Understanding Your Auto Insurance Deductible in Québec

The deductible (franchise) is the share of a loss that remains your responsibility. The Q.P.F. No. 1, Québec's standard policy, defines it as “the amount left to be paid by the named insured.” The idea seems simple, but the deductible does not apply the same way everywhere: it all depends on which chapter of the policy pays, on your share of responsibility and on the protection chosen. Understanding it helps you choose a realistic amount and read a quote correctly.

How the deductible works

When a loss is covered by Chapter B, which protects your own vehicle, the insurer determines the value of the damage and then subtracts the deductible: that is the general rule set out in the Q.P.F. No. 1. (The English version of the form calls the chapters Section A and Section B.) If the repair costs less than the deductible, the insurer pays nothing. If it costs more, the insurer pays the difference. At a body shop, you usually pay the deductible directly to the shop, and the insurer pays the rest.

The deductible has a purpose: by leaving small amounts to the insured, it keeps every minor bit of damage from going through a claim, and it shares the risk between you and the insurer. That is also what ties it to the premium, as discussed further on.

The deductible applies per loss: that is in fact the wording used in the form's Declarations. Two separate events in the same year therefore mean two deductibles. And if several vehicles are described in the contract, the form provides that it applies to each of them as if a separate contract had been issued for each: each vehicle has its own protections and its own deductibles.

One deductible per Chapter B protection

Chapter B has four protections, commonly called B1 (all perils), B2 (collision or upset), B3 (accidents without collision or upset) and B4 (specified perils). Each has its deductible, shown in your Declarations. With B1, a single deductible applies in principle, whatever the event. With the combination of B2 and B3, each protection has its own, and you can set them at different levels. The standard endorsement Q.E.F. No. 41, Change to deductibles, is used to adjust Chapter B deductibles.

What about Chapter A?

Chapter A, civil liability, has no deductible in its standard form: when you cause damage to other people's property, the insurer compensates the victim up to the amount of insurance. A standard endorsement allows one to be added for property damage (Q.E.F. No. 8); if that is your case, it appears in your Declarations.

Where to find your deductible and how to change it

Your deductibles appear in Item 4 of the Declarations, on the line for each Chapter B protection, under the heading “deductible per loss.” If a line is empty, the protection was not purchased. An endorsement can also change a deductible; it is then named in your Declarations.

You can ask your insurer to change a deductible, during the contract or at renewal; the premium is then adjusted. At renewal, the AMF advises checking whether you want the same protections and the same deductibles as under the previous contract, and it points out that an insurer that wants to change your contract must notify you 30 days before renewal. To measure the effect of a deductible on your premium, you need priced quotes: that is the job of a licensed representative.

The collision for which you are not at fault

This is where Québec's system stands apart. According to the Groupement des assureurs automobiles (GAA), the Direct Compensation Agreement (Convention d'indemnisation directe) applies to a collision that occurs in Québec, between at least two vehicles, whose owners are all identified. Each insurer then compensates its own insured, and it is your insurer that determines your share of responsibility using the fault scales set out in the agreement.

• You are not at fault: according to the GAA, you are compensated even if your policy does not cover collision, and you have no deductible to pay. The Q.P.F. No. 1 places this damage under Chapter A of your own contract.
• You are at fault: you are only compensated if your policy covers collision (B1 or B2), and you pay the deductible.
• Responsibility is shared: the share attributed to the other driver is paid under Chapter A, with no deductible, and your share under Chapter B, if you have collision coverage. In the example given by the AMF, an insured found three-quarters responsible receives one quarter of the indemnity under Chapter A and bears only three-quarters of the collision deductible on the rest.

The Autorité des marchés financiers (AMF) also states that you can dispute, with your insurer, the responsibility attributed to you. The joint report (constat amiable), for its part, is used to identify the parties and report the accident; according to the GAA, it is not an admission of liability.

The agreement does not apply, the GAA points out, to a hit-and-run, to a collision with a tree or a pole, or to a collision in the United States. The following table sums up who pays for your vehicle and when the deductible applies.

Situation	Coverage that pays for your vehicle	Deductible
Collision in Québec, owners identified, you are not at fault	Chapter A, under the Direct Compensation Agreement	None
Same collision, you are entirely at fault	B1 or B2, if you bought it	Yes
Shared responsibility	Chapter A for the other party's share, B1 or B2 for yours	In proportion to your share
Hit-and-run, hitting a tree or a pole	B1 or B2, if you bought it	Yes
Theft, vandalism, hail	B1, B3 or, for the perils it lists, B4	Yes, that of the protection
Fire or lightning	B1, B3 or B4	No, under the Q.P.F. No. 1

Three special cases

• Fire and lightning. Under the Q.P.F. No. 1, the deductible does not apply if the damage is caused by lightning or fire. A standard endorsement, Q.E.F. No. 40, Fire deductible, can nevertheless provide for one.
• Replacement insurance. According to the AMF, if you bought replacement insurance (Q.P.F. No. 5), the deductible paid to your main insurer is reimbursed to you, whereas with the replacement cost endorsement (valeur à neuf) a deductible is generally payable.
• The temporary replacement vehicle. If you temporarily use another vehicle while yours is being repaired, its owner's insurance applies first. Under the Q.P.F. No. 1, your Chapter B only steps in if that owner is not covered for damage to the vehicle, or if the owner's deductible is higher than yours: your insurer then pays the difference between the two deductibles.

Deductible and premium, a trade-off

According to the AMF, the higher the deductible, the lower the premium. The logic is simple: you keep a larger share of the risk, and small losses are no longer paid by the insurer. Conversely, a low deductible pushes the premium up. How large the gap is varies with the insurer, the vehicle and your record: only a quote can put a figure on it.

Work out your break-even point

A simple calculation helps you judge whether a higher deductible is worth it for you. Ask for two identical quotes that differ only in the deductible. Then divide the difference between the two deductibles by the difference in annual premium: the result tells you after how many years the lower premiums make up for the extra deductible you would pay on a Chapter B claim. If that number of years seems long compared with your driving experience, the low deductible may still make sense; if it is short, the high deductible deserves consideration. Do this calculation with the figures from your own quotes.

Choosing a deductible that fits your situation

No deductible suits everyone. A few reference points help you decide.

Your savings cushion

Choose a deductible you could pay tomorrow, without borrowing or putting off an essential expense. A high deductible only makes sense if the money is really available when the loss occurs, sometimes at the same time as other unexpected costs.

The vehicle's value

A vehicle's value drops over the years, while the deductible stays the same. For a vehicle whose value has fallen a great deal, compare the cost of the protection with the amount you could receive, minus the deductible. If you have replacement insurance, find out before making any change: according to the AMF, removing a protection from your policy can cost you the replacement insurance indemnity.

The lender's or lessor's requirements

A financing or lease contract may require certain protections and a maximum deductible. Check it before changing your deductible.

Your habits

If you plan to pay for small damage yourself, a higher deductible is consistent with that habit. The GAA nevertheless recommends reporting every accident to your insurer, whether or not you make a claim, so that your version is recorded in the Fichier central des sinistres automobiles, the central auto claims file.

Different deductibles for B2 and B3

With the combination of B2 and B3, you can fine-tune: for example, a higher deductible for collision and a lower one for theft, vandalism or glass breakage, events that do not depend on how you drive. The reverse can also be argued, depending on where you park. Ask for quotes for each combination.

Mistakes to avoid

• Choosing a deductible higher than what you could pay right away.
• Forgetting that each Chapter B loss carries its own deductible.
• Comparing two quotes with different deductibles as if they were equivalent.
• Believing a deductible applies to a collision for which you are not at fault, when the agreement provides otherwise.
• Changing a deductible without checking your financing, lease or replacement insurance contract.

For details on the protections, see our guide to the Q.P.F. No. 1 policy; for the other components of the premium, the one on the factors that affect it.

We explain; the quotes come from licensed partners.

Sources

• Autorité des marchés financiers (AMF), lautorite.qc.ca: the Q.P.F. No. 1 and approved endorsement forms; how the price of auto insurance is determined; how to limit problems with auto insurance; replacement cost and replacement insurance; Québec's auto insurance program and the Direct Compensation Agreement.
• Groupement des assureurs automobiles (GAA), gaa.qc.ca: Direct Compensation Agreement, joint report (constat amiable), Fichier central des sinistres automobiles.
• Automobile Insurance Act (Loi sur l'assurance automobile, CQLR, chapter A-25) and Civil Code of Québec, LégisQuébec, legisquebec.gouv.qc.ca.