# Car insurance question



## MoneyGal (Apr 24, 2009)

I don't know a ton about car insurance. Here's my question: when does it make sense to cancel the collision coverage on a vehicle? 

Thanks for any input!


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## CanadianCapitalist (Mar 31, 2009)

MoneyGal said:


> I don't know a ton about car insurance. Here's my question: when does it make sense to cancel the collision coverage on a vehicle?
> 
> Thanks for any input!


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.


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## Elbyron (Apr 3, 2009)

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!


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## MoneyGal (Apr 24, 2009)

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!


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## Elbyron (Apr 3, 2009)

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.


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## MoneyGal (Apr 24, 2009)

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.


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## Elbyron (Apr 3, 2009)

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.


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## MoneyGal (Apr 24, 2009)

Hey -- now you're talking my language! Thanks for the equation. Awesome!!!


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## MoneyGal (Apr 24, 2009)

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?


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## Cal (Jun 17, 2009)

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.


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## Plugging Along (Jan 3, 2011)

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


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## briant (Jun 23, 2009)

MoneyGal said:


> New question: in thinking about replacing my car, how can I find the relative insurance costs for different car models?


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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## MoneyGal (Apr 24, 2009)

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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## Four Pillars (Apr 5, 2009)

MoneyGal said:


> 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.


Did you ride today?


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## MoneyGal (Apr 24, 2009)

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.


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## Four Pillars (Apr 5, 2009)

MoneyGal said:


> 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 was just kidding. It was unbelievably cold this morning.

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.


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## marina628 (Dec 14, 2010)

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'm Howard (Oct 13, 2010)

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???


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## MoneyGal (Apr 24, 2009)

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.


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## MikeT (Feb 16, 2010)

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?


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## hystat (Jun 18, 2010)

Collision coverage on a cheap car is not usually worth having in my experience.

If you shop around for your own car and see it on dealer lots for $3500-$5000, it probably has a wholesale value of $1000 to $1500. If it gets hit, the insurance company writes it off and gives you wholesale.
Then, you have to fight with them to get paid anything near what it would actually cost you to replace it. Forget taxes and extra replacement costs like registration and such being covered.

For a cheap car, just bank the premiums and self-insure.


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## Jungle (Feb 17, 2010)

Elbyron said:


> 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,
> ...


Also if you are at fault for a collision and make a claim, would your insurance claims go up upon renewal, as you now have a recent, at fault accident history, resulting in higher risk to the insurer?


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## Jungle (Feb 17, 2010)

As mentioned in this thread, if you have no collision coverage and are involved in a "not at fault" accident, your repair is covered and does not negatively affect your insurance rates and history. 

Add that with your 1999 station wagon being worth $2000..I'd drop it and save.


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## bbsj (Aug 26, 2010)

You can go to http://www.kanetix.ca/ and try various options to find the best insurance for your car.


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## jamiechese (Jul 13, 2010)

I have actually recently had insurance issues. Being an 18 year old driver and am currently insured with TD Insurance (Until Feburary 25 when my policy expires). The reason why TD will not insure me anymore is because I got two tickets when I was on the 407 ETR with my mother in her Toyota Highlander. I got a speeding ticket aswell as a "Failure to surrender insurance ticket" which is the fault of my mom as she had screwed the stuff up. Now that I have 2 tickets because my mom being the lightheaded person she is paid off the insurance ticket.

Therefore I now have 2 tickets on my record, TD Insurance will NOT insure me since their policy is "We do not insure drivers with less than 4 years driving experience and 2 or more tickets"

So as of recently I have been looking for car insurance. I have decided that Belairdirect is really my ONLY choice. Now, I have a 2000 Honda CRV....an amazing car but the insurance is horrible. With TD I currently pay 224$ a month, but with the tickets etc I will end up paying somewhere around the 255$/month mark.

Now I was also looking at quotes for used vehicles. I have quoted a TON of vehicles...so far ive determined that a Ford Ranger 2000 - 2003 is the cheapest vehicle to insure for some reason (dont ask me why!). Its quite funny actually, even WITH two tickets at Belairdirect the quote came to approx 210$/month.....what kind of crack is that? Why am I paying 40$ a month MORE just because I drive a SAFER Honda CRV AWD vehicle. Ive never quite understood insurance apart from it being based on claims, theft etc.

This 210$/month is derived from an absolute barebones policy, as I see no point in contributing to some of the features that I never intend on using. Deductible, comprehensive etc....as if the truck gets wrecked...its wrecked....

That would be the main advantage of having a barebones policy, saving quite a bit of money UPFRONT....although if you ARE in an AT FAULT accident you might be screwed. Although either way....you claim...your insurance skyrockets for 3+ years (I dont view it as worth it, I would pay dmgs to not claim it) or you end up paying for vehicle repairs for the other party.

Actually my friend a while ago inadvertendly T-Boned another car at a 2-Way stop sign and his parents did not want to claim it, because then he would not be able to drive. Now his family doesnt exactly have that much money, it has literally almost bankrupted them just because this person in the other car has "Problems" and has to go to some bullshit chiropractor....his accident has cost his family a ton of money (I dont know the exact amount but I put it at around 30k because they had to repair other parties car as well as replace their own car).

That is one of the huge issues you have to watch out for if you do not want to claim it, people taking real advantage of you to pay for **** they may or may NOT need. It can be a 4 way screw fest in other words .

It really is sad, because in reality it has set my friend and his family back years just because of a freak accident, and I swear to god....he is THE most cautious teenage driver ive EVER seen. I have followed behind him a few times....its amazing that he has the ability to stay UNDER the speed limit ALL the time(frusterating at times). I guess it goes to show what a horrible accident can do to your conscience.


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## MoneyGal (Apr 24, 2009)

jamiechese said:


> I got a speeding ticket aswell as a "Failure to surrender insurance ticket" which is the fault of my mom as she had screwed the stuff up.


Nope. If you are driving, you are responsible for making sure everything you need - including proof of insurance - is with you so it is available as required. (This doesn't mean you get to harass your mom about insurance paperwork, either.)


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## Four Pillars (Apr 5, 2009)

jamiechese said:


> I got a speeding ticket aswell as a "Failure to surrender insurance ticket" which is the fault of my mom as she had screwed the stuff up. Now that I have 2 tickets because my mom being the lightheaded person she is paid off the insurance ticket.
> 
> Therefore I now have 2 tickets on my record, TD Insurance will NOT insure me since their policy is "We do not insure drivers with less than 4 years driving experience and 2 or more tickets"


Hey, lay off your mom - she was probably stressed out by your crazy driving. 

Did you consider going to court and fighting the tickets? It's not hard to get tickets reduced (a bit at least). It might have made a big difference in your case.


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## MikeT (Feb 16, 2010)

30k just so he could drive? Could hire a limo and driver for that price.


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## HaroldCrump (Jun 10, 2009)

jamiechese said:


> Why am I paying 40$ a month MORE just because I drive a SAFER Honda CRV AWD vehicle. Ive never quite understood insurance apart from it being based on claims, theft etc.


Because it costs more to repair and replace the CRV compared to the used Ranger.
Honda cars are notoriously high on the stolen list as well.

Are you sure the CRV is safer than the Ranger?
CRV may be safer than other vehicles _in its class_, however, you are comparing apples to oranges.

Aside from your personal driving record, the make/model of the car impacts your insurance rates substantially.


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## kcowan (Jul 1, 2010)

Howard,
I think you need to check out the rules about importing a vehicle to the US for personal use. I suspect you need to get insurance in Florida from a local insurer. They can provide all the status info about your vehicle that you need. ISTR that you have 3 months to run under your Ontario registration then you must get local registration to remain legal.


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## I'm Howard (Oct 13, 2010)

I will buy a car in Florida, plate and insure it here.

Florida laws make it very difficult to suspend Insurance part way, so we will keep the Insurance on year round.

I have learned that if you are driving a car with an outdated license late, even though you have paid your Insurance Premium, the car is not registered and the Insurance Company will refuse your claim in the case of an accident.

I have a neighbour, Retired O.P.P, told me that Insurance Companies have tons of Lawyers whose job it is to deny coverage.


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## Cal (Jun 17, 2009)

I'm Howard said:


> 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???


I would go to one of those kiosks and see if you can renew if there....if so then problem solved.


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## Xoron (Jun 22, 2010)

MoneyGal said:


> 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?


Here is the info I used when we decided on our 2008 Subaru Forester purchase (used). The ICB provides the collision and comprehensive costs associated with every car sold in Canada.

http://www.ibc.ca/en/car_insurance/documents/hcmu/2010/hcmu_e_2010.pdf

and for the excel version of the PDF

http://www.ibc.ca/en/Car_Insurance/documents/hcmu/2010/HCMU_E_2010.xls

Hope that helps.


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