Rethink your auto insurance protection because the planet warms up – Driving

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Make sure you have the right coverage on a constantly warming planet

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Jessica Mach, LowestRates, approx Low angle side view of car driving fast at sunset with motion speed effect. Photo by Getty

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Across Canada, temperatures are rising, rainfall is increasing, and the risk of flooding continues to grow. These results, published by the federal government in 2019 as part of Canada's changing climate report, offer a gloomy look into the future of our climate.

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For the insurance industry, the effects of climate change are probably best measured by the types of damage that customers submit most frequently. In household insurance, for example, storm and climate risks have replaced fire as a hazard "that determines the relationship between property owners and the insurance industry," as stated above a 2020 report by Paul Kovacs, a senior researcher at the insurance company.

Motorists are also exposed to climate risks. Extreme weather can potentially lead to expensive car repairs. However, as with property owners, drivers can minimize these costs by making sure they have auto insurance with the correct coverage.

Types of motor vehicle insurance for weather-related hazards

In Canada, in order to get their cars on the road, drivers are required by law to Car insurance. The minimum amount of insurance that drivers must have (Liability insurance) varies from province to province, but in general this minimum coverage does not protect drivers from weather-related hazards. (One exception: this rule does not apply to drivers in Manitobawhere the compulsory fully comprehensive insurance offers financial protection if your vehicle is damaged by hail and fire.)

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This means that in addition to your basic insurance, you have to take out additional insurance to ensure that you receive financial compensation in the event of damage to your car from a climate event. Your coverage options are:

  • Full: This type of coverage provides financial protection if your car is damaged in a non-collision incident such as theft, vandalism, or environmental damage. As severe, unpredictable weather conditions become more common, putting your vehicle at risk from hail damage or fallen trees, this can be worth considering.
  • All dangers: This coverage combines the benefits of comprehensive coverage and Collision protection, which offers compensation if you are hit by an unknown driver or if your car has been damaged in a collision with another car or a stationary object such as a traffic sign.
  • Specified hazards: This type of cover covers damage that only results from risks that are expressly stated in your policy. These hazards can, but do not have to, include: lightning, hail, rising water, storms, and fire.

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Of course, all types of insurance are subject to exclusions, limitations and deductibles. Before committing to any additional coverage, make sure you know exactly how far your coverage will go and whether it will suit your needs.

How to choose the right insurance coverage for your needs

In his report, Kovacs writes: "The greatest impact of climate-related risks on the insurance industry over the next 10 years will come from random extreme events that hit exposed and vulnerable properties and communities, resulting in loss and damage."

Since the 1980s and adjusted for inflation, the number of storm claims paid by the Canadian insurance industry has doubled every five to ten years, writes Kovacs. He adds that recent "major loss events" include hailstorms, urban floods, forest fires, tornadoes, high winds and residential floods.

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The Insurance Bureau of Canada also reports that in 2020 Storm causes $ 2.4 billion in damage – This made last year the fourth highest insured loss since 1983.

While it seems like severe weather will stay here, that doesn't mean that every driver needs the same type of protection against weather-related hazards. To determine what type of additional coverage you should get – or whether you need any additional coverage at all – you should consider the following questions:

  • What types of severe weather or climate risks are you likely to experience in your area? Your policy should cover threats that you are actually exposed to.
  • How much is your car worth? Most experts recommend discontinuing auto insurance if there isn't a huge difference between the cash value of a car and the amount you would pay for coverage plus the deductible. It can cost less to pay for repairs out of pocket.

As always, we encourage you to do your research, compare rates, and speak to specialists to make sure your insurance coverage meets your needs.

LowestRates approx is a free and independent price comparison website that allows Canadians to compare prices from over 75 vendors on a variety of financial products such as auto and home insurance, mortgages, and credit cards.

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