April 29, 2021 by David Christianson
This year, I recommend that you read carefully your annual Autopac car insurance renewal notice and coverage amounts. These feature the biggest changes we’ve seen in many years.
If you take advantage of the adjustments that MPI is making, you should be able to tailor your coverage better to your personal circumstances, while keeping your costs as low as possible.
MPI, of course, says protection “…is being enhanced“, which is the exact words my company used describing changes to our group insurance coverage this year. And, certain coverage is enhanced, while other protections will cost more for the same thing. Overall, I think it’s an improvement, and the new structure gives more flexibility to customize your coverage.
At any rate, it’s worth it to become informed. The changes are mainly in three broad categories:
The increase in third-party liability is likely way overdue, as the old Basic amount was just $200,000. Every policy will now include $500,000 of Basic third-party liability coverage.
We’ve always recommended to our clients to get a minimum of $2 million of coverage. The new maximum available through MPI is $10 million.
The cost is relatively low (my $5 million third-party liability will cost $22 this year) but the potential risk can be high, especially when travelling (someday in the future?) to jurisdictions that are not no-fault and may leave you open to third-party lawsuits after an accident. The Excited States, for example, has some highly litigious locations.
The basic maximum insured value per car is increasing from $50,000 to $70,000. You can also purchase Excess Value Coverage if your replacement value is higher. With many people taking advantage of low interest rates to purchase new cars with high values, this change also makes good sense.
The biggest change for most people will be the deductible, with the basic being bumped up to $750 from $500.
The deductible is the amount that you pay out of pocket when you have a claim. Increasing the deductible limit reduces the number of claims for MPI (as people with $600 of damage and a $750 deductible would no longer have any benefit for making such a claim) but this increases your “co-insurance“ amount - the money you have at risk when driving your car.
In a major accident, the deductible is a relatively small part of the overall calculation, but in the case of window breakage, vandalism or other relatively small claims, the deductible can be a big part of it.
The basic deductible doesn’t cost anything extra, but it means you would pay the first $750 for a collision, theft, glass repair, collision with animals, vandalism, fire, hail, break in, theft of contents or any other claim.
If you pay an extra premium to reduce your deductible to $300, then it becomes zero in a collision with animals and $300 on other claims.
You could also reduce the deductible to “$200 Standard“ or “$200 Plus“. The latter means a zero deductible for attempted or actual theft, glass repair, collision with animal or vandalism. Your deductible would remain at $200 for glass replacement and other claims.
Reducing deductible is naturally the most expensive option. For me, reducing my deductible to “$200 Plus” costs $245 per year now, compared to $189 last year.
Reducing to $300 deductible may cost between $119 and $204 this year, based on my experience, both amounts up about 25% from last year. The lower amount is on a 2003 car and the higher amount on a more expensive 2017 car. Your experience will likely be different, but that gives you a range.
As always, the key to reducing your insurance cost is to increase your Driver Safety Rating, as 15 points provides you with a 33% discount. I don’t mean to brag but…my 33% discount saves me a bundle each year.
Defensive driving and a light foot can save you a lot of money over the course of the year, especially when we get back to travelling and road trips.
* * *
Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice.
Please consult legal, tax, insurance and investment experts for advice on your unique situation.
David Christianson, BA, CFP, R.F.P., TEP, CIM is recipient of the FP Canada™ Fellow (FCFP) Distinction, and repeatedly named a Top 50 Financial Advisor in Canada. He is a Portfolio Manager and Senior Vice President with Christianson Wealth Advisors at National Bank Financial Wealth Management, and author of the book Managing the Bull, A No-Nonsense Guide to Personal Finance.