Insurance is a contract between you and an insurance company.
When you buy insurance, you pay an amount of money every month or every year.The insurance company pays you if an accident happens that lowers the value of the insured item (a loss).
Insurance works by collecting small amounts of money from many people and paying the few people who have a loss.The amount that the insurance company will pay is in the contract.
People use insurance to protect themselves against big losses, like a fire or a car accident.
You must have some kinds of insurance (like car insurance) by law.
You can choose to have other kinds of insurance.Many people have insurance to protect themselves and their families from big losses.
Types of Insurance
Propertyinsurance protects you against a loss of “things,” such as cars and homes.
For example, a fire damages your home.The insurance company pays to repair your home and to replace things that were damaged by the fire, such as furniture and clothes.
Property insurance also gives liabilityinsurance, which pays people who get hurt or have their property damaged when youare responsible for an accident.
For example, someone falls on the ice and gets hurt because you didn’t shovel the snow out of the way.The insurance company may pay for special nursing care to help the person get better and for the person’s lost wages.
Lifeinsurance and disability insurance protect you against lost income if the insured person dies or becomes disabled.
Health insurance pays for some expenses that the province’s health insurance doesn’t cover.
Usually, you fill out an application for insurance.
You get a policy or contract (a written agreement) from the insurance company.
You are the policyholder or the insured.
You are insured against perils (things that cause loss or damage, like a fire or theft).Some insurance policies cover all perils, and some don’t.
Exclusions are things that your insurance policy does not cover.Make sure you know about all the exclusions so you don’t get a surprise.
If you add coverage for something extra on the policy, it is a called a rider.
For example, you can get a rider to your home insurance policy for extra insurance for valuable jewellery.
Paying for Insurance
The amount you pay for the insurance is the premium.
The insurance company decides on the premium using the information in your application.
For life and health insurance, the application will ask questions about your health.
You may need to have a doctor or nurse examine you or have your doctor give the insurance company some information.
The insurance company will decide on your premium depending on your age, gender, whether you smoke, and other information.
For property insurance, the application will ask you to describe the property and tell how you use it.
For example, if you drive your car to work every day, you will probably pay a higher premium than if you only use it on evenings and weekends.
Making a Claim
If you have a loss, you make a claim to the insurance company.
You need to show proof of the loss, such as receipts for health care expenses or a death certificate for a life insurance claim.
For property insurance, an adjuster from the insurance company will decide on the value of the damage to the property.
For property and health insurance, you pay for part of the loss – the deductible.The amount of the deductible is in your policy.
For example, if your claim is for $3,500 and your deductible is $200, the insurance company will pay you $3,300.
Direct sellers sell insurance for one company by telephone or over the internet.
Brokers sell insurance for more than one company.
An agent or broker who sells life and health insurance may also sell savings and investment plans, and is often called an advisor.
Group plans can be for many kinds of groups, like people who work together or people who went to the same university.
Group plans are usually less expensive than individual plans.
You get group insurance with your employer or with an association.
But when you are not a member of the group any more (such as when you leave a job), your group insurance may stop.You may be able to get an individual policy that continues the benefits of your group insurance.
Any person acting as an agent or broker must have a licence to sell insurance in Canada.The licence should be from your province.
Some companies offering insurance (such as payday loan companies or car dealers) may not be licensed.
Ask to see the agent’s or broker’s insurance licence before you buy.
You can check to see if the person has a licence by calling your province’s Superintendent of Insurance or Financial Services.
You may see an ad offering cheap insurance, but it may not be true.
Some people pretend to be insurance agents or brokers.
They tell you that you can have a much lower premium for your insurance.
They ask you for a payment or charge you a fee in cash or by wire transfer.
They may just take the money and not get insurance for you at all.
They may call a real insurance agent and pretend to be you.They may lie about your application to get a lower rate.
If you don’t have valid car insurance and the police stop you or you are in a car accident, you will pay a big fine.
You may have to pay to fix the other car and for medical costs for anyone who got hurt in the accident.
This could be many thousands of dollars.
If an agent or broker fills out an application for you, check to make sure everything is true before you sign it.
Don’t sign a blank form for the agent or broker to fill in later.
If anything is not true on your application, the insurance company can refuse to pay any benefits if you make a claim.
Almost everyone in Canada has basic government health insurance.
You can buy extra health insurance for the things that government health insurance does not cover, like buying glasses and prescription medicine.
A few companies sell health insurance for visitors to Canada and returning Canadian residents who can’t get basic government health insurance yet.
The insurance is often just for emergency medical treatment.
Extendedhealth plans often cover prescription medicine, ambulance services, and vision care.
Check your policy to see what it covers.
Dental plans usually cover check-ups, cleaning, fillings, and dental x-rays.
Usually health insurance covers the plan member and dependants (spouse or partner and children under 19).Older children may be covered if they are full-time students or if they are disabled.
Usually you pay a deductible every year ($25 or $50 per person).
Some plans have a deductible every time you use a service (such as $5 for every prescription).
Some plans have co-insurance, which means you pay part of the expenses (from 10% up to 50%).
Many plans also have a maximum amount you can claim per year for a kind of service (like glasses).
Some plans don’t cover expenses for a pre-existing condition (a health problem you had before you got the insurance).
Making a Claim
Usually you pay the bill, and then you fill out a form and attach a receipt to make a claim.The insurance company pays you back.
Sometimes the insurance company pays the pharmacy or dentist for your claim, and you only pay the part that is not covered by your insurance.The insurance company gives you a card with your policy information to show at the pharmacy or the dentist.
Usually you get money back quickly from your claim.
Some insurance companies pay by direct deposit and some pay by cheque.
Questions to ask:
·What does the plan cover?What does it not cover?
·Do I need a medical examination?
·How much is the deductible?
·Is there co-insurance?How much do I pay?
·Does it cover expenses for a pre-existing condition?
You may want to buy life insurance to pay for expenses if you die.
Life insurance is important if you have children or other dependants, so that they will have money to live on if you die.
The person who will get the money when you die is thebeneficiary.
There are two kinds of life insurance.
Permanent life insurance covers you for your entire life, until you die.
Term life insurance covers you for a fixed number of years or until you are a certain age (such as 60 or 65).Term insurance is less expensive in the beginning but you will pay higher premiums if you renew the policy after it expires.
Term life insurance is good if you have bigger expenses now and not too much money for insurance (such as if you have a young family).
Make sure that your term life insurance is renewable (you can get a new term at a higher premium without a health examination).
Make sure it is also convertible (you can change it to permanent life insurance later on without a health examination).
Most life insurance policies will let you cancel without a penalty if you change your mind in the first 10 days after you get the written policy.
If you return the policy to the company within 10 days, you will get back any premium you paid.
Questions to ask:
·How long has the company been in business?
·What qualifications does the salesperson have?
·What is guaranteed in the policy (premiums, benefits, riders)?What is not guaranteed?
·What is the difference between the policies you are looking at?
·For term policies, how much will it be to renew in the future?Are renewal rates guaranteed?When does the policy expire?When does any conversion right expire?