Many people get excited buying a new vehicle. The smell, the sparkly paint – you can`t beat the feeling of having a new vehicle. Very few people, however, get excited about insurance for their new vehicle. It is a pain to arrange and the cost … well it can be expensive.
In Alberta, the minimum amount of liability insurance that you must carry is $200,000. That has been the minimum coverage for over 20 years. Anybody who only carries $200,000 insurance is making a mistake. Anybody who is willing to sell you only $200,000 of liability coverage is also making a mistake.
If you cannot afford to hold at least $1 Million in liability coverage (and preferably $2 Million) you cannot afford to drive. The risks associated with being under-insured are not worth taking. Serious accidents happen every day and if you do not have enough coverage you put all of your personal assets at risk. Ask your broker, how much more it will cost to get $2 Million in coverage for liability. You will likely be surprised at how little extra your premium will be.
Also, do not buy a vehicle and insure it in the name of your parent to reduce the cost of insurance. There is a principle in insurance called “insurable interest”. You must have a beneficial interest in the vehicle before you have an insurable interest. This means, it must be yours. You must have paid for it. If you register it in the name of someone who has not paid for it, and if you insure it in that person’s name, you risk having your insurance nullified by the insurer if you are in an accident. This is not a risk worth taking.
Always be honest with your insurance agent or broker when taking out insurance and you won’t put your life savings at risk. Advice to live by.