April 15, 2008
By Darren Rodrigues,
Sinclair-Cockburn Financial Group

Darren RodriguesIn this day and age, one doesn’t need to be a millionaire to experience a lawsuit. It takes a split second for an accident to take place, but the financial recovery process can be much longer without adequate insurance.

When people think of auto insurance, it usually brings to mind physical damage to their car, or liability insurance if they are sued. What many don’t immediately consider are the benefits available if injured in an accident.

Every auto insurance policy in Ontario has mandatory accident benefits coverage set out in the Statutory Accident Benefits Schedule (SABS). Coverage pays medical and even funeral expenses for you, members of your family and passengers in the event of an auto accident, regardless of who caused the accident. Mandatory first-party accident benefits provide injured parties with a basic level of treatment and care, also regardless of fault. The operative word here is “basic.”

It is important to note that there are optional benefits to fit your specific situation and income needs. Many people buy additional protection beyond the mandatory coverage, including extra income replacement, protection against additional medical and rehabilitation costs, larger death benefits and inflation coverage.

Here is what is included in a standard policy, with optional benefits noted:

Medical/Rehabilitation and Attendant Care Benefits. You are entitled to receive up to $100,000 over a period of ten years for medical/rehabilitation expenses. If your injury is serious enough to be termed catastrophic under the SABS, this benefit increases to $1 million over a lifetime. The standard maximum for attendant care is $72,000. You can buy optional benefits, which will cover up to $1,172,000 in additional medical, rehabilitation and attendant care expenses, and up to $3 million for catastrophic injuries.

Income Replacement Benefits. After a seven-day waiting period, you can receive up to 80 per cent of your net weekly income. This benefit is normally capped at $400 per week, but there is an option to increase this amount in your policy up to $1,000 per week.

Funeral and Death Benefits. If an insured dies as a result of an accident, the insurer may be required to pay funeral expenses to a maximum of $6,000 and a sum of $25,000 to a spouse or dependants. If the insured was a dependant, there is a $10,000 benefit for the person who the insured was dependant upon. If you buy optional benefits, you can increase these amounts to $50,000 to an eligible spouse, $20,000 for each dependant and $8,000 for funeral expenses.

Caregiver Benefits. You may be eligible for caregiver benefits if you need to hire someone to care for your dependants. The standard maximum amount for caregiver benefits is $250 per week for one dependant, plus $50 per week for each additional dependant. If you buy optional benefits, the coverage increases to $325 per week for one dependant, plus $75 per week for each additional dependant.

For many people, the standard benefits available are not enough if they are injured in an accident. If you operate your own business and/or are the sole provider for a family, the standard $400 per week offered is clearly insufficient to meet expense needs. The income replacement benefit is often increased for self-employed professionals and trade contractors.

Similarly, for medical/rehab benefits, the maximum amount of $100,000 for less serious injuries and $1 million for catastrophic impairments look like a lot of money. But, you would be surprised how quickly health care costs will eat away at these sums. For no-fault benefits, very specific criteria are set out to help determine whether a person is catastrophically impaired. This typically means that individual impairments must add up to 55 per cent of “whole person impairment” as interpreted through the American Medical Association’s Guide to the evaluation of permanent impairment.

The bottom line is that you could have a serious injury that is not deemed a catastrophic impairment, but you still require extensive medical care. That means accident benefits are capped at $100,000. Given the expenses associated with modern health care and rehabilitation, some consumers choose to increase this benefit.  

With such dramatic cost increases over the years, car owners should assess whether their insurance policy meets the current financial protection needs. Increasing the liability coverage provides added financial protection with only a marginal increase in the annual premium. As a consumer, there are many choices when buying auto insurance. All of these options, and your deductibles, will have an effect on the cost of your policy. Don’t let a lack of information keep you from ensuring you have the proper coverage. Car owners with substantial personal assets to protect, may want to consider purchasing an umbrella policy, which provides coverage for losses above the underlying policy limits. Drivers should work closely with their insurance company or agent to determine the best possible individual policy. If you have questions, give us a call at Sinclair Cockburn Financial Group. We can discuss options and give information needed to make the right choice.
Darren Rodrigues of Sinclair Cockburn can be reached by phone at (416) 494-9883, or by e-mail at darren.rodrigues@scfg.ca