Insurance is an agreement between two parties: the insurer and the insured. An insurance company protects the insured from financial losses incurred under certain conditions. There are different types of insurance policies and benefits. Knowing which and how much coverage is pertinent to you and your circumstances is a vital part of a person’s personal financial plan.
How being insured properly is important to your financial health
Proper insurance has many benefits for your financial and mental health. It can be scary to think that literally one moment in time, like a car accident, can change your life forever. In extension, it can change your loved ones’ lives as well. Having proper insurance coverage helps you navigate through a life-changing event with as much ease as possible. Undeniably, knowing you are protected should something occur goes a long way to relieving stress and improving mental health.
Should something happen, being insured helps in a variety of ways. Insurance helps with
- Replacing or repairing damaged property
- Recouping loss of income
- Providing temporary transportation or living arrangements
- Maintaining mortgage payments
- Funding any accessibility improvement requirements
- Childcare costs
- Health care expenses
- Preserving a business
- Paying off debts
Types of insurance
There are many types of insurance protections.
Home insurance protects your home and belongings from theft, damage or loss. It can also help cover living expenses if you can’t stay in your home.
Home insurance may cover:
- Repairs to any damage to your home
- Theft, damage, or loss of personal possessions
- Damage caused accidentally to somebody else’s property
- Items taken during a vehicle break-in
- Harm or injury to visitors on your property
Examples of when house insurance may protect you:
- Someone trips and falls entering your home and makes a claim against you
- A fire breaks out in your house that causes damage to your neighbour’s property
The minimum level of car insurance required in Canada depends on the province. It’s best to familiarize yourself with the requirements in your area. You can purchase car insurance even if you don’t plan to drive your car. However, you will need to have a valid driver’s license to get car insurance.
Third-Party Liability Coverage
Third-party liability insurance is the most basic type of car insurance. It protects you if someone gets hurt or killed in an at-fault accident caused by you.
At a minimum, it should cover the medical expenses of anyone who gets hurt in an accident. To drive in Canada, you are required to have third-party liability coverage.
Collision coverage is the second type of insurance. It protects you from third-party liabilities or if you hit other objects, like an embankment. It also protects you in the event of an accident with an uninsured driver. Collision coverage usually costs more than basic third-party liability.
Comprehensive coverage is the third type of car insurance. It offers the widest range of protection including, theft and floods, as well as medical and collision-related costs. This level of protection comes with a cost. Generally, comprehensive coverage is the most expensive.
Life insurance provides financial assistance for your loved ones in the event of your passing.
A life insurance policy pays a tax-free lump sum when the person covered passes away. This can help with:
- Replacing lost income
- Providing for children or dependents
- Funeral expenses
- Paying off debt
Health insurance is a critical element of financial health. If you suffer a medical ailment or emergency health issue, insurance will help cover the cost of various health services and expenses including; medication, treatments, and hospitalization.
Some health care plans include dental benefits. Dental benefits help cover the cost of dental services, however, what services are covered varies quite a bit depending on the policy.
Critical illness insurance supplements health insurance should you suffer from certain major illnesses. While coverage varies depending on the policy, most commonly it covers heart attacks, stroke, and cancer.
Commercial, or business Insurance, protects business owners from financial losses. Business insurance can protect you from risks like:
- Property damage
- Professional errors
Avoiding being over or underinsured
Many people don’t realize they need more life insurance coverage than just enough to pay off their mortgage. Additionally, you should also consider how much your spouse or partner would need to:
- pay bills
- support children
- pay for college tuition
- cover any other long-term needs
While you don’t want to be underinsured, It’s best to avoid being overinsured as well. Only purchase what you need. You can save a lot of money by getting rid of unnecessary insurance riders and policies. You can use that money to invest elsewhere.
Tips for maintaining good coverage
Whether you get a new car, get married, or have a baby, it’s important to review your insurance. Yes, these busy times can make it difficult to find the time to review your coverage, but it’s well worth making the time. You’ll be grateful for it should something happen.
Review your coverage regularly
Make sure to regularly review your policy. It is best to do a thorough review every year to make sure your coverage is sufficient.
Review whenever there’s a life change event
Whenever major life changes happen within your family it can impact your insurance. It is important to take time to ensure your coverage is updated to reflect life events like marriage, divorce, having or adopting a baby, a new driver in the house, or a death in the family.
Insurance helps you avoid money problems after an unexpected event. It provides protection against loss and damages. It offers peace of mind. Insurance companies vary widely in what and how much they cover. Do your research to make sure you find the best insurance company and coverage for your needs.
Struggling financially because of an unexpected event in your life? Our expert credit counsellors can help. Call today to find out how.