Insurance is a vital aspect of financial planning and security, offering protection against various unforeseen circumstances. As a newcomer to Canada, understanding the different types of insurance available is important to help you make informed choices.
In this article, we will explore the various types of insurance and things to consider when purchasing them.
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What is Insurance?
Insurance is a tool that provides financial protection against loss or damage from an insured event. In the case of a covered loss, the insurance company pays out compensation or reimbursement against losses to the policyholder or their beneficiaries.
Types of Insurance:
a) Auto Insurance:
Auto insurance could help protect you from financial loss following an auto accident. It is helpful to understand the various aspects of it before purchasing a policy.
Before you purchase auto insurance, you must have a valid driver’s licence and be a resident of Canada.
There are two types of auto insurance: mandatory coverage, which is legally required, and optional coverage, which provides additional protection.
- Mandatory coverage can vary by province but generally includes liability coverage for others’ injuries or damage to their property, and accident benefits for your injuries.
- Optional coverage could include damage caused to your vehicle in the event of an accident that is deemed your fault, as well as loss of, or damage to, your vehicle from other events, such as fire and theft to name a few. You can also purchase additional coverage through policy endorsements, such as paying for alternative transportation if your vehicle is damaged in an accident, insurance on a rental vehicle and roadside assistance.
Factors that impact auto insurance cost:
When calculating your insurance premium, some of the factors that auto insurers may consider including: [1]
- Vehicle make, model, year, and safety features
- Your age and gender
- Your driving and insurance history, which includes claims and convictions, and may include other factors such as whether or not you have taken driving training
- How long you have had your licence
- Where you live
- How frequently you drive/how many kilometres per year
- If your car is also used for commercial purposes
- Your personal driving history and that of other household drivers who are listed on your auto insurance policy
- Your current driver’s license class
Car insurance is not just a legal requirement but also important for your financial well-being.
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b) Home Insurance
Home insurance provides financial protection against loss or damage to your home and/or personal belongings. Although not legally required like car insurance, it is highly recommended. If you’re financing your home purchase using a mortgage, your lender will likely insist on it.
Types of home insurance coverage available: Home insurance is available to meet your needs whether you own or rent a house/condo.
- Homeowners’ Insurance – Generally Covers your home and belongings against many causes of loss except those directly mentioned as exclusions in the policy term. It also covers personal liability of you (the policyholder), your spouse or partner, and your children (age limited).
- Tenant Insurance – Tenant insurance offers renters financial protection against personal liability, and the loss of or damage to their belongings. It’s a lot like home insurance but without coverage for the physical structure of the building.
- Condo Insurance – Condo insurance provides coverage for your belongings, any unit improvements and betterments, loss assessments, etc. These things are usually not part of the condo corporations’ policy and would require you to purchase a separate condo insurance.
Understanding levels of home insurance coverage:
As with car insurance, there are different levels of protection you can purchase for your home and belongings. Unlike auto insurance, the terminology used to describe the level of coverage can differ from one company to another but usually falls into one of the following categories:
- A basic home insurance policy typically includes named risk coverage for your home’s structure and personal belongings, meaning the insurance company will list specific risks your policy covers, for example, fire and theft.
- A comprehensive home insurance policy offers you more protection by covering your home’s structure and personal belongings against all risks, except for those specifically excluded such as flood, earthquake, etc. This can have the added benefit of covering certain types of accidental damage or mysterious disappearance.
- A broad form home insurance policy is a hybrid of sorts, offering all risk coverage for your home’s structure and named risk coverage for belongings.
- No frills coverage provides coverage for properties that don’t meet normal insurance standards.
In addition to the level of coverage selected, most home insurance policies will also include additional coverages, such as Personal Liability coverage and Additional Living Expenses to name a few. Similar to car insurance, a home insurance policy can be further customized through the use of endorsements, which often enhance or extend coverage not normally covered under a typical policy.
Factors that impact home insurance cost:
These can include the location of your property, the age, living area, number of stories, and various other considerations along with your coverage choices. All these factors will influence your home insurance premiums. Be sure to consult your insurance advisor.
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c) Health Insurance
Health insurance is vital for accessing necessary medical care and safeguarding your family’s health. In Canada, the public healthcare system covers essential medical services for citizens and permanent residents. Provincial and territorial health plans in Canada cover most of your health care needs. Depending on where you live, they may cover hospital and doctor visits. It may not cover other health care or paramedical services.
Some workplace health care plans may cover services that your provincial or territorial health care plan doesn’t cover. For example, prescription drugs, dental care, and vision care. Based on your needs or resident status in Canada you may consider buying other health care plans provided by private insurance companies.
Additional health insurance [2]: Additional health insurance may help you pay for services that your regular health care plan doesn’t cover. For example, special nursing services, ambulance services, wheelchairs and other equipment or pay for your medical expenses if you become ill while travelling, additionally supplement your income if you suffer a major illness or severe injury.
Before buying additional health insurance, check your workplace health care plan so you don’t buy coverage you already have. You should also check your policy to find out if:
- Your insurer only covers a percentage of the claim.
- Your insurer only covers a maximum annual amount.
Health insurance can provide financial support through challenging times, offering peace of mind for you and your family.
Whether it’s car insurance, home insurance, or health insurance, each type serves a specific purpose in helping to ensure your financial security. Ensure to go through your policy details carefully and in detail as different providers can offer different types of coverage. Taking the time to research and select the right insurance coverage for your needs is a vital step towards a secure financial future in Canada.
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[1] https://www.ibc.ca/insurance-basics/auto/how-auto-insurance-rates-are-set
[2] https://www.canada.ca/en/financial-consumer-agency/services/insurance/health.html