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Understanding your car insurance policy.

Rarely a day goes by where you do not see, hear, or read about a car accident. Some car accidents are minor fender benders in which no one gets hurt while others are tragic multiple vehicle accidents resulting in injury and death.

Our legal system is built on the belief that those injured by the carelessness of others have a fundamental right to be fully compensated for their injuries. Car accidents can result in injury to both persons and property.

Automobile insurance arrived with the invention of the automobile. At first, it was optional, but as the damage caused by automobiles increased, all of the provinces passed laws requiring everyone who owns a car to have a minimum amount of car insurance.

Car insurance serves two purposes. Your car insurance protects you when you are at fault for an accident. The other person's car insurance protects you when you are the victim of a car accident.

The Standard Automobile Policy

Contrary to the suggestion in advertisements on radio and television, everybody has the same basic automobile insurance policy. In Alberta, this is the Alberta Standard Automobile Policy. This policy has three sections, each corresponding to a specific type of coverage. This is similar in other provinces which have private car insurance as well as in provinces such as British Columbia where car insurance is handled by a Crown Corporation.

Section A - Third Party Liability

This section provides coverage for legal liability to others arising from an automobile accident causing death or injury to persons or damage to property.

When a car accident is your fault, you are legally liable to compensate the people you injure for any loss or damage they suffer. In this situation, the purpose of third party liability insurance is to cover you for liability resulting from your use or operation of your vehicle. In addition to paying any damages you are legally required to pay, your insurance company will defend any lawsuit that may be brought against you.

After you notify your insurance agent of the accident, you will be contacted by an insurance adjuster working for your insurance company and asked to give a statement. Unless the claim against you proceeds to court, you will have no contact with your insurance company after you give your statement. The terms of the insurance policy are such that your insurance company is entitled to defend and settle the claim on your behalf. You have no right to interfere or influence the manner in which the claim against you is being defended or settled.

If you are the innocent victim of a car accident, the owner and driver of the other vehicle is responsible for compensating you for your injuries. When you bring a claim against the owner and driver of the other vehicle, their insurance company covers their legal liability to you by paying you compensation for your injuries.

When you bring a claim against the owner and driver of the other vehicle, you or your lawyer will deal exclusively with their insurance company, through its insurance adjuster or insurance defence lawyer. Unless your claim proceeds to court, you will have no contact with the owner and driver of the other vehicle.

The minimum insurance coverage for third party liability in Alberta is $200,000. Most policies provide either $500,000 or $1,000,000 in coverage. It is worth increasing your third party liability coverage to $2,000,000 to improve the likelihood of benefitting from the "Family Protection Endorsement" that has become standard on all car insurance policies.

The Family Protection Endorsement provides you with insurance coverage in the event you are injured in an accident caused by someone who is inadequately insured. To take advantage of this endorsement, the limits of your third party liability coverage have to be greater than the limits of the other driver's.

Section B - Accident Benefits

If you are injured in an accident, your insurance company will pay you accident benefits as provided for in Section B of your policy. You are entitled to receive these benefits regardless of who was at fault.

The medical benefits under Section B are only paid if you sustain bodily injury "directly and independently of all other causes arising from the use or operation of the automobile".

Section B covers all reasonable medical expenses incurred within two years from the date of the accident if the expenses are essential for your treatment and rehabilitation. Both your doctor and your insurance company's medical adviser have to agree that the treatment is essential in order for your medical expenses to be reimbursed.

In addition to medical expenses, the coverage under Section B includes death and total disability benefits. The death benefits are paid to the survivors in accordance with the formula set out in the policy.

The total disability benefits are paid only when you are "wholly and continuously disabled" as a result of the injuries sustained in an automobile accident. These benefits are only paid if you were employed at the date of the accident and you were unable to "perform any and every duty pertaining to your occupation or employment" within 60 days of the accident.

The weekly benefit payable is the lesser of $300 per week or 80% of your average gross weekly earnings. These benefits are not paid for the first week of disability and stop at 104 weeks.

If you are injured in a car accident and not employed, you can receive disability benefits only if you are a "spouse residing in the same house as your husband or wife" and are completely incapacitated and unable to perform any of your household duties. These payments are limited to $100 per week and a maximum of 26 weeks.

You have to apply for these Section B Benefits. The forms are supplied by the insurance company. If you were in your own vehicle at the time of the accident, you apply to your own insurance company. If you were driving or a passenger in someone else's vehicle you would apply to that other person's insurance company.

Section C - Loss of or Damage to insured automobile

This section of the policy provides coverages for loss or damage to your own vehicle caused by the perils insured against. Depending on your choice of coverage you can be insured for all perils, collision or upset, comprehensive or specified perils. These four terms are defined in your insurance policy.

Exclusions and Exceptions

As with every type of insurance policy, the Alberta Standard Automobile Policy has exclusions and exceptions that apply to each section of the policy. In order to fully understand what is covered by your car insurance policy, you have to read the paragraphs of the policy telling you what is covered (the insuring agreements) with the paragraphs describing what is not covered (the exclusions and exceptions).

Policy Conditions

You also have to comply with a number of conditions to preserve your right to be compensated under your car insurance policy. Some of these conditions are set out in the policy and some are not.

All insurance policies contain the following implied conditions:

* you and your insurance company will deal with each other in good faith;

* the vehicle covered by the policy actually exists;

* the vehicle is properly identified; and

* you have an insurable interest in the vehicle.

These are the only implied conditions. All car insurance policies also contain statutory conditions. They form part of every automobile policy and cannot be varied by the insurance company. It is your responsibility to prove that you have complied with both the implied and the statutory conditions.

Insurable Interest

Your insurance company will not indemnify you under the third party liability section, pay you medical or disability benefits, or compensate you for loss or damage to your automobile unless you have an "insurable interest" in the vehicle you insured. You have an insurable interest in a vehicle if

* you have a financial benefit or advantage from the continued existence or preservation of the vehicle; or

* you will be prejudiced or suffer a financial loss from its destruction, damage or injury.

For example: Your teenager buys himself a car with his own money and you agree to register the vehicle in your name and add his vehicle to your car insurance policy. In these circumstances, if his car is damaged or stolen your son will suffer the financial loss. He has the insurable interest in this vehicle; you do not. Although you paid the premium, you, your teenager and his car would not be insured.

Being the registered owner of the vehicle does not automatically give you an insurable interest for insurance purposes. The insurance companies always look to see who is the actual owner of the vehicle.


As with all insurance coverage, you never know how much you need it until you need it. Although you are always better off not needing insurance coverage, knowing that you are properly insured and understanding the coverage you have makes the claims process far less intimidating.
COPYRIGHT 1999 Legal Resource Centre of Alberta Ltd.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1999 Gale, Cengage Learning. All rights reserved.

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Author:Waller, Adrienne
Date:Dec 1, 1999
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