Insurance 101: Auto Insurance Terms to Know

When you are discussing the terms of your auto insurance policy with your provider, there may be some terms that you are unfamiliar with or that are confusing. To help you better understand your auto insurance policy, we’ve put together a list of some of the most common terms that you may come across during the process.

Auto insurance terms

Agreed value This type of policy pays out for the value agreed upon by the policyholder and insurance company when the policy is purchased in the event the vehicle is wrecked beyond repair. This is as opposed to actual cash value coverage, which reimburses whichever is lower between the stated value or actual cash value at the time of the loss.

Accident Benefits This is mandatory coverage that comes standard under your automobile policy, but there are also increased optional coverages that can be purchased. This coverage helps pay for medical expenses and income replacement expenses that the policyholder and their passengers incur due to a car accident, even if the driver was at-fault.

AutoPlus This report details a person’s driving history, including accidents and automobile insurance history. You can access your own AutoPlus report here.

Collision coverage This part of an auto insurance policy covers the cost of damages resulting from a collision with another vehicle or object.

Comprehensive coverage This is the portion of a car insurance policy that pays out damages not caused by a collision such as fire, vandalism, and natural disasters. It also covers incidents of vehicle theft.

Direct Compensation Property Damage (DCPD) is when your insurer pays for your vehicle (property) repairs after a collision if you are deemed to be not responsible for causing the loss. In the provinces with a no-fault insurance system, DCPD is one part of the standard auto insurance policy. Essentially, if you are deemed not responsible for causing the loss, DCPD is where the coverage to fix your vehicle would be taken from.

Liability coverage There are two types of coverage under the liability section of your car insurance policy: bodily injury and property damage. Bodily injury covers expenses associated with injuring someone else in an at-fault accident. This policy also covers legal costs in the event the insured is sued for damages. Property damage helps pay for damage you cause to someone else’s personal property during an accident.

Motor vehicle report (MVR) The MVR details a person’s drivers licence information, including any convictions (also referred to as tickets) as well as the type of licence a person holds, their address, and the status of that licence (valid, cancelled, suspended).

SPF 1 Standard Policy Form Across provinces this is the standardized and approved policy wording for your automobile insurance coverage. Each provincial regulator approves the standard wording that is used by all the insurers in that province. This is the contract that outlines the details of coverage as well as the requirements that both you and the insurance company must follow. There are also endorsements (or policy change forms) that can add, remove, or suspend the standard coverage.

Telematics insurance Also called usage-based insurance or UBI, this works by adopting onboard technology or mobile applications to monitor a policyholder’s driving habits. Telematics then uses the information gathered to reward safe drivers in the form of discounted premiums or, in some instances, penalize risky motorists in the form of surcharges.

Uninsured motorist coverage is designed to protect policyholders from both uninsured drivers and underinsured drivers. An uninsured driver is a person who does not have an auto insurance policy that meets the province’s minimum coverage requirements and yet chooses to drive illegally anyway. Meanwhile, an underinsured driver is someone who has a valid car insurance policy but does not have enough coverage to cover the costs of the damages or injuries that arise from an at-fault accident. Therefore, an uninsured driver is driving illegally, whereas an underinsured driver is not. However, the underinsured driver may not have purchased a high enough coverage limit to reasonably cover them in the case of a serious accident.

GIO is an independent body set up to help Canadians find a fair resolution to disputes with insurance providers. GIO can provide advice on dealing with your insurance company as a first step. If you are not satisfied with the decision from your provider, GIO may be able to help resolve your concerns. 

 

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