C14: Automobile Insurance Part 1 cheat sheet

Automobile insurance transfers the financial consequences of owning and operating a vehicle to an insurer in exchange for a premium.

Compulsory coverage (third party liability) is mandated by provincial law; physical damage and accident benefits extensions vary by jurisdiction.

Indemnity principle: the insured is restored to pre-loss financial position, never bettered; betterment is deducted on repairs.

Insurable interest must exist at the time of loss; a person with no financial stake in the vehicle cannot collect.

Utmost good faith requires both parties to disclose material facts; misrepresentation can void the contract ab initio.

Fortuity: coverage responds to accidental, unforeseen events; intentional acts by the insured are excluded.

Subrogation lets the insurer pursue the at-fault party after paying a claim, preventing double recovery by the insured.

Premium components: expected claims (pure premium), expenses, commissions, taxes, and a margin for contingencies and profit.

Standard policy structure: declarations, insuring agreements, definitions, exclusions, conditions, and statutory conditions.

Declarations page identifies named insured, described automobiles, policy period, limits, deductibles, and listed drivers.

The insuring agreements are read with the exclusions and conditions; coverage applies only where all three permit it.

Definitions govern meaning throughout the contract; defined terms such as 'insured' and 'automobile' control scope.

Exclusions narrow coverage (e.g., intentional acts, racing, carrying passengers for compensation) and are interpreted narrowly.

Statutory conditions are prescribed by provincial regulation and override conflicting policy wording.

Policy period sets the coverage window; claims arising outside the term are not covered absent a discovery clause.

Endorsements (forms) amend the policy; the endorsement prevails over the printed base policy when they conflict.

Third party liability pays sums the insured is legally liable to pay for bodily injury or property damage to others.

Limits are stated per occurrence; defence costs are typically paid in addition to the limit in Canada.

Minimum third party limits are set by province (commonly $200,000); higher limits are sold as options.

Coverage follows the vehicle and extends to permissive drivers using the described auto with consent.

Excluded vehicles and excluded drivers (e.g., unlicensed, unauthorized use) fall outside the liability grant.

The insurer has a duty to defend the insured against covered claims, even if allegations are groundless or fraudulent.

Claims for punitive or exemplary damages are often excluded or sublimited; check the wording.

Liability coverage responds on a bodily injury and property damage basis; property damage to the insured's own auto is not covered here.

Accident benefits are no-fault: they pay regardless of who caused the accident, subject to provincial schedules.

Typical benefits include medical/rehabilitation, attendant care, income replacement, death, funeral, and caregiver benefits.

Income replacement is a percentage of gross income (commonly 70%) subject to a weekly maximum; waiting periods apply.

Medical and rehabilitation limits and durations are set by provincial regulation and vary significantly between jurisdictions.

Benefits are available to the named insured and family members in any auto, and to occupants of the described auto.

Coverage is excess or first payer depending on jurisdiction; private health plans may coordinate with the auto insurer.

Catastrophic impairment designation unlocks higher limits and longer benefit durations.

Medical payments coverage (where offered) pays reasonable medical expenses for accident victims up to a stated limit, regardless of fault.

Collision covers damage from impact with another object or overturning, regardless of fault; a deductible applies.

Comprehensive (all perils) covers non-collision losses: theft, fire, vandalism, weather, and glass.

Specified perils coverage lists covered causes; unlisted perils are excluded.

Actual cash value (ACV) = replacement cost minus depreciation; replacement cost pays new without depreciation deduction.

Deductible is the insured's retained portion of each loss; higher deductibles reduce premium.

Betterment charges apply when repairs leave the vehicle in better condition than before the loss.

Salvage and total loss: when repair cost exceeds the ACV less salvage, the vehicle is written off.

Waiver of depreciation endorsement pays replacement cost on a new vehicle within a stated period after purchase.

Uninsured automobile coverage responds when the at-fault driver has no insurance or cannot be identified (hit-and-run).

Underinsured coverage responds when the at-fault driver's limit is insufficient to pay the claim in full.

Coverage is subject to the insured's own limit; the insurer pays the shortfall up to the purchased limit.

A deductible applies to unidentified (hit-and-run) motorist claims in most provinces.

The insured must report the accident to police and cooperate; notice conditions apply within a stated period.

Coverage extends to the named insured and family members as pedestrians or occupants of other vehicles.

Exclusions include claims where the insured was driving an uninsured vehicle or was not authorized to use it.

Subrogation rights transfer to the insurer against the uninsured or underinsured motorist.

Statutory conditions are mandatory contract terms set by provincial insurance regulation and cannot be waived by the insurer.

Common conditions cover: material change in risk, prohibition against use, termination, proof of loss, and limitation periods.

Material change in risk must be reported; failure to report can allow the insurer to deny a claim.

Proof of loss must be provided within a prescribed period (commonly 90 days) after the loss.

Limitation period to sue the insurer is typically two years from the date the claim is discovered.

Termination rules: the insured may cancel at any time; the insurer must give prescribed notice (often 15 days).

Minimum liability limits and mandatory coverage types are set by each province's Automobile Insurance Act.

Dispute resolution (e.g., arbitration for inter-company claims) is governed by provincial regulation and inter-company agreements.

Rating variables include territory, vehicle class, driver age/experience, claims history, and usage (commute/pleasure).

Territory rating reflects claim frequency and severity by geographic area; urban areas typically rate higher.

Driver class and experience: young/inexperienced drivers carry higher loss costs and higher rates.

Claims history (at-fault accidents, convictions) is used to surcharge; a clean record earns discounts.

Risk selection: the insurer decides whether to accept, decline, or surcharge a risk based on underwriting guidelines.

Vehicle rating factors include symbol (repair cost), theft rate, and safety features.

Physical damage premium = rate × base × territory factor × vehicle symbol factor × deductible credit.

Reinsurance and portfolio management protect the insurer against catastrophic or concentrated losses.

Fleet policies cover multiple vehicles under one policy with a single aggregate limit and shared declarations.

Ride-sharing and delivery endorsements extend coverage to commercial use that the personal auto policy excludes.

Seasonal or lay-up coverage suspends physical damage during storage months while retaining liability.

Rental reimbursement and loss-of-use coverage pay for a substitute vehicle while the insured auto is repaired.

Waiver of subrogation prevents the insurer from pursuing a specified party (e.g., a landlord) after a loss.

Named driver exclusions and multi-vehicle discounts are common rating and underwriting tools.

Total loss settlement: insurer pays ACV less deductible; the insured may retain salvage at reduced settlement.

Driver training and telematics discounts reduce premium for demonstrated lower-risk behaviour.

The insured must promptly notify the insurer of any accident, giving date, time, place, and circumstances.

The insured must cooperate with the investigation, submit to examination under oath if required, and provide records.

Proof of loss is a sworn statement of the claim amount and supporting documentation, due within the statutory period.

The insured must mitigate further damage (e.g., secure the vehicle, cover broken glass) after a loss.

Fraudulent claims or material misrepresentation in the proof of loss void coverage.

The insurer must respond within prescribed timelines and give written reasons for denial.

Payment of a claim may be reduced by deductible, depreciation, betterment, and policy limits.

If the insurer and insured disagree on value, appraisal or arbitration resolves the dispute.