A Step by Step Guide to Auto Insurance With Sonnet


If you drive a car, you also need to have car insurance. That’s because auto insurance is mandatory across Canada. But, do you know what your auto policy covers you for? Insurance jargon isn’t always the easiest to understand. You also shouldn’t just assume that you’re covered for everything. It’s important that you understand what your policy really covers you for and what it doesn’t. This way you can ensure that your auto policy truly fits your needs. Sonnet wants to simplify insurance, so we’re giving you the inside scoop on what some of your auto coverages mean.

Is auto insurance the same across Canada?


Not exactly. Although there are a lot of similarities, some things can and do differ from one province to the next. This includes what coverage is required, as well as how you go about getting insurance in the first place. In some provinces, your main auto insurance is provided by the government; in others, it’s provided by private insurers; and in Quebec, it’s a combination of the two. 

Because differences exist, it’s important to understand how auto insurance differs between provinces. This is why you should also take the time to read your provincial auto policy to know what’s included and what isn’t.

What is third party liability?

Under your auto policy, third party liability provides coverage if you’re held legally responsible for causing injuries (except in Quebec, where injuries are covered by the SAAQ) or property damage to someone else through the use or operation of your car. In other words, liability coverage protects you financially if your vehicle hurts someone else or causes damage to their property because of your negligence. 

Although third party liability coverage is required all across Canada, each province sets its own limit for the minimum amount of liability coverage that you’re required to carry. For example, in Ontario, you are legally required to have a liability limit of at least $200,000, whereas in Quebec, your liability limit can be as low as $50,000.

However, it isn’t recommended that you just carry the minimum limit for third party liability. This is because liability claims can cost a lot more than these minimum limits, which means you’d be responsible for paying anything over and above this amount out of pocket. You should consider having at least $1 million’s worth of liability coverage, but really the higher the limit the better. Paying a little more now in your premiums for a higher limit means that you could potentially save a lot more later.

What is accident benefits coverage?


Except for Newfoundland and Labrador, accident benefits is also a mandatory coverage in every province and territory. But it is a little different in Quebec where accident benefits coverage is provided by the SAAQ (Société d’assurance automobile du Québec), which is a public insurance plan. 

But why is accident benefits coverage so important? If you were to ever be injured in a car accident (regardless of who is at fault), this coverage helps to cover the cost of medical care and income replacement, among other things. Exactly what is included in your accident benefits coverage will vary by province, so (again) be sure to review your auto policy to know how you’re protected. For example, in Ontario, you’re able to customize your accident benefits coverage to better meet your needs. This could mean increasing the limit for income replacement or adding coverage for housekeeping and home maintenance expenses.

What is physical damage coverage?

Physical damage coverage can also be referred to by other names, such as loss of or damage to insured automobile. No matter what it’s called, it covers damages to your own vehicle (aka the vehicle insured on the policy) under different events. You have a few options to choose from here depending on your needs.

Specified perils

This first level of physical damage coverage has your back when it comes to a specific list of events. If the event is listed, you’re covered; if it’s not listed, then you know the deal. Specified perils will cover you against such events as fire, lighting, hail, and windstorms to name a few. It also includes coverage for theft, except if the vehicle is stolen by someone in your household.


This is a level up from specified perils coverage. It covers you for everything specified perils does plus damage caused by vandalism and falling objects. In other words, it covers almost any damage that isn’t caused by a collision or upset (it still doesn’t cover wear and tear or mechanical breakdown).


Typically, you’ll combine this coverage with comprehensive or specified perils. Collision coverage comes into play when your vehicle is involved in an accident, such as with another vehicle or a roll-over.

In Ontario, New Brunswick, Nova Scotia and Prince Edward Island, collision coverage covers you for the percentage that you’re at-fault for an accident. For the portion that you’re not at-fault, you’re covered by Direct Compensation – Property Damage. This is automatically included on your auto policy in these provinces.

Check out this video to learn more: https://www.sonnet.ca/blog/whats-the-difference-between-collision-comprehensive-coverage

All perils

The top tier of physical damage coverage. This combines comprehensive and collision coverage, plus it covers you if someone in your household or an employee steals your vehicle. In comparison to having both collision and comprehensive on your policy, all perils coverage allows you to have just one deductible (with collision and comprehensive you’d have two, one for each coverage).

No physical damage coverage

Physical damage coverage is optional in most jurisdictions so you could choose to go without it. For example, if you have an older vehicle, you may choose to forgo physical damage coverage and just repair or replace your car out of pocket should it be damaged. You may go this route if the deductible on your policy is similar to the value of your car. But, if you’re just looking to save a few dollars on your auto premium by dropping this coverage, you might want to think again. Ask yourself, am I prepared to pay for repairs or a new vehicle if something happens to mine? Also, if you’re currently leasing or financing your car, you’re likely required to have physical damage coverage on your vehicle.

If you choose to go with physical damage coverage, you’ll also have a deductible or two on your auto policy. A deductible is the amount that you’re responsible for paying in the event of a claim; your insurance company will then take care of the rest. This means that if you ever need to make a claim under your physical damage coverage, you’ll likely be asked to pay the deductible outlined on your policy. For example, if you have comprehensive coverage with a $500 deductible, and a tree falls on your vehicle, you’ll pay $500 out of pocket and your insurer will cover the remaining cost. There are also some cases where you may not have to pay your deductible at all, such as if your vehicle is damage by fire or lightning (and you have specified perils, comprehensive, or all perils coverage).

What are endorsements?

Endorsements allow you to extend, restrict, or change your coverage. They are optional add-ons to your auto policy. Here are a few that are worth the extra premium.

Transportation replacement

Do you drive to work or school every day? What if something happened to your car? This is where transportation replacement comes in handy. If you’re in an accident or have a comprehensive claim (other than theft), this endorsement will provide you with a rental vehicle or will help with transportation costs (such as public transit).

Damage to non-owned vehicles

This endorsement extends your policy to cover a rented or borrowed vehicle. It even provides coverage both in Canada and the U.S. Adding this endorsement is actually more cost effective than buying coverage through a rental vehicle company.

Check out this video to learn more: https://www.sonnet.ca/blog/coverage-to-drive-vehicles-you-dont-own

Waiver of depreciation

You’ll want to add this on if you’re insuring a brand-new vehicle (it’s actually only available for newer vehicles). This endorsement means that if something happened to your car, it would be repaired or replaced without any deductions for wear and tear (also known as depreciation). Your car would be covered for its full value.

What isn’t covered by auto insurance?

Although your personal auto policy can cover a lot, there are some things that it doesn’t provide coverage for, such as:

  • General wear and tear
  • Mechanical breakdown
  • Rusting
  • Corrosion
  • Freezing

Your policy also has restrictions around how you can use your vehicle. For example, a typical auto policy doesn’t let you use your car to carry paying passengers (this includes ridesharing) or making deliveries for a business.

If you’re ever unsure about anything on your insurance policy, don’t hesitate to contact your insurer for help. If you’re ready for a straightforward insurance option, get a quote online with Sonnet today.

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