Insurance coverage can be confusing and overwhelming. But, to ensure you’ve got the right coverage for your needs it’s VERY important that you understand your insurance.
It’s so important that you understand your insurance and the coverage you’ve purchased, to ensure that, in challenging times, you have the peace of mind knowing you’re adequately covered.
An unexpected cold snap of weather can freeze and burst your water pipes. A car collision. A wind storm brings a tree down on to your roof. Your business is damaged by vandals. Life can be disrupted so easily, and so significantly, after an accident or loss. And, though you can’t anticipate the unexpected, you can certainly be prepared to ensure that you’re not attempting to manage through it on your own – that’s where insurance steps in.
Being adequately insured provides the protection you need from paying huge amounts in the face of the unexpected – the tree through your roof, a car collision, or nefarious vandals.
When you understand the basic components of insurance, you’re able to make informed decisions regarding the coverage you need to ensure you’re as prepared and protected as possible when it comes to the various unknown circumstances and events that can impact and, in some cases, completely upend our lives.
In the absence of insurance, purchasing a home, driving a vehicle, or traveling abroad would simply pose too great a risk.
What exactly is insurance and how does it help?
When you purchase insurance those funds are added to a premium pool along with the many others who’ve also purchased. It’s those funds that are drawn upon to help if you or another contributor are the victims of unexpected hardship due to losses from a motor vehicle accident, home fire or damage, or business interruption in that calendar year.
Any payouts for these losses are referred to as ‘claims’. And it is required by law that insurers have sufficient funds to accommodate and cover all claims.
Why MUST I have insurance?
Without insurance, buying a home, driving a vehicle, traveling out of the province, or starting a business would pose an unaffordable risk. In the event of losses, mishaps, or accidents you would be left to pay out of pocket – often thousands of dollars or much, much more.
What will my insurance policy cover?
In all cases, your insurance only pays for the insured losses described in your insurance coverage contract. Take the time to review – and understand! – your policy. If you have any questions at all, be sure to talk to your insurance representative.
It isn’t just about what’s covered in your policy. Equally important is that for which isn’t covered. Talk to your agent and be clear about both aspects of your policy.
Insurance isn’t going to cover every problem you may face, and it’s not intended to. For example, your home insurance policy will not cover the regular home maintenance you perform.
Typically insurance is intended – and priced – to help you better manage the financial consequences and impacts of unpredictable and unexpected occurrences that are accidental and sudden.
If, for instance, your home sits on a floodplain close to a river, the seasonal flooding of your property in the spring is considered neither accidental nor sudden; it is an inevitability and, therefore, unable to be insured.
It’s important that you speak to your insurance representative about any potential inevitabilities as well as any other questions or details regarding your insurance policy to thoroughly understand your coverage.
Why do I pay for insurance yearly?
With only a very few exceptions, an insurance policy is purchased as an annual contract. All premium pools operate for a period one year at a time. The insurance company employs a formula to predict how much money they will need to pay the coming year’s claims.
After one year, the entire contract renews and your premiums will not carry over or build up over time.
The calculation of insurance premiums is rather complicated and involves a process that requires a risk assessment that draws on actuarial science.
Premiums are calculated based upon informed predictions about how much money may be needed to pay future claims. Insurers gather the information that they understand from experience will help them set fair yet accurate premium prices.
There are 4 steps in the insurance process
- Your insurance company estimates an annual cost, or premium, to accept the risk of covering your vehicle, home, vehicle, business, or travels.
- On an annual, or monthly, basis you will pay a premium to your insurance provider for assuming the risk on your behalf.
- Your insurance company places all premiums into one large pool, contractually operating on an annual basis.
- Your insurance company uses the pool to pay for the losses of those who make claims that year.
There is no question that our lives and all of the activities in which we enjoy and participate bring inherent risk. Fortunately, insurance provides us the preparation, protection, and peace of mind to take it all on, enjoy, and live to the fullest.