Life doesn’t always go as we plan, and sometimes certain things happen that can cost us a lot of money. Whether it’s a car accident, burglary, or an injury that leads to loss of income, certain situations can leave us with big bills to pay.
But with an insurance policy in place, the majority of the financial burden can be alleviated.
What is Insurance?
Insurance is a policy – or contract – between an insurance company and an individual or business that provides financial compensation in the event of damage or loss. For instance, it may cover damage to a car after an accident or may cover the cost associated with replacing belongings that have been stolen from an insurance policyholder’s home.
Insurance policies are paid for by the individual or entity that takes out the policy in the form of a premium that is paid on a regular basis. When an incident occurs that requires compensation covered by the policy, the client would need to file a claim, which the insurance provider would assess and make a payout if the claim is approved.
Before the payout, the client must first pay a “deductible,” which is a portion of the claim that is paid for in one lump sum up front before the insurance provider pays out for damages.
There are many types of insurance policies available to Canadians, some of which are mandatory, and others that are optional. The most common forms of insurance include the following:
- Home insurance
- Auto insurance
- Tenant insurance
- Life insurance
- Travel insurance
- Health insurance
Businesses also have a variety of policies available to them that are specifically designed to protect business owners in various situations. For instance, warehouses may have some sort of policy in place that protects the expensive machinery they house, while a clothing store might want to insure the garments within the store that could be subject to damage from a fire or theft.
Why Do We Need Insurance?
Insurance helps homeowners, individuals, and businesses manage risk. In exchange for a paid premium, an insurance policy will cover any financial losses suffered. The funds that insurance companies collect through premiums are securely invested so that they can grow, and when a payout is required through a claim, the funds can be distributed accordingly.
There are various situations in which insurance may be needed, such as the following:
To Protect Homeowners
If you own a home, you will want to have an insurance policy in place to protect your home if it is ever subject to damage from things such as a fire, earthquake, flooding, and other natural disasters. Your home can also be protected against vandalism, and the contents within it can also be protected against theft, loss, or damage.
To Secure a Mortgage
Buyers who need a mortgage to finance a home purchase will likely need a home insurance policy in order to get approved, Lenders will require proof that the property can be insured in order to protect their investment. In this case, insurance is mandatory.
To Protect Your Car
If your car is ever stolen, vandalized, or damaged, an auto insurance policy can help cover the damages.
To Protect Yourself and Others in an Auto Collision
If you are ever involved in a car accident, any costs associated with medical bills to help you or others recover from harm experienced may be covered.
To Protect You Against Liability
If someone visits your home and injures themself, or if you are at fault in a car accident that causes bodily harm to another person, an insurance policy can cover the cost of any litigation that may be taken against you.
To Pay For Costs Incurred When Travelling
A travel insurance policy can offer you compensation if you ever need medical attention, to cover the cost of travel cancellation or interruption, to pay for any damage to a rental vehicle, or to cover any losses suffered from lost luggage, among other things.
To Pay For Medical-Related Costs
While provincial health plans cover the majority of the costs of healthcare, there are certain things that are not covered, including regular oral care and procedures, eyeglasses, prescription medications, or physical therapy, among other things.
If you don’t have a policy from an employer to help cover these costs, you can take out a policy that will help cover the majority of these expenses as they are incurred.
To Protect Yourself or Your Family
If you are the breadwinner for your family, any interruption in your income can be devastating. In the event of your death, a life insurance policy can pay out your beneficiaries to help continue paying any bills or mortgage payments.
Or, if you are injured or become ill and are no longer able to work, your life insurance policy can help provide the compensation required to keep up with all bill payments.
To Protect Your Business
No matter what type of business you operate, you should have some form of insurance policy in place to protect yourself, your employees, vendors, clients, and any equipment or items that are part of your business. A policy will also protect you against possible litigation in certain situations.
Things to Consider When Choosing an Insurance Provider
With so many insurance providers out there, each offering their own set of insurance policies with varying terms and premiums, which provider should you choose? Before you settle with a specific insurance company, consider a few factors first, including the following:
Directly with an insurance company or through a broker. You can always call around or do an online search of the various insurance companies available. If you were to do this manually, it could take some time, but there are also online aggregators available that make the searching for insurance companies quite easy. They’ll even make it easy to compare rates and products.
Otherwise, you can work with an insurance broker, which is a third-party entity that works on your behalf and is not affiliated with any particular agency. Brokers will do all the legwork and comparison shopping for you and help put you in touch with the right provider and policy that best suits your particular needs.
Company reputation and history. Check out the insurance company’s track record and history in the insurance industry. You can easily find this information on the company’s website; otherwise, you may be able to find more information by visiting the Better Business Bureau’s website. Ideally, the company will have been around for a long time and be financially sound enough so that if you ever do have to file a claim, there will be no issue with the insurance company paying you out.
Premium. It’s important to choose a policy that will adequately cover you, but you should also consider the price. The premium that one company charges may be much different from the premium of another company, so weigh out these costs before you make your choice. That said, don’t compromise on coverage in the name of saving a few bucks.
Coverage. Choose an insurance company that offers the right type of coverage for your particular needs.
Customer service. The last thing you want is to work with an insurance company that is difficult to get a hold of, especially if you’ve been involved in an incident that requires immediate attention from your insurance provider and you need to file a claim right away.
Plus, you want to know how long the turnaround time is for claims to be processed and paid out. You can gain all this information by speaking with an agent from the company.
Discounts. Many insurance providers offer discounts to clients for various reasons, such as the following:
- Student rates
- Senior rates
- Good driving record
- Clean claims history
- Multiple vehicles in a household
- Alarm systems in your home or car
- Newer homes in good conditions
- Groups or organizations
- Multiple insurance policies (ie. life, auto, and home insurance all with one company)
Different Types of Insurance Everyone Needs
Earlier we touched on the more common types of policies that Canadians take out. In this section, we’ll get into detail about each.
Home insurance is designed to compensate you for damages caused to your home and the contents within it. If your home is ever vandalized or damaged, you can file a claim to cover the costs of repairing or replacing it.
The same is true for your belongings, which are also covered against theft or loss. Home insurance will also cover you against any potential lawsuits from visitors who are injured on your property. If they decide to sue you, your policy may help cover the costs of damages incurred if they sue successfully.
Home insurance will also pay for any temporary living arrangements for you and your family if your home is deemed uninhabitable as a result of the damage caused until your home is safe to move back into.
Learn more about home insurance and find a home insurance provider that works for you.
If you rent your home, you still may want to consider taking out a tenant insurance policy. While the actual structure of the home is the responsibility of the owner or landlord, you still may want to have your contents covered in case they are ever stolen or damaged. Like home insurance, you may also be covered in the event that you need to temporarily relocate if the unit is not safe to live in as a result of damage.
Looking for the right tenant insurance provider? Learn more below.
There are various types of car insurance available in Canada, but the only one that is mandatory is liability insurance, which protects you if someone else’s car or property is damaged while operating your car, or if you are deemed liable if someone is injured or killed in a crash.
In this case, liability coverage will cover the costs of settling these claims. This policy will also protect you from financial loss suffered as a result of any medical expenses you need to pay for, as well as any loss of income if you are injured and can’t work.
Other types of car insurance include the following:
Collision coverage. This provides financial compensation for any damages to your car from a collision.
Comprehensive coverage. This type of coverage protects you against loss from events that are not directly associated with operating your automobile or your actions. It covers things such as the actions of other drivers, vandalism, or theft. You will also be covered for environmental situations causing damage to your car, such as flooding, windstorms, hail, and so forth.
Find the right auto insurance provider in your area.
If your family depends on you to financially provide for the household, then a life insurance policy may be appropriate. This is especially true if you are still dependent on the home and still have a mortgage to pay. In the event of your untimely passing, a life insurance policy would payout your beneficiaries to help them cover the ongoing mortgage payments and other bills that you may have that they depended on you to cover.
Life insurance will also provide financial compensation if you are ever injured or become too ill to continue working. In this case, your payout will help you continue to make all bill payments in lieu of you being unable to bring in an income from work.
Learn about your life insurance options and find a provider that meets your needs.
If you travel abroad and cross international borders, you’ll want to have some form of travel insurance policy active. If you are employed or have a credit card, you may already have some type of travel insurance in place. In this case, you may want to find out exactly what type of coverage it offers.
Travel insurance covers a few different things, including the following:
Medical expenses. If you are ever injured or become sick while travelling, a travel insurance policy will help cover the cost of doctor or hospital visits, medications, and medical procedures. It will also cover emergency medical evacuation and unfortunate events of accidental death or dismemberment. This is one of the biggest reasons why Canadians take out a travel insurance policy.
That said, there are other things that this type of policy covers, such as:
- Lost or stolen luggage
- Rental car coverage
- Cruise ship/hotel accommodation protection
- Protecting your experiences
- Trip cancellation/interruption
- Flight cancellation
- Travel supplier bankruptcy
Be prepared for the unexpected and find travel insurance that works for you.
We are very fortunate as Canadians to have our medical expenses covered by the government. As such, health insurance is not a priority like it is in other countries. That said, provincial health coverage does not pay for everything.
For example, dental visits and procedures, eye doctor visits and eyewear, chiropractic treatments, physical therapy, massage therapy, and prescription medication are not usually covered.
Some Canadians may choose to take out an additional policy that helps cover much of the cost of these visits and procedures, especially those who are self-employed or are not employed with a company that offers an employee health plan.
Certain types of insurance policies are optional, while others might be a requirement. Regardless, having an insurance policy in place can help cover you financially when unpleasant surprises pop up. Just be sure to do a little homework before choosing an insurance company and policy that works best for you.