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Insurance Basics – Choosing The Right Type of Insurance
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Whether you prefer to plan ahead or like to live in the moment, insurance is a critical thing to have. Designed to protect your interests in the event of an unforeseeable incident, proper insurance can keep you financially solvent during emergencies. Of course, not all insurance is the same. There are specific sectors, designed to secure different aspects of your life. By gaining a thorough understanding of insurance, you can choose the ideal coverage while preventing overlap.
What is Insurance?
Insurance is a program that enables you to pay small amounts, regularly and over time, into a shared fund. The insurance company collects these funds and invests them according to their company policies (though this doesn’t affect you). When a covered emergency arises, you make a claim, pay the deductible, and receive funding proportionate to the incident.
5 Main Types of Insurance Available
There are five key types of insurance. When used together, you can fully protect yourself in the event of a serious incident. These types include:
- What it is: This insurance offers coverage for your home in the event of damage or loss. While most mortgages and rental agreements mandate fire insurance, home insurance goes a step further and protects you from more potential events.
- What it covers: Protection includes reimbursement for theft or the cost associated with a visitor injuring themselves on your property (and the potential litigation associated with the same). Usually, you get coverage for things like your roof and foundation, though it does not necessarily protect you from ‘acts of God’ such as hurricanes or lightning strikes.
- Do You Need it? Everyone with property, whether rented or owned, needs some sort of insurance. You are able to adjust the amount you pay based on how much value you wish to ensure. The key is protecting you from liability. Without insurance, in the event of an injury, you are vulnerable to the financial claim of a litigation. Plus, it protects the financial value behind your possessions.
- What it is: Life insurance is designed to cover the costs that commonly arise after a death. Usually, it is split into two unique types. One is term insurance which covers you for a set period. Typically, this is more cost-effective, though has little value if the death does not occur within that period. Whole insurance is less popular, though offers a permanent death benefit that can be left to family members or other beneficiaries.
- What it covers: The covered costs include funeral arrangements and the price of burial or cremation. It can also be used to address debts from home or other loans. Even if the amount doesn’t cover the full amount, it can be used toward those expenses to limit the financial strain on survivors.
- Do You Need it? If you are single and have no beneficiaries, there is limited benefit to a life insurance policy. However, if you care for a family, it has immense value. Since funeral costs and leftover debt can leave a burden on those left behind, an insurance plan can remove some stress. Often, it is used as a manner of continuing to financially provide after passing.
Check out some of Canada’s Best life insurance providers here.
- What it is: Car insurance is meant to protect your car and its driver and passengers from financial risk due to incidents on the road or when parked.
- What it covers: There are different types of insurance, though quality plans tend to bundle them together to minimize risk and liability. Collision insurance covers the price of an accident regardless of fault. Litigation protection or liability insurance protects you from costs associated if you hit a pedestrian. Personal injury insurance pays for medical bills related to injuries incurred by passengers or drivers. There are other options (called comprehensive insurance) meant to protect you from damage while the car is parked. If there are other drivers not covered by your insurance, or with less insurance, you can opt for under-insured driver insurance to make up the difference.
- Do You Need it? Legally, every driver is mandated to have some form of automobile insurance. While some opt for the basic plan, this is not necessarily the best way to go. Especially if you have a good driving history, it is likely a nominal additional fee to get yourself fully covered.
- What it is: Health insurance is meant to cover the costs of medical expenses. While each province has health care (RAMQ for Quebec), this does not cover all treatments. You are protected in the event of a hospital visit, though not for the ambulance. You have access to publicly-funded doctors, though not private clinics. Supplemental health insurance can make up the difference and expand your treatment options.
- What it covers: Coverage includes surgeries, pharmacological treatment, preventative treatment, and other health-related issues. Basically, it is meant to address anything that isn’t taken care of by the publicly-funded health care arrangement.
- Do You Need it? Especially if you routinely access things like lab testing, or other matters not covered by RAMQ, it is important to have health insurance. Designed to remove the stress associated with paying for treatment, health insurance can be helpful. Should you have a family history of illness or struggle with a chronic condition, it is a worthy investment. However, be sure that you aren’t covered through your employer prior to opting into a program.
- What it is: Disability insurance is there to protect you in the event of a severe injury which results in loss of income.
- What it covers: This type of insurance covers you in the event of all types of disabilities (depending on the plan). Some deal only with temporary or permanent disability, where others cover the differential associated with partial disabilities. Each of them provides financial compensation for the amounts lost resulting directly from the disability.
- Do You Need it?
Unfortunately, you cannot access disability insurance after an incident. It is generally quite affordable and must be started before a disability occurs. While it is often covered under an employee insurance plan, depending on your work situation, you may not be covered. If you aren’t, and rely on your working income for money, this is a very helpful form of insurance to have.
Check out what mortgage disability insurance is and if you need it.
Insurance Providers in Canada
For those consumers currently looking for the right insurance policies to meet their unique lifestyle needs, below are a few of the best online insurance providers and platforms in Canada.
|Type of Life Insurance||Availability||Number of Partners|
|- Term life insurance - Permanent life insurance||-||-|
|- Term life insurance||BC, AB, MB, ON, NS, PEI||-|
|- Term life insurance - Whole life insurance - Disability life insurance - Critical illness life insurance - No medical life insurance||ON||16|
|- Term life insurance - Permanent life insurance - Critical illness life insurance||BC, AB, SK, MB, ON, NB, NS||50+|
|- Term life insurance - Permanent life insurance||All of Canada||30+|
What Affects the Cost of Your Insurance?
Many things impact the price of your insurance, including:
- Type of insurance: Car insurance tends to cost more than life insurance, because of the longer payment period and multiple claim opportunities. Also, if you’re covered by supplemental insurance, your premiums may go down.
- Age and gender: As a matter of assessing risk, especially for health, life, and car insurance, these two factors heavily impact the price you pay.
- Health: How healthy you are is a direct factor in how much you pay for both life and health insurance as a matter of risk assessment.
- Value of property: Insuring more expensive property, including the value of your home, means your premium will be higher.
- Car value: The more valuable your vehicle is, the more you will pay for insurance (since it’s more expensive to fix or replace).
- Amount of coverage: The more comprehensive your coverage, the higher the regular premiums will be.
- Deductibles: This is the amount you pay to activate a claim. The lower your deductible, the higher your premium. Conversely, a higher deductible can result in lower monthly costs.
Find out if your insurance agent is misleading you.
Terms to Consider when Getting Insurance
There are some key things to consider when you’re approaching insurance. Essential factors include:
- Deductibles: Figure out how much it will cost you, upfront, to make your claim. A high deductible can reduce your routine costs, though may make it difficult to get the insurance when needed. Choose something that balances the two for the best results.
- Policy Exclusions: Identify what is covered by the policy; and, perhaps just as importantly, what is excluded. If you want home coverage and live in a hurricane-exposed area, make sure your insurance doesn’t exclude floods. Identify your likely risks and be sure your policy covers those.
- Premiums: Insurance is an ongoing expense and must be factored into your budget accordingly. Identify the amount that you are able and willing to invest in this necessary feature. If you are concerned about the premium, you can consider bundling your services. Often, this results in significant savings.
Making a Claim
The process for making a claim is usually straightforward and will be detailed in your insurance agreement. Ensure you follow procedure to the letter. Keep everything including receipts, photographs, and any other necessary records. Be as prompt as possible when filing your claim. Submit the information, along with your policy details, to your agent. Pay the deductible (if any) and then the claim can be processed according to the policy arrangement.
Cancelling an Insurance Policy
It is easy to cancel insurance, though critical to ensure that you don’t spend time uninsured. If you’re switching companies, be certain that the new coverage is effective before you cancel. To do so, you must contact your provider directly. After proving your identification, you can request policy cancellation. Depending on the time of the month you do this, you may receive a refund from the insurance company.
Being prepared is always a responsible decision. When you opt for comprehensive insurance, you can protect both yourself and those you care about. Naturally, every situation is unique. Finding the best insurance is a matter of identifying your assets and your priorities. From there, you can find an arrangement to serve your needs and keep you safe, no matter what the future holds.
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