Understanding Insurance

How many of you get excited at the prospect of reviewing your insurance when it's coming up for renewal? If I had to guess, I would say the majority of you aren't jumping for joy when that annual date approaches.

Aside from wondering how much the premium will be when you open that envelope, you probably don't even consider spending time reviewing the policy documents that are sent to you. If this describes you, believe me you aren't alone. Before I became an insurance broker, I also fell in to that category. Why spend time reviewing reams of paperwork when you have a broker that will do that for you?

Well the answer is pretty simple, it's YOUR coverage, it's unique to you and addresses your needs alone. Every policy is not the same, and every person does not require the same coverage. You need to understand what your needs are before you can be certain you are being covered appropriately.

Car Insurance

With regard to your car insurance - there are some major things to think about when you decide on what coverage you require. First there's the liability limit. This is the amount that you could potentially have to pay if you were in an accident and caused injury to another person. While the minimum limit is $200,000 in Ontario, most policies are not written for less than $1,000,000. Most settlements are rarely lower than $500,000 and can climb to $1,000,000 very quickly depending on the extent of the injury.

There are also 2 types of physical damage coverage, which will cover the damage to your vehicle if you are in an accident. Direct Compensation, which will respond to repair or replace your vehicle if you are not at fault for an accident, and Collision coverage which will respond if you are at fault for the accident. Direct Compensation is automatically included on the policy however you do have a choice to exclude collision coverage if you so choose. The only time you would do this is if the value of the car you have is low, and you are willing to pay for any damage or replacement yourself should you be involved in an at fault accident.

Comprehensive coverage is also an optional coverage, and this covers the vehicle for Fire, Theft and Vandalism as well as things like stone chips or cracks in the glass. Again, whether you choose to purchase this coverage or not is entirely up to you and your financial situation. If you can afford to replace your car if it's stolen, then you may choose to exclude this coverage.

A general rule of thumb when deciding whether you should have Collision and Comprehensive coverage is to go by the age and value of the vehicle. If the car is over 10 years old, chances are the replacement value is likely fairly low, so do your homework, find out what the value of your car is today, and once you know that number, decide if this is a value you are comfortable with paying yourself in the event of an accident. If the answer is yes, then you may want to save the additional premium and exclude the physical damage coverage.

While this blog outlines just a few of the main coverages that the Ontario Auto Policy provides, there are many more endorsements (additional coverages) and deductibles (the amount you pay if you have an accident) that are available.

It's important to educate yourself a bit, and be sure that you are not just looking at that bottom line - the premium. Call your insurance provider and take 10 minutes to review your policy with them. You'll be happy you did. After all, insurance is all about peace of mind, and you have too many other things in your life to worry about, like getting your son to his soccer game on time, or your daughter to her ballet class, then to spend time stressing about your insurance!