What is insurance?

Insurance is an agreement, that should you need it, your insurer will cover the costs associated with illness, damage, or losses. In exchange, you pay an annual premium, often paid out over 12 months.

Do I need insurance?

There are some scenarios where it’s beneficial to have insurance, many where it’s vital, and some instances where it’s mandatory. Ultimately, you pay an insurance premium as a way of managing risk.

You can’t control what happens in your life, but you can certainly help protect yourself. The type of insurance you need will depend on your current lifestyle. This could include where you live, where you work, and what you own. You should have insurance to protect all your assets (including your life).

How do I get insurance?

It can be hard to know which type of insurance you need. It’s best to enlist a professional to help you figure it out.

Financial Advisor

A financial advisor’s role is to take a holistic view of your finances, your lifestyle, and your goals. From there, an advisor will recommend how to best manage and plan. Because of their generalized focus, they do know about insurance products and can make recommendations for policies and coverage that make the most sense for you.

Insurance broker

An insurance broker’s role is to work with you to review your current situation and determine which types and levels of insurance will best meet your needs.

Insurance agent

An insurance agent works for a specific company. They are well-informed about all products and services their company offers. An agent will be able to guide you toward the specific offerings that will best benefit you and your insurance needs.

No matter which professional you turn to, make sure you feel comfortable enough to ask questions. It’s important to work with a professional that will not only comprehensively answer these but will also make sure you fully understand your policy.

And to ensure you know how to fully read insurance documentation — and therefore have a better handle on your policy — the Insurance Bureau of Canada has a great policy checklist to help.

What are the most important types of insurance to have?

We get it. It’s not necessarily intuitive to know what type of life insurance to buy.

There are many different types of insurance you should consider if you’re a working adult with any family or assets. Here are the most important types of insurance you should invest in.

Health insurance

In Canada, your provincial government pays for many major medical expenses, but not all. Prescription coverage, as well as dental, eye care, and even most mental health-related expenses, are unfortunately not included.

Many employers offer health benefits to help fill in the gaps. Some benefit plans require employees to pay a premium, while in others, the employer covers the full cost. In either case, it’s best to have an independent professional — or, ideally, the person in charge of benefits at your company — review your coverage, making sure your family is protected.

Self-employed? You can get independent coverage. This even works if your employer-provided benefits aren’t adequate.

Home Insurance

Home insurance isn’t legally required if you fully own your home. To qualify for a mortgage, however, home buyers are required to have home insurance.

One of the biggest mistakes homeowners make is letting that insurance lapse and then needing a charity website to help friends and family raise money when they lose everything in a fire. Home insurance is vital to protecting your home and all of the valuables within it from damage or theft. There is a lot to know about what types of things home insurance covers. It all depends on the policy you choose.

Here are the types of insurance that fall under the home insurance banner.

  1. Comprehensive home insurance
  2. Broad insurance
  • Basic or named perils
  1. Personal liability
  2. Mortgage insurance
  3. Title insurance
  • Tenant insurance
  • Life insurance

The second you start building a family, you should consider getting life insurance. And not just when or if you have kids. You want to protect yourself and your spouse should something happen to either one of you. Consider the financial burden of planning a funeral and burial or time off work needed to emotionally recover from a tragedy. And then there is the ongoing cost of living without the benefit of the income the other spouse provided.

Ultimately, life insurance is the best way of making sure a tragic loss isn’t compounded by crippling financial responsibilities.

What are the main types of life insurance?

There are two primary types of life insurance in Canada: term life insurance and permanent life (sometimes called participating life or whole life)

Term life insurance is an insurance product that covers you for a set amount of time — typically 10-20 years. If you pass away during that term, the policy will make a payment to your beneficiary, also called a death benefit. During the period of your term, your payment rate remains the same. When the term expires, you need to renew for another term, at which point your rate and coverage can, and likely will, change.

It might appear to make sense to lock in for as long as possible, but remember, your needs change as you age. Term insurance is great if you’re raising small children or your mortgage is almost paid off. Once these shorter-term additions to your insurance needs are no longer an issue, permanent insurance might be the better choice.

With permanent life insurance, your policy remains in effect in perpetuity, as long as you continue to pay your premiums. These policies tend to be more expensive but they come with big benefits, including tax-deferred payments. This means nice savings for you (think long-term, towards retirement) and a nice payout to your beneficiary no matter when you pass away. Secondly, some provide cash value options — funds you can borrow if needed, while you’re alive.

Mandatory insurance

Car insurance

You’re required to have car insurance if you drive a vehicle in Canada. For those living in BC and Manitoba, car insurance is through government-owned corporations. Insurance is also done through the government in Saskatchewan, but extra coverage can be bought via private companies. The government of Quebec handles minimum limits for bodily injury, while private insurers provide coverage for property damage. In the remaining provinces/territories, auto insurance operates through private companies.

Car insurance premiums vary widely based on how long you’ve been driving, what you drive, where you typically drive, what you use your car for, and your driving history. You can often pair your car insurance with home insurance at the same insurer to lower your premium.

Broadly speaking, no matter which province you live in, there are specific types of coverage that are usually required: liability coverage, accident benefit/bodily injury insurance, and uninsured motorist or automobile coverage.

Liability insurance

Liability insurance has nothing to do with protecting your vehicle. Instead, liability insurance offers protection if you are legally liable for causing injury or damaging a person’s property/car while operating a motor vehicle.

Accident benefit/bodily injury insurance

This type of insurance will cover your medical expenses and loss of income in the event of an accident.

Uninsured motorist or automobile coverage

This coverage is protection against uninsured or unidentified drivers. It provides benefits to you or your family if you are injured or killed by one of these, and will also help pay for vehicle damage by an uninsured driver.

The important thing to remember concerning car insurance is that every province is different. Additional insurance might be required, so research the specifics of your province.

Optional car insurance

Collision insurance

While it’s not mandatory if you own your car, collision insurance is highly recommended. It covers the cost of repairing or replacing your vehicle as a result of a collision. If you lease or finance, you will likely require collision insurance.

Comprehensive car insurance

Not sure what falls under comprehensive auto insurance? The other types of insurance cover damage as the result of an accident. Comprehensive covers a wider breadth of damage, including damage as the result of fire, vandalism, or theft.

Travel Insurance

In Canada, we’re able to access the same medical coverage we have in our home province, across the country. Certain medical costs can be claimed once you’ve returned to Canada after traveling abroad.

However, many medical costs aren’t covered when you travel. Even when they are, you’re required to pay upfront. If you have insurance, insurance will pay. If you don’t have insurance, you’ll have to foot the bill. And nothing puts more of a damper on a vacation than having to pay thousands for a broken limb.

Many credit card companies include travel insurance but be sure you know exactly what kind of coverage you have before you leave the country.

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