Car insurance question
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I'm always confused about the different auto insurance terms, so I had to Google collision coverage. I found this useful FAQ:
http://www.ibc.ca/en/Car_Insurance/documents/brochure/on-faq.pdf
It says collision coverage "pays for damage to your vehicle
to the extent that you are at-fault or for damage
caused by an unidentified vehicle or object".
IIRC, the premiums depend on the value of the vehicle. If the vehicle isn't worth much and you are willing to self-insure, the savings aren't that much. So, I simply go with a $1,000 deductible.
I don't think I have comprehensive on our cheap car.
If you have a clean driving record and lots of experience, your collision coverage probably isn't costing you very much (unless you're getting ripped off). I find it's usually worth it for me, though with a fairly high deductible.
But for new drivers, including those from other countries who's experience isn't recognized, the collision amounts can be unfairly high, and it might make sense to cancel it and assume the risk yourself. Of course, you would then have to pay to fix or replace your car, or be willing to live without it in the event of an at-fault accident. It may be a good idea to set aside the saved money into a savings account or GIC (use your TFSA if it's not maxed yet), to help cover some of your costs in case you do smash up your vehicle. Once the savings gets higher than the replacement value of the vehicle, then congratulate yourself for winning the gamble!
But for new drivers, including those from other countries who's experience isn't recognized, the collision amounts can be unfairly high, and it might make sense to cancel it and assume the risk yourself. Of course, you would then have to pay to fix or replace your car, or be willing to live without it in the event of an at-fault accident. It may be a good idea to set aside the saved money into a savings account or GIC (use your TFSA if it's not maxed yet), to help cover some of your costs in case you do smash up your vehicle. Once the savings gets higher than the replacement value of the vehicle, then congratulate yourself for winning the gamble!
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I'm going to upgrade this car within a year (1999 station wagon), and it isn't worth much now (perhaps...$2000? I don't really know. It has lots of cosmetic flaws!)
The reality is that if we were in a collision, whether at-fault or not, we'd just replace the car earlier. Hmmm. Perhaps I've answered my own question!
Thanks for your input!
The reality is that if we were in a collision, whether at-fault or not, we'd just replace the car earlier. Hmmm. Perhaps I've answered my own question!
Thanks for your input!
Look at it this way: if you smash up the car before you replace it, the insurance company might give you $2000 toward a new car. If you don't get in an accident, then you can sell it for $2000 or whatever it's worth (maybe repair the cosmetic flaws to get better resale value). Either way you're sure to have the extra cash toward a new vehicle. But if you cancel your collision insurance, you're putting that money at risk. So the fact that you're upgrading within a year doesn't matter, the gamble is still the same: do you risk your $2000 in hopes that you won't cause a collision in the next x months, or do you insure the car against collision for x months?
The value of x doesn't really matter, except that you can probably make a more informed decision for the nearer future.
The value of x doesn't really matter, except that you can probably make a more informed decision for the nearer future.
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But: the problem with that analysis is that there is a cost to insure against the collision. It isn't a neutral trade-off between getting $2,000 for the car from my insurance company versus selling the car for $2,000: there is some cost (and I don't know what it is; I've asked my husband to look into this today) associated with the premium to insure against the risk of collision.
The other (probably purely psychological) factor is that the costs to insure against collision are known (although not by me at the moment) and payable whether the car is in a collision or not. My likelihood of getting in a collision, on the other hand, is unknown. Given how little I drive, I estimate it at low.
When costs are known and risk is low, I prefer to self-insure.
The other (probably purely psychological) factor is that the costs to insure against collision are known (although not by me at the moment) and payable whether the car is in a collision or not. My likelihood of getting in a collision, on the other hand, is unknown. Given how little I drive, I estimate it at low.
When costs are known and risk is low, I prefer to self-insure.
True, it's not a neutral trade-off because even if you smash the car in the first month, you're still out 1 month's insurance (assuming you didn't prepay the whole year). There's also the deductible to account for. We could figure this out mathematically:
Let c = cost of collision insurance per month,
v = market value of the car,
p = probability of at-fault accident causing damages in excess of v in a 1-month period,
d = deductible
If insured, your expected cost = c + p*d
If not insured, your expected cost = p*v
These are equal when c = p(v - d)
So let's give this some real numbers. Let's say your vehicle is worth $2000, and you have a $500 deductible. Let's say you hardly ever drive it, so the chance of you smashing it up in a one month period is 0.5%. Then c = 0.005(2000 - 500) = 7.5, which means that if the collision portion of the policy costs more than $7.50 per month, you should cancel it (mathematically speaking). This is of course a simplified method that doesn't take into consideration other probabilities like partially damaging the vehicle.
Insurance companies are in the business of figuring out your value of p, and using it in a similar formula to figure out how much they need to charge (c) and still earn a profit. You can be sure they pad their bets by a good margin, and of course they have operating costs to add in as well. So unless you are a much worse driver than they think you are, chances are the value of c will be higher than the expected value. The difference is really just the cost you pay for peace of mind (the psychological factor), and everyone puts different value on that. When you can easily afford the risk, you obviously don't care as much about the potential costs of a crash. But for a more expensive vehicle that you can't afford to replace, you might be willing to pay more for that peace of mind.
Let c = cost of collision insurance per month,
v = market value of the car,
p = probability of at-fault accident causing damages in excess of v in a 1-month period,
d = deductible
If insured, your expected cost = c + p*d
If not insured, your expected cost = p*v
These are equal when c = p(v - d)
So let's give this some real numbers. Let's say your vehicle is worth $2000, and you have a $500 deductible. Let's say you hardly ever drive it, so the chance of you smashing it up in a one month period is 0.5%. Then c = 0.005(2000 - 500) = 7.5, which means that if the collision portion of the policy costs more than $7.50 per month, you should cancel it (mathematically speaking). This is of course a simplified method that doesn't take into consideration other probabilities like partially damaging the vehicle.
Insurance companies are in the business of figuring out your value of p, and using it in a similar formula to figure out how much they need to charge (c) and still earn a profit. You can be sure they pad their bets by a good margin, and of course they have operating costs to add in as well. So unless you are a much worse driver than they think you are, chances are the value of c will be higher than the expected value. The difference is really just the cost you pay for peace of mind (the psychological factor), and everyone puts different value on that. When you can easily afford the risk, you obviously don't care as much about the potential costs of a crash. But for a more expensive vehicle that you can't afford to replace, you might be willing to pay more for that peace of mind.
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New question: in thinking about replacing my car, how can I find the relative insurance costs for different car models? (Is this info publicly available? Or do I need to phone my broker and ask him which car models carry lower insurance costs?)
I know my ultimate costs will depend on a number of factors, including the ratings of the drivers in the household and the purpose for which the car is driven. But another factor must be the car itself - can anyone help?
I know my ultimate costs will depend on a number of factors, including the ratings of the drivers in the household and the purpose for which the car is driven. But another factor must be the car itself - can anyone help?
My car got hit the other day, by 2 cars, seperately, about 2 minutes apart at the side of the road.
Not srue exactly how no fault insurance works, but I understand it to be that my insurance co., pays for my damages (as per the link below), and the other cars involved each pay out for their damages.
http://en.wikipedia.org/wiki/No-fault_insurance
Am I understanding this correctly? In a way it sounds silly, as the other cars did the damage, so in a sense their ins should pay out for my damages, but I think my co., pays for my damages.
Not srue exactly how no fault insurance works, but I understand it to be that my insurance co., pays for my damages (as per the link below), and the other cars involved each pay out for their damages.
http://en.wikipedia.org/wiki/No-fault_insurance
Am I understanding this correctly? In a way it sounds silly, as the other cars did the damage, so in a sense their ins should pay out for my damages, but I think my co., pays for my damages.
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Generally, if the cost of the car replacement is not going to cause a hardship, it's not worth having the insurance.
For a $2000 vehicle, if you have a $500 deductable, and you get into an accident, you will get only $1500 back, but the big negative is that your premiums will go up by up to 6 years. So if you're planning on getting another vehicle, that is worth a lot more, then that collision coverage will be porportionally higher, as you will be deemed a bigger risk with the claim.
If you can self insure, then I would
For a $2000 vehicle, if you have a $500 deductable, and you get into an accident, you will get only $1500 back, but the big negative is that your premiums will go up by up to 6 years. So if you're planning on getting another vehicle, that is worth a lot more, then that collision coverage will be porportionally higher, as you will be deemed a bigger risk with the claim.
If you can self insure, then I would
I've just used online insurance quotes from insurance companies. Keep everything the same except for make/model and you'll see the price difference.
E.g. I found that a Corolla is $10/month cheaper than a Civic or Mazda3.
Try Kanetix, or ratesupermarket.
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Heh. I forgot I even started this thread. It's 2011 and we have no plans to replace our (1999 Suzuki Esteem station wagon) yet. Husband and I are both bike commuters - the car mostly gets used for multi-errand trips and to get groceries. I still don't see any real need to replace it, given that there's nothing really wrong with it. 
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Did you ride today?Heh. I forgot I even started this thread. It's 2011 and we have no plans to replace our (1999 Suzuki Esteem station wagon) yet. Husband and I are both bike commuters - the car mostly gets used for multi-errand trips and to get groceries. I still don't see any real need to replace it, given that there's nothing really wrong with it.
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Nah. Thanks for asking, though. I don't feel safe when there's that amount of slushy snow on the streets. A neighbour gives me a ride to work and I TTC it home on crap days like this.
Plus, I would have been fracking FREEZING today. This has been a bad winter (so far) for cycling. I will be back on my bike when I'm not worried about ice under snow - I cannot wreck the knee I just had repaired less than a year ago.
Plus, I would have been fracking FREEZING today. This has been a bad winter (so far) for cycling. I will be back on my bike when I'm not worried about ice under snow - I cannot wreck the knee I just had repaired less than a year ago.
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I was just kidding. It was unbelievably cold this morning.Nah. Thanks for asking, though. I don't feel safe when there's that amount of slushy snow on the streets. A neighbour gives me a ride to work and I TTC it home on crap days like this.
Plus, I would have been fracking FREEZING today. This has been a bad winter (so far) for cycling. I will be back on my bike when I'm not worried about ice under snow - I cannot wreck the knee I just had repaired less than a year ago.
I ride as much as I can, but I stop when there is ice or snow on the ground. The last 2 years, I've ridden up to the first week of December.
I was a passenger in a Car that got hit by a bus,I did not even drive yet my husband's insurance paid all my medical bills then I had to sue my husband's insurance and other insurance company in my lawsuit.Totally messed up but that is how no fault works.
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I would appreciate an answer to this.
Ontario Senior, Car registered in Ontario, has Ontario plates, stickers have not been bought for over five years,car is left in Florida, but driver/owner has continued to insure the vehicle.
Is the driver protected in case of an accident, valid license, has purchased insurance, but no recent Ontario sticker???
Ontario Senior, Car registered in Ontario, has Ontario plates, stickers have not been bought for over five years,car is left in Florida, but driver/owner has continued to insure the vehicle.
Is the driver protected in case of an accident, valid license, has purchased insurance, but no recent Ontario sticker???
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Your insurer will be able to provide a definitive answer.
But in essence: You are driving the car without a valid license - that's what the sticker is, a license validation. And if you've been doing this for 5 years, you have a bunch of missed emissions tests for your vehicle (not that your insurer will necessarily care about emissions tests).
Normally out-of-province waivers are given for up to 6 months. I doubt any insurer would agree to a 5-year absence from Ontario during which they continue to provide coverage. The issue is that they are not able to manage the risk as you are not driving in an area which they have assessed for risk purposes.
My bet would be that you would not be covered in the event of a claim.
But in essence: You are driving the car without a valid license - that's what the sticker is, a license validation. And if you've been doing this for 5 years, you have a bunch of missed emissions tests for your vehicle (not that your insurer will necessarily care about emissions tests).
Normally out-of-province waivers are given for up to 6 months. I doubt any insurer would agree to a 5-year absence from Ontario during which they continue to provide coverage. The issue is that they are not able to manage the risk as you are not driving in an area which they have assessed for risk purposes.
My bet would be that you would not be covered in the event of a claim.
Removing collision is a gamble with a downside limited to the blue book value of the vehicle. When my blue book drops below 3 grand I cancel the collision. At that point it's a wager worth only 5 fold. ($500 bucks to win 2500).
If I just drive for 5 years without an accident, I save the same amount anyways, and I have at-fault accidents at a rate of less than 1 every 5 years, so I'm more likely to win by dropping the insurance. And even if I lose, well its limited.
This isn't investing or anything, both options are pure gambling. Which side of the wager is better for you?
If I just drive for 5 years without an accident, I save the same amount anyways, and I have at-fault accidents at a rate of less than 1 every 5 years, so I'm more likely to win by dropping the insurance. And even if I lose, well its limited.
This isn't investing or anything, both options are pure gambling. Which side of the wager is better for you?
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