Written by Jan Oakes
Insurance is a vital part of our lives, protecting us from financial hardships when unforeseen events occur. I’m sure everyone has heard an insurance story from a neighbour, friend, or family member about some sort of quirk where certain factors can increase or decrease your insurance premiums or a unique situation where a claim would be denied or unexpectedly paid out. This has led to many myths surrounding insurance that can cause confusion and misguidance. In this blog, I will discuss some common insurance myths and clarify them to help you make informed decisions when purchasing insurance.
Myth #1: Insurance is a waste of money
Many people believe that paying for insurance is a waste of money as they may never use it. However, the purpose of insurance is to protect you from the financial burden of unexpected events, such as a car accident, a house fire, or a health issue. Without insurance, you could face significant costs by paying out of pocket that could potentially ruin your financial stability. For example, you could pay $1200/year to insure a home worth $750,000 on a home insurance policy or pay $750,000 to rebuild your home should it burn down due to a fire. So, insurance is not a waste of money, but rather a smart investment that protects your finances and your future.
Myth #2: All insurance policies are the same
Another common misconception is that all insurance policies are the same. However, each policy is unique and tailored to the individual’s needs and circumstances. For example, auto insurance policies can vary based on the type of car, the age and driving history of the driver, and the level of coverage needed. Regarding property insurance, owning a home is different renting a condo, and thus your insurance policy will reflect these differences. Commercial/business policies vary the most as every business has its own unique insurance needs as every business is different and has varying risk factors to consider. It’s essential to work with an experienced insurance broker who can help you find a policy that fits your specific needs and budget.
Myth #3: Insurance covers everything
While insurance policies can cover a wide range of events, they don’t cover everything. For example, most homeowners’ policies do not cover floods or earthquakes, and auto insurance policies do not cover wear and tear or routine maintenance. It’s crucial to read your policy carefully to understand what is covered and what is not. If you have any doubts, ask your insurance broker for clarification.
Myth #4: My insurance rates will go up if I file a claim
Some people avoid filing a claim because they believe it will cause their insurance rates to increase. While it’s true that filing a claim can result in higher premiums, it’s not always the case. In some cases, the insurance company may determine that the claim was not your fault and may not raise your rates. Additionally, some policies include accident forgiveness, which means your rates won’t go up after your first at-fault accident. A general tip for claims, is that insurance is meant for significant or catastrophic losses. If you home burns down, then obviously a claim is put in. If you have a wallet stolen and the total contents lost are $1200 but your deductible is $1000, then likely not a good idea to put in a claim as you would only receive $200 for this claim and be subject to a possible price increase that would negate future savings.
Myth #5: I don’t need life insurance because I’m young and healthy
Many young people believe they don’t need life insurance because they are healthy and have many years ahead of them. However, this is precisely the time when you should purchase as life insurance is very inexpensive for young people. Also consider that the need for life insurance is the highest when people are young… if a person in their 20’s-40’s passes away prematurely, the financial consequences would be catastrophic to their family. These people typically have mortgages, young children that are dependent on them and many future income earning years to consider. Life insurance can provide financial security for you and your loved ones in the worst case scenario.
Myth #6 The colour of your car affects insurance premiums.
In fact, the colour of your car has no bearing in the rate the insurance companies charge. Cars insurance premiums are calculated by many things including make & model, postal code, usage, coverage, claims & tickets for the drivers, etc… however the colour of the car is not a risk factor for insurance companies.
Myth # 7-Where I live will impact my insurance rates.
This is true. Insurance companies do factor where you live as a major risk factor for home and automobile policies. I’m sure anyone who as driven in both Toronto and in Milverton can see the differences in risk factors… many more cars on the road= greater risk for accidents & claims. Home insurance is similar when you consider that a home in a low-lying area will be at a greater risk of water claims than a home in an elevated area.
Myth #8- If another licensed individual drives my car and gets into an accident their car insurance will cover the cost of repairs to my vehicle.
This is false. In Ontario if you lend your car to a licensed driver and they get into an accident whether an at-fault accident or not-at-fault accident, your insurance company will pay for loss or damages from that loss. However, if this licensed driver does not have their own insurance policy, then the accident can be “rated” to the owner of the vehicle and not the person driving at the time.
In conclusion, understanding insurance myths and realities is essential in making informed decisions about your insurance coverage. Work with an experienced insurance broker who can help you find the right policy that fits your needs and budget. Remember, insurance is not a waste of money but a smart investment that can protect your financial stability and your future.
Call Zehr Insurance brokers and see if we can help you with your insurance needs.