Money & Career

How to pick insurance

Reading policies can be an exercise in being confused, blurry-eyed and bored. Here's what you really need to know

1. HEALTH: You can take it with you
Most Canadian residents are covered through provincial health care (and some of us have benefits at work, too), which is usually all the coverage you need. What these policies don’t always cover are supplementary services such as massage therapy, chiropractic care, wheelchairs, crutches and eye exams.

You may want to take out additional health insurance if you’re travelling out of the country, particularly to the U.S., where the cost of medical services can bankrupt you. Most travel-insurance policies cost a pittance – an average plan will set you back from $2 to $7 a day for a trip to the States – and if you need medical care outside of Canada, your province may pay for only some of your costs. But, as with all types of insurance, you should always read the fine print of your policy to know for certain what your coverage is.

2. LIFE: It can save your family
There are three major types of life-insurance policies available: term, whole life and universal. Most financial advisers will suggest the more budget-friendly term insurance. That type of policy is good only for a specific period of time and is very useful for covering temporary needs, such as your mortgage; if, for instance, you die before your house is paid off, the policy could rescue your spouse from foreclosure or a forced sale.

Insurance agents will suggest that you sign up for between five and seven times your current net income, but you should also consider what stage you are at in life since your insurance needs will change as your family or business situation changes. If you’re single and have no dependants, you likely only need a policy to cover your funeral expenses, which currently cost an average of $7,600 in Canada. But if you have children, you’ll want to have enough money left to help feed, clothe and shelter them, and you might also want to consider leaving them funds to help with their post-secondary schooling.

If you’re currently in the market for life insurance, think about getting critical-illness insurance, too. These policies, which vary in cost depending on your age and any medical conditions, act as a safety net in case you contract a serious condition, such as cancer, a heart attack or stroke, and can’t do the same work you did before your illness. Some agents call it the most necessary yet underutilized form of insurance.

3. HOME: It’s where your stuff is
Canadian households spent an average of $413 on home insurance in 2006. Standard policies typically cover fire, theft and vandalism, but some policies omit damage caused by pets and certain types of flooding. Often home insurance will reimburse you for only a portion of what you paid for your belongings; some items, such as books and business computers, have firm maximum limits; a more expensive policy will extend your coverage on other goods to 100 percent. And if you have a child who is a university student living away from home, or an elderly parent in a health-care facility, your policy may cover their possessions as well.

If you do have to make a claim, you can make the process quicker and easier by keeping a home inventory, says Mary Lou O’Reilly, a vice-president at the Insurance Bureau of Canada (IBC). “You can use digital photos to keep a record of your stuff, put it on a disc and then store it somewhere other than in your home,” she says. The IBC has free software to help create a home inventory, available at www.ibc.ca.

Tenants are often under the false impression that their landlord’s policy covers them, too. But if a renter causes a fire in a basement apartment, the owner’s insurance will not cover the tenant’s possessions. “If the tenant was negligent and caused the fire, the owner’s insurance company may even have the right to take the tenant to court to recover what they paid out,” O’Reilly says. Tenants may wish to purchase policies that cover liability and personal belongings and even additional living expenses if they need to move out while their home is being repaired.

4. AUTOMOBILE: Yield to it
All drivers need car insurance by law, but take the time to shop around for the best rates before signing on with a company, which will consider everything from the number of drivers to the car’s make before offering you a policy. If you already have home insurance, you might be eligible for a discount if you add on your auto insurance with the same company. Besides your basic package, you can sign up for features such as accident forgiveness and vehicle rentals for more protection. Just don’t “forget” to report if you modify your car, you add or remove drivers from the policy, or your teen gets her licence. And never make a false claim, because insurance companies are determined to catch fraudsters, who are costing them a fortune. The IBC estimates false insurance claims cost Canadians more than $3 billion each year, and more than one-third of all accident benefit claims are at least partly fraudulent, according to the Canadian Coalition Against Insurance Fraud.