What Kind of Insurance Do I Really Need?

Insurance PolicyYou may have come across the recent news story of Raymond Ellis, the 81-year-old who has paid more in premiums over a 26-year span than the amount of his life insurance coverage. Not only has he paid a small fortune over the decades, he now potentially faces years of increasing premiums. While Ellis chalks up his predicament to misleading policy claims made by his agent at the time, he also admits his unfortunate situation could have been avoided had he better understood what he was signing up for. This leads to the question – how well-versed are Canadians when it comes to their insurance coverage? Keep in mind that insurance, after all, is a product to be sold.

Insurance is a sunk cost that every person should review on an annual basis. In my opinion, most Canadians are over-insured, driven by the fear that one day there will be an emergency they won’t be able to afford that will leave them with nothing. This is the fear that insurance companies feed off of and sales agents play on to get Canadians to pay more out of pocket than necessary. Here are five things you should know about insurance and how to make sure you have the coverage that is right for you.

Understand What’s Covered

Ask anyone what coverage they have for their car, home or life and most won’t be able to give you many specifics. If you are carrying an insurance policy of any kind where you’re paying monthly premiums, you should know exactly what you are covered for. Make sure you can answer these questions: Is there a deductible you would have to pay if you made a claim? Are there circumstances that would void your policy? What events can change how your coverage works?

Review Your Coverage After Every Life Event

If you get married, have a baby, change jobs or have a loved one pass away, it’s considered a life event – and in many cases it can change the coverage on your policy. For example, if you have a baby, your little one isn’t automatically covered under you family health insurance; you have to add that new person onto your policy in order to make claims. Another common mistake is assuming that your new spouse is covered under your policy. In most cases they too will have to be added after you get married.

The Older Your Car, The Less Coverage You Need

A 10-year-old car needs less coverage than a brand new one – but we often keep the same coverage on our vehicle for its lifespan. Once your car’s market value drops below $5000, I would recommend having the minimum coverage required by law. Paying thousands every year for a car that is only worth a few thousand makes no financial sense.

Travel Insurance Pitfalls

We have all heard the stories of Canadians falling sick while on holiday and getting stuck with a massive medical bill; it happens often enough and can bankrupt a person. It can happen even if you have travel insurance. A small error like failing to declare a previous condition or operation can void your coverage. Before you leave, read your policy very carefully to make sure you don’t miss anything. Call an agent and ask them to review your coverage and whether any info is missing. Keep in mind that If you’re pregnant, most insurance companies will not give you coverage after you’re 7 months along.

Shop Around For The Best Rate

Insurance companies are highly competitive and have the ability to beat each other’s rates. Exercise your right as a consumer and ask for better coverage for less money. Also ask if there is anything you could do to bring down your insurance payments. Sometime adding extra safety equipment to your home, taking a car training course or quitting smoking will bring your costs down.

To sum it up, yes, you should have insurance – it’s a necessary expense that most Canadians will need to rely on. But that doesn’t mean you need to be a victim to higher insurance premiums that may end up costing you more than the event you’re protecting yourself from would. Also build you own “insurance” by having an emergency reserve of money to cover at least 3 month’s worth of expenses. This will give you peace of mind that you are protected  and ready for any  situation – and that’s invaluable.

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