This post is by Jon Haver from OurInsuranceCanada.com where he provides useful content that simplifies the often confusing world of the Canadian Insurance Industry.
Insurance… It’s a love-hate relationship. You love to have it for the peace of mind it provides, but you hate to pay so much for something you might never need or use. Here are four important things to ask yourself, or an insurance adviser, before purchasing a policy:
Photo by – SWGN
ONE – Do I already have this? Are you knowledgeable about what your credit card, home insurance, group plan, etc. cover? You might already have the coverage. Credit cards often cover you for travel medical, cover the insurance portion of renting a car, and even offer roadside emergency assistance. Home Insurance policies include personal liability and can cover you even if something happens outside of your own home. Group Insurance Plans through employers often carry travel insurance and life insurance coverage as well as health, dental, and disability. Make sure you know what safeguards you already have in place, and don’t double-up if you don’t need to.
TWO – How much is the deductible? Choosing a higher deductible transfers some of the risk. You pay more if the unfortunate occurs, but not if it doesn’t, so you are paying less for what you might not need. Deductibles can range anywhere from $500 to $10,000, and discounts are applied accordingly. If you make a claim, you need to be prepared to pay the full deductible, so don’t make your deductible a higher amount than you can actually pay.
THREE – Is this the coverage I want? Shopping around for insurance quotes is a great idea, but cheaper is not always better. Cheaper insurance is generally higher risk insurance. Be sure the risk you carry is the risk you want. Service is also something you pay for; if you don’t like spending time waiting on the phone, don’t buy bargain-basement insurance. Doing research on the internet is an effective way of learning about types of insurance, common coverage, and typical premiums. This will help you to organize a list of specific questions to ask an insurance adviser or agent.
There are legitimate ways to lower insurance costs. Insurance companies give discount incentives to gain more of your business. Having more than one insurance policy with the same company will often earn you a multi-policy discount. You can also get a discount for reaching a varied “age of maturity.” Being a younger age can allow you a lower premium on certain types of insurance too, so also think about what coverage you might want in the future and secure premiums now.
FOUR – Do I understand my insurance policy? Insurance policies have grace periods, time during which you can go over your policy and make necessary changes. Don’t be shy about asking questions until you fully understand your coverage. You need to know what you are and are not covered for.
Reviewing your policy every three years, or so, is an important step in keeping up-to-date with changing needs. Markets change, coverages change, and dependencies change as life progresses. Insurance geared towards retirement is much different from the insurance required by an entrepreneur starting a business. Confirm that the insurance you currently have is the insurance you need for your present stage of life.
These are just 4 of the basic questions you should be sure to understand before you go ahead with any insurance policy purchase. Another great resources for insurance related questions in Canada is the Insurance Bureau of Canada.
Mike, aka The Dividend Guy, authors The Dividend Guy Blog since 2010 and manages portfolios at Dividend Stocks Rock. He is a passionate investor.