What is indemnity car insurance?

Indemnity insurance might sound complicated, but it's actually pretty simple. It's just any insurance policy that covers you financially for unexpected damages. You pay a premium, and in return, you get this protection. In fact, car insurance, home insurance, contents insurance, and business insurance all fall under the category of indemnity insurance. But let's break it down further for car insurance.

Indemnity insurance explained

Let’s break down indemnity insurance by first talking about indemnification, one of many insurance terms. In simple terms, it’s an insurance contract agreement where your auto insurance company—or any insurer—promises to cover the costs of losses from covered events. This could include things like bodily injuries, property damage, lawsuits, lost wages, and more. Basically, indemnity just means your insurer has your back and will pay for those losses as long as you keep up with your premium payments.

How indemnity insurance works with car insurance policies

Car insurance works by shifting the financial burden from you to your insurer when you experience a covered loss. For example, if you’re in a collision or deal with something like bad weather or vandalism, your insurance steps in to help. Here are a few ways your car insurance might have your back:

Property damage

If you cause an accident and damage someone else’s car, mandatory third-party liability insurance pays for their repairs. With collision coverage or comprehensive coverage, your insurer can also help pay for repairs to your own car.

Medical bills

Liability insurance covers medical expenses for the other driver and their passengers, up to your policy limits. Accident benefits coverage can help with medical bills for you and your passengers.

Legal fees

If you have liability coverage and you’re sued by the other party after an accident, your insurance can help cover the legal costs.

Benefits of indemnity car insurance

The great thing about indemnity insurance is that it takes the financial burden off you for covered losses. For example, if your car gets stolen and you have comprehensive coverage, your car insurance company will step in to cover the cost of replacing it.

Even if you’re in an accident that’s not your fault, the indemnity clause has your back financially. For example, if another driver rear-ends your car, your insurer steps in to cover your repair bills and medical treatment, especially if you’re in a no-fault insurance province and have direct compensation-property damage (DCPD) coverage. After that, your insurer will handle the hassle of getting reimbursed by the other driver’s insurance company.

And indemnity doesn’t just apply when you’re in an accident with another driver. Let’s say you skid off a wet road and crash into someone’s mailbox or even a tree. In either case, as long as you have collision coverage, your insurance steps in to cover the damage—both to the property and your car—so you’re not stuck footing the bill on your own.

Who should consider indemnity car insurance?

When it comes to car insurance, indemnity insurance is just a fancy way of saying the same thing. And since car insurance is mandatory in Canada, every driver has to carry at least the minimum amount of liability car insurance. The exact amount depends on the province or territory you’re in, but it’s a requirement across the board. Depending on where you live in Canada, you may be required to carry:

Third-party liability coverage

Liability insurance, also called third-party liability coverage, is there to help with costs if you accidentally cause injuries or property damage in a car accident. It can cover things like medical bills, lost wages, and even legal defence or court fees if needed. This coverage is mandatory across Canada, though the minimum amount you need depends on the province you’re in. The most common required amount is $200,000 in liability, but in Quebec, it's $50,000, and Nova Scotia requires $500,000.

Accident benefits coverage

Accident benefits coverage ensures that you and any passengers in your vehicle are taken care of if someone is hurt or killed in an accident. It helps cover medical expenses like rehab programs, caregiving costs, income replacement, and even funeral expenses if needed.

Uninsured motorist coverage

Just like other types of insurance, uninsured automobile coverage is mandatory in many parts of Canada. It steps in if you’re in an accident with a driver who doesn’t have insurance or doesn’t have enough coverage. It also has your back in hit-and-run situations or when no one is found at fault for the collision.

Direct compensation-property damage (DCPD) coverage

Direct compensation coverage, also called no-fault insurance, helps cover damages if you’re in an accident that wasn’t your fault. This includes things like injuries and damage to your car. But if the accident is your fault, you’ll only be covered if you have collision and comprehensive coverage.

Other indemnity car insurance coverage options

In addition to mandatory coverages, there are several popular types of optional indemnity car insurance, including collision, comprehensive, loss of use, and accident forgiveness. We will explain each type of coverage in detail in the sections below:

Collision coverage

Collision coverage is a popular add-on for car insurance. It covers damage to your vehicle if you collide with another car, hit a stationary object, or roll over. While it’s optional, it might be required if you’re leasing or financing your vehicle.

Comprehensive coverage

Comprehensive coverage is another popular optional car insurance add-on. It kicks in when your car is damaged by something other than a collision, like theft, vandalism, fire, water damage, or even hitting a deer. If you’re leasing or financing your car, you might be required to have this coverage.

Loss of use coverage

If you’re ever in an accident and your car needs repairs, loss of use coverage has you covered. While your car’s in the shop, this coverage helps pay for alternative transportation—whether that’s public transit, ride shares, or a rental car. It’s a real lifesaver, especially if your car is out of commission for days or even weeks.

Accident forgiveness coverage

One final type of optional car insurance coverage popular among Canadian drivers is accident forgiveness. Accident forgiveness is additional coverage that can be added to your car insurance policy as an endorsement, to protect your driving record and to help prevent your insurance premium from increasing if you have an at-fault accident claim. Note: coverage varies by province

How much does indemnity car insurance cost?

There are many factors that influence the cost of car insurance premiums. As such, no two indemnity car insurance rates are the same. While each insurance company has their own list of factors it use when calculating your rates, here is a list of common factors many car insurance companies in Canada will use:

• Where you live
• Age
• Gender
• Marital status
• Vehicle type
• How you use your vehicle
• Driving record
• Driving experience
• Past claims
• Prior insurance coverage
• Number of kilometres you drive
• Type of coverage on your policy
• Your deductible(s)

Ways to save money on your indemnity car insurance premiums

Nobody likes paying more than they have to, especially for car insurance. Luckily, you’ve got some control over how much you spend on your indemnity car insurance. Here are a few tips to help you lower your premium and save:

Bundle insurance policies

If you’re shopping for property insurance—like homeowner’s or tenant's insurance—it’s worth bundling it with your indemnity car insurance. Combining both policies could save you a lot, sometimes as much as 15% on each. It’s an easy way to cut costs and keep things simple. And if you've got more than one vehicle in your household, consider insuring them all under one policy for a multi-vehicle discount.

Increase your deductible

Choosing a higher deductible is a quick way to lower your car insurance premium. If it’s not already, consider bumping your deductible up to at least $1,000—it can make a noticeable difference in your rate. Just be careful not to set it so high that you can’t afford to pay it if you need to file a claim.

Pay annually

Want to avoid those pesky administrative fees some companies charge for monthly payment plans? Pay your premiums annually in one lump sum instead. Not sure if your insurance company adds extra for monthly payments? Just ask—they’ll let you know!

Review your coverage often

Get in the habit of reviewing your policy every year before it renews. Take a look at your coverage—does it still match your needs? If not, think about how much you could save by adjusting or reducing some of your coverage. It’s a quick way to make sure you’re not paying for more than you need.

Use winter tires

Did you know you could save up to 5% on your car insurance just by using approved winter tires? Many insurance companies offer this discount because winter tires are much safer in icy and snowy conditions. They reduce your chances of an accident compared to all-season tires, and that’s why insurers reward you for installing them each year.

Ask about other discounts

Talk to your insurance broker or agent about discounts that might apply to you. There are plenty of options out there, and insurance companies are always updating and adding new ways to save on car insurance. It never hurts to ask!

Choosing the right insurance company for indemnity insurance

When picking an indemnity insurance provider, it’s important to think about a few key factors to make sure you’re making the best choice. Here’s what to keep in mind:

Reputation and knowledge

An insurer’s size, experience, and the number of policyholders they serve can give you a good sense of their credibility and reliability. Be sure to check out their online ratings and reviews. Also, check out their blog posts and social media updates, and pay attention to their guidance during conversations. All of these reflect their expertise and dedication to you.

Customer service

Great customer service is a must. Whether it’s getting help with a quote, speaking to a claims adjuster when you need one, or interacting with specialists throughout your policy, you want an insurer that’s professional, accessible, and reliable.

Products and discounts

While most insurers offer similar coverage, the details can vary. Some might have better options for specific needs, like extra protection for your bike or gaming equipment. Be sure to compare coverage and ask about discounts tailored to your situation.

Buying process

Getting a quote and purchasing insurance should be quick and easy. Look for things like an intuitive mobile app, a convenient online portal for your documents, and a smooth insurance claims process. These little conveniences make a big difference.

Accessibility

Check if the insurer has a local or regional presence, and see how easy it is to reach them. Can you call, email, or message them directly? Having multiple ways to connect can save time and hassle.

Other types of indemnity insurance

As we mentioned, indemnity insurance is where your insurance company promises to cover the costs of losses from covered events. As such, there are several types of indemnity insurance policies other than indemnity car insurance. Here are a few other types:

Indemnity home insurance

Indemnity home insurance is there to protect you financially when life throws unexpected surprises your way. It covers things like damage to your home or belongings caused by fires, storms, theft, or vandalism. For example, if a pipe bursts and floods your living room or someone breaks in and steals your valuables, your insurance can help cover the cost of repairs or replacements.

It’s not just for big disasters, either—it can also cover situations like someone getting injured on your property and filing a claim against you. It’s all about giving you peace of mind, knowing you’re covered when the unexpected happens.

Professional indemnity insurance

Professional indemnity insurance—also called professional liability insurance, errors and omissions insurance, or medical malpractice insurance—helps protect you from third-party claims of mistakes or oversights in your work. Depending on your policy, it can also cover things like negligence or not delivering a service as promised.

The damages it covers can vary: for professionals like accountants, mortgage brokers, or consultants, it’s usually financial; for physiotherapists, doctors, dentists, or paramedics, it could involve physical harm.

Learn more with BrokerLink

Still have questions about indemnity car insurance or need advice on anything else car insurance-related? Reach out to BrokerLink! We’re car insurance experts and can help you find the best car insurance quotes around.

You can reach us by phone, email, or in person at any one of our locations throughout Canada. No matter how you choose to get in touch, a BrokerLink insurance advisor will be happy to assist you. We also encourage you to take advantage of our free online quote tool that can provide you with a competitive quote in minutes.

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