Tag: insurance

Do you need insurance?

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This is a very common question. Let’s start by defining “insurance”. Insurance is an arrangement by which a company provides financial compensation for a specified loss, damage, illness, or death in return for payment of a premium.

Obviously, insurance policies are complex and usually have deductibles and exclusions. But their basis is to provide financial protection.

To help you determine if you need insurance, here is a series of questions:

  • If you have an accident or become ill and can’t work, can you pay your bills?
  • Can you also pay for the medical costs not covered by the BC MSP or other provincial plans?
  • If you die, will your spouse and/or children suffer a major financial loss? Can they pay for your funeral and after-death tax/expenses?
  • If you have a car accident, can you pay for the repairs to your car?
  • If your home sustains damage, can you pay for the repairs and replacement of your belongings?
  • If you cause damage to another property, can you reimburse any amount assigned to you?

If you answered “no” to any or all of these questions, you need the applicable insurance. Period.

A lot of people argue that premiums are expensive. It is true that, depending on needs, they can add up to a significant chunk of the household budget. But compared to the actual costs of healthcare, living expenses, property damage, funeral…etc. premiums are pennies!

By the way, one of the leading causes of bankruptcy is long-term disability, not reckless spending.  And, yes, disaster can strike anyone, not  “just other people”.

 

Thoughts and tips on home insurance

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Recently, I received an updated insurance policy for my condo. I took the time to review it carefully and noticed a mistake in my initial application summary. It stated my condo does not have laminate or hardwood floors, when it actually has.

I called my insurer to have this corrected and decided to ask additional questions about my coverage and to clarify some terms I didn’t understand. I am glad I did! I suddenly realized that I had been blissfully ignorant since I moved in a year ago. Luckily, nothing happened during that time or I would have been in for a nasty financial surprise.

Like the majority of people, I assumed I was covered for some items and not for others….I was wrong on all points! For example, I wasn’t sure if I had coverage for sewage back-up. It turned out I had. I also thought I would be covered in case of flood when there were actually lots of exclusions to this in my policy.

But the biggest shock was when my insurer told me my coverage was only $ 2 500 in case of damage caused by me to another unit or to common property in my building. As a condo owner, my strata provides additional insurance, however their standard deductible is $ 10 000. If there had been any claim, I would have been on the hook for a minimum of $ 7 500!

Here are a few tips to avoid being left high and dry by your insurance company:

–          Don’t assume that because you pay premiums, you are covered for everything and anything. Read your policy thoroughly and call your insurer if you don’t understand terms or clauses. There are usually lots of exclusions when it comes to flood, sewage back-up or earthquake. You need to know what you are covered for and for how much.

–          Know what your deductibles are. A deductible is a specified amount of money that you must pay before the insurance money kicks-in. Choose an amount you are comfortable with and able to take on. The lower your deductible is, the higher your premium will be. Better safe than sorry, I say!

–          Declare any change in your situation. You started a home-based business? You rent out a portion of your property? You had a baby? Declare it! Not doing so could result in your claim being denied and/or your coverage being cancelled.

–          Check your initial application summary and correct any mistake. Your initial application is the basis for underwriting your policy. When you file a claim, your insurer will compare it against your initial application to see if you have misrepresented yourself or lied.

–          Periodically review your policy. If you did substantial renovations in your home, you need to increase your home improvements coverage, and so on. Your policy needs to reflect your current situation.

But, most importantly, remember that insurance companies are businesses, not charities. The fewer claims they pay, the higher their profits. If your insurance provider has any opportunity to deny your claim, it will do so. Sadly said, but it is the -harsh- truth.