How Much Do You Know About Your Insurance?

When I was presented with the challenge of answering some questions about insurance, I was pretty confident.

Having worked for an insurance company throughout university, I figured I would know a lot. I processed thousands of new homeowner policies, and typed countless descriptions for scheduled items. While the motorboats and furs didn’t interest me much, it’s always helpful for a 20 year old girl to be fluent in the language used to describe the 4 C’s of diamonds: carats, cut, clarity and colour!

However, once the questions were posed, I was surprised by how unsure I was of my responses. Check out the questions below, with my answers and the actual truths about insurance from the Insurance Bureau of Canada.
Question 1: Are Ontarians paying more for auto-insurance, but getting less coverage? 

My Answer: Well, I know my rates continue to rise, but I honestly don’t know about the coverage. I am going on the naive assumption that my coverage remains the same.

Real Answer:  Well, I was close! According to the Insurance Bureau of Canada, auto insurance premiums have gone up, and coverage has changed. The reason is the increasing cost of accident benefit payouts (would you believe it rose 180% between 2004 and 2010?) mainly because the costs of assessing, not treating, an injury, rose 235% during the same period. During the same six years, premiums rose, on average, only 5.6%. Yet despite the huge increase in accident benefit injury claims, Ontario roads are safer with a 12% reduction in severe collisions that require hospitalization.

I wasn’t surprised to learn that a lot of this claims money is going to many (opportunistic – my word) medical rehabilitation clinics, lawyers and paralegals, tow truck operators and body shops that make their money from Ontario’s generous auto insurance system. They believe that if the money is there, they should use it regardless of specific needs.

To stop insurance rates from increasing, reforms were made to the cap on minor injuries and the definition of catastrophic impairment. So yes, rates have gone up, with coverage adjusted.

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Question 2: Is the money I pay for insurance set aside just for me to cover any claims I may have in the future? 

My Answer: No, as I assume it all goes into one pot (where I imagine it is invested until any policyholder needs it for a claim).

Real Answer:  I was right on – there is no such insurance “account” building up with your name on it. But, don’t worry, you’re still covered. (Considering I have never made a homeowner claim, and perhaps one or two small auto claims, I kind of wish that there was a pot building up…and that perhaps I could get some sort of rebate for not using it!)

Every year, your insurance dollars go into a pool along with the dollars from other policyholders. Out of that pool, insurers pay the claims of the few people who suffer an insured loss – an auto collision, a fire, wind damage — in that year.

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Question 3: Is flood damage caused by a spring thaw covered by your home insurance?

My Answer: I am guessing no…but maybe you can pay extra and choose to have that protection? I know when there was a huge flood in our area several years ago, people were able to make claims, but that’s different from a spring thaw flood. I’m torn about this one.

Real Answer: Generally, overland flooding is not covered. This kind of flooding can be caused by a spring thaw. Here water overflowing from rivers, streams or other bodies of water flows onto dry land and causes damage to homes.

Flood coverage isn’t available because only a small percentage of the population is at risk. Since the purpose of insurance is to spread risk among many policyholders, this type of insurance for those at risk would be unaffordable.

However, water-related damage and insurance claims are rising across Canada due to the increase in severe weather. Damage from heavy rainfalls can be extensive to your home and result in the loss of irreplaceable keepsakes. (This is what happened in our area – record rainfalls led to a declared emergency, and homeowners were covered.)

The IBC stresses that it’s more important than ever for you to learn how you can protect your property and stay dry when the heavy rains come.

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Considering the amount of money we pay for insurance, it’s surprising how little many of us know about our coverage. I skim the paperwork when it arrives in the mail, but I also go on faith that information is accurate, and that we would be informed about any important changes. I think I’ll be a bit more thorough now.

I’d also like to add, as a potential money-saving tidbit, that before your insurance renews each year you should shop around for the best deal (making sure you’re comparing the same coverage) and consider contacting your current provider to see if there are any ways to save. Perhaps the distance of your commute has changed, or you’ve upgraded your home security system…there are many ways to get discounts, but you won’t know unless you try!

For more insurance information and other myths debunked, please visit http://getintheknow.ibc.ca/Insurance-Explained.aspx

Disclosure: Although this post has generously been sponsored by the Insurance Bureau of Canada , the opinions and language are all my own, and in no way do they reflect the Insurance Bureau of Canada .