What is the minimal vehicle insurance you may need for both a new or used vehicle?
December 30, 2019. When buying a vehicle in Alberta, whether new or used, you must make sure you have at least the minimum insurance required by law before you can register or drive it.
Mandatory coverage in Alberta
Personal liability and property damage coverage
Also known as third party liability insurance, PLPD covers injury and damage caused to others by your vehicle. You are required to be insured for $200,000 but this amount is quite low compared to what the cost of a serious accident can be, and most drivers opt for a higher amount such as $1,000,000 or $2,000,000.
Accident benefits
This type of coverage is for medical, funeral, death, and income replacement expenses for passengers in your vehicle. Medical expenses are capped at $50,000 per person, funeral expenses at $5,020, and income replacement benefits at 80% of gross wages up to $400 a week for 104 weeks. Accident benefit amounts can be increased with additional coverage.
Coverage to consider when insuring a new car
A new car is a big investment and you will probably want to consider additional coverage to protect it.
Collision coverage
Collision coverage pays for repairs if your car is damaged in an accident even if you are at fault.
Comprehensive coverage
Comprehensive coverage is for damage caused by weather, fire, theft, and circumstances other than an accident.
Specified perils coverage
This type of insurance provides additional coverage for perils outlined in your policy.
Gap insurance
Because cars depreciate quickly, if you are financing your car you may want to consider gap insurance. If you get in an accident and your car is damaged beyond repair, insurance will cover what the car is worth at the time, not what you paid for it, possibly leaving a gap between what is covered and what is owed. You would end up making payments on a car you can no longer drive.
You should consider gap insurance if:
- You are leasing a car
- You are buying a luxury vehicle
- You did not make a large down payment
- You cannot survive without having a car immediately after an accident
- You are financing your vehicle for 4 years or longer
- You drive long distances
Coverage to consider when insuring a used car
The basic coverage you are required to have is the same for a used car as it is for a new car and you should have at least $1,000,000 liability coverage for either type of car. In some situations, it is not worth having full coverage for a used car and you may save some money on your premium.
You can consider not having comprehensive, collision, or specified perils coverage in these situations:
Your car is older than 10 years
Unless it is a vintage car, your car has depreciated quite a bit over 10 years or longer and full coverage might not be worth the cost.
Your car has over 100,000 miles
High mileage on your car contributes to rapid depreciation.
You have an emergency fund you can use to get another car if you need to
If you would be able to replace your vehicle out of pocket in a worst-case scenario you may not need full coverage.
Full coverage costs more than you can afford
If full coverage is too expensive for you, you can shop around to see if you can find a better deal or drop coverage you so not think you will need.
You own your vehicle and are not making any payments on it
If you are financing or leasing a vehicle you will probably be required to have full coverage, but if you paid for it in cash and are ok with replacing it yourself if you need to then you can consider reducing your coverage.
Overall, the value of your car does not justify paying for major repairs on it
If major repairs could cost almost as much as the car itself, you could be better off replacing the car and not paying for full coverage. Keep in mind that you would need to pay the deductible in addition to the insurance premiums.
