or leasing company wants to protect their financial investment if your car is totaled in a car accident.
But even if you are not required to buy collision insurance, it’s worth considering. The average cost per collision insurance claim in 2020 was $7,983, according to the IBC. If you caused a car accident and did not have collision insurance, you would not have coverage for your car repair bills. And if your car is deemed a total loss, you would have to pay out of pocket to replace it.
Collision Insurance FAQ
When should you drop collision insurance?
Some car owners drop collision insurance when their vehicle hits a certain age or mileage marker. The idea is that an older or high mileage vehicle has depreciated to the point where the maximum payout for a collision insurance claim (the depreciated value of your car minus your deductible) will be very low and not worth the cost of collision insurance over time.
For instance, if you pay $300 a year for collision insurance, and your deductible is $1,000, you might consider dropping your coverage if your car’s value is less than $1,300.
But there is no golden rule when it comes to dropping collision insurance. Some car owners prefer the peace of mind that comes with collision insurance, especially if they don’t have the financial means to repair or replace their car out of pocket.
Keep in mind, if you have a car loan or lease, you are most likely required to have collision insurance and you cannot drop your coverage
Is collision insurance required by law?
Collision insurance is not required by law, unless you live in Saskatchewan or Manitoba, where it’s mandatory. But if you have a loan or lease, your lender or leasing company will likely require you to have both collision and comprehensive insurance. That’s because they want to protect their financial investment from problems like car accidents, car theft, floods, fire, hail, collisions with animals, vandalism and falling objects.
What is the difference between collision and comprehensive insurance?
Collision and comprehensive insurance are often sold together, but they both cover car repair and replacement for different types of problems.
For example, collision insurance covers car accidents, like crashing into another vehicle or guardrail, but it won’t cover your car if it’s stolen. If you want insurance for car theft and other types of problems, such as vandalism, fire, hail, floods, falling objects and collisions with animals, you’ll need to add comprehensive insurance to your policy.
