The Cost Of Not Having Adequate Car Insurance Coverage

What happens if you have car insurance, but your coverage limits are lower than the costs that result from an accident? And what happens if you drive without any type of coverage at all? We'll address these two questions in more detail below. In doing so, we hope to demonstrate the importance of regularly reviewing and updating your coverages to fit your needs. How The Law Views Driving Without Insurance Many people knowingly drive their cars without insurance. Sometimes, they do so to avoid paying premiums. Other times, they have been assigned to a high-risk category due to past tickets or accidents, and cannot afford to pay the high rates. This is essentially a gamble that they will never be caught. All provinces and territories have laws in place that prohibit operating a motor vehicle without sufficient auto insurance. If a driver is caught doing so, he or she may be subject to one or more serious penalties, including hefty fines. For example, in Ontario, a first-time conviction for driving without insurance can result in a fine ranging between $5,000 and $25,000. A second conviction results in a fine between $10,000 and $50,000. Drivers may also face a suspension of their driver's licenses for a period up to one year. The Risk Of Operating A Vehicle Without Accident Benefits In addition to tickets, fines, and driver's license suspensions, driving without being properly insured exposes you to enormous financial risk. Suppose you are involved in an accident during which you are seriously injured. Further suppose that due to your injuries, you require hospitalization as well as physical therapy and rehabilitation. Treatment and recovery from your injuries also force you to take time away from your job, and thus call for some form of income replacement. Accident benefits coverage, mandatory in nearly every province and territory, pays a significant portion of these items. If you lack this coverage, you may be forced to pay costs associated with your medical care and rehabilitation out of your pocket. This can add up to tens of thousands of dollars. Driving Without Proper Liability Insurance Suppose you cause an accident that seriously injures another person. If you are found to be legally liable for the incident, you will be required to pay for medical care of the injured party. You'll also be held responsible for property damage that resulted from the accident. Third-party liability, also compulsory, covers these costs, thus helping to shield your assets from judgment. If you lack this coverage, you could potentially lose control of your home, investments, and other assets. Driving Without Collision And Comprehensive Coverages Unlike accident benefits and third-party liability, collision and comprehensive coverages are optional. Both cover damage to your vehicle, though do so in different circumstances. Collision covers damage that results from an accident. Comprehensive covers damage or loss that results from events such as vandalism, floods, and falling rocks - essentially any situation other than a collision. A lot of people choose to forgo these two coverages because they are expensive. This is often a good decision. If your vehicle is old, its market value is likely to be low. Hence, the money you'll pay in premiums for collision and comprehensive will quickly exceed the potential payout in the event your vehicle suffers damage. It is fine - and even recommended in certain cases - to drive without these coverages. But realize that doing so exposes you to financial risk. Inadequate Uninsured And Underinsured Motorist Coverage Suppose your car is hit by a driver who lacks insurance, or has too little coverage. The purpose of uninsured and underinsured motorist coverage, mandatory throughout Canada, is to cover losses that would otherwise be covered by the at-fault driver's insurance company. If you lack this feature, you would be forced to cover costs out of your own pocket. As mentioned earlier, this can add up to tens of thousands of dollars. There is a substantial risk - legally and financially - to driving without auto insurance. Driving with insufficient coverage is nearly as dangerous. Before you put your foot on the gas pedal, ensure that you have adequate coverage and auto insurance.