Insurance 101: A Beginner's Guide
There are few purchases and decisions that are as stressful and important as choosing your home and auto insurance. At Pinch, we have made the process simple to understand and efficient, while also providing the best rates available. First timers in the insurance world often have questions about the terminology, so let’s dive into the basics! We also believe it’s important for our users to fully understand what they’re purchasing and how it works.
Auto insurance is required in all provinces in Canada, with some provinces keeping the market controlled by the provincial government. These places include British Columbia, Saskatchewan, Manitoba, and Quebec.
Home insurance is not required by the government in Canada, but most mortgage providers will make it a requirement of your mortgage. If you own your home outright, it makes sense to keep it insured since it was the largest purchase in your life, why not protect it? Home insurance can cover the structure of your home, its contents, as well as limited personal liability, such as a visitor slipping and falling in your home.
Insurance providers are similar to cable and internet providers, they compete for your business using price (premium), coverage, and service.
What is a Premium?
Your premium is the amount you must pay to the insurance provider for your coverage. Insurance companies take your premium and the premiums of other customers, and place them into a premium pool. When you or anyone else makes a claim, the funds are paid out from this premium pool. The less likely you are to draw from the pool, the lower your premium will be.
What is a Deductible?
A deductible is the amount that you are required to pay for each loss or settlement before receiving any additional payment from the insurance provider. For example, if you have a $500 deductible for auto insurance and you get in a collision that costs $2,000, you will first pay the $500 and then the insurance provider will pay the remaining $1,500. The lower the deductible, the higher the premium and the higher the deductible, the lower the premium.
Tips for lowering your premium:
In addition to going with a higher deductible, here are a few keys to keep your premiums down:
Shop around. Don’t deal with an insurance agent who only sells insurance for one company. Using Pinch or an insurance broker will allow you to compare offers from different providers and get them competing for your business.
Bundle! Just like your cell phone, cable and internet, you will get a better deal if you combine your home, auto, recreational vehicle, and vacation property under the same provider.
Pay premiums annually. This can help you save on potential service and interest charges.
Only insure what it costs to rebuild. Too many Canadians include the market price of the land their home is built on in the insured value, but your insurance will only cover the costs of rebuilding the structure.
We hope that these tips have helped you learn a little more about insurance in Canada and be sure to stay tuned for even more information in future blog posts! If you have any questions about insurance, or would like to learn more about it, please reach out to us on Facebook, Twitter, or Instagram.