INSURANCE AND WHY YOU NEED IT

Insurance is a contract in which the insurer agrees to compensate the insured for specific losses and specific perils. Insurance has many forms and functions but really just one purpose: to provide peace of mind.

Four good reasons to insure
In some cases insurance is mandatory - to obtain a mortgage, for example, or to drive a car. Otherwise, the choice is yours, but it's a wise choice for four main reasons:

1. Reduces worry: With the right type and amount of insurance, you can be protected from the risks to property and person that are inherent in everyday life.
2. Helps to prevent loss: Brokers and insurers work to help prevent loss with information and advice on road safety, theft prevention, fire prevention and fraud reduction.
3. Makes it easier to obtain credit: Lenders may be more willing to extend personal or commercial credit if they know that proper insurance is in place.
4. Frees up capital: Because insurance protects your assets, you do not have to put money aside in case of future losses. This security applies to individuals and businesses.

Three main types of insurance
In addition to life and health insurance, there are three main types of property and casualty insurance in Canada:

1. Automobile insurance in which vehicles and their equipment are covered in cases of accidents and theft
2. Property insurance in which home and business assets and property are protected from perils such as fire, theft and accidental damage
3. Liability insurance, which protects people who are responsible for injuries or damages to third parties

Two key players: your insurer and your broker
Insurance is sold in a number of ways, some of which make it easier for customers to get objective advice and rapid service. Some insurance companies will sell directly to customers through their sales forces or agencies. Brokers, on the other hand, are not tied to any one company but are independent advisors whose best interest is long-term customer satisfaction. As Insurance Shoppers, we can comparison shop across insurance companies to find good rates or special insurance products.

CODE OF CONSUMER RIGHTS AND RESPONSIBILITIES

Insurance companies, along with the brokers and agents who sell home, auto and business insurance, are committed to safeguarding your rights when you shop for insurance and when you submit a claim following a loss. Your rights include the right to be informed fully, to be treated fairly, to timely complaint resolution, and to privacy. These rights are grounded in the contract between you and your insurer and the insurance laws of your province. With rights, however, come responsibilities including, for example, the expectation that you will provide complete and accurate information to your insurer. Your policy outlines other important responsibilities. Insurers, their distribution networks, and governments also have important roles to play in ensuring that your rights are protected.

Right to be informed
You can expect to access clear information about your policy, your coverage, and the claims settlement process. You have the right to an easy-to-understand explanation of how insurance works and how it will meet your needs. You also have a right to know how insurers calculate price based on relevant facts. Under normal circumstances, insurers will advise an insurance customer or the customer's intermediary of changes to, or the cancellation of, a policy at least 30 days prior to the expiration of the policy, if the customer provides information required for determining renewal terms of the policy at least 45 days prior to the expiration of the policy.

You have the right to ask who is providing compensation to your broker or agent for the sale of your insurance. Your broker or agent will provide information detailing for you how he or she is paid, by whom, and in what ways.

Insurance companies will disclose their compensation arrangements with their distribution networks. Brokers and agents are committed to providing information relating to ownership, financing, and other relevant facts.

Responsibility to ask questions and share information
To safeguard your right to purchase appropriate coverage at a competitive price, you should ask questions about your policy so that you understand what it covers and what your obligations are under it. You can access information through brochures and websites, as well as through one-on-one meetings with your broker, agent, or company representative. You have the option to shop the marketplace for the combination of coverage and service levels that best suits your insurance needs. To maintain your protection against loss, you must promptly inform your insurance company or broker or agent of any change in your circumstances. Information required to determine the renewal terms of your policy must be provided at least 45 days prior to the expiration of the policy.

Right to complaint resolution
Insurance companies, their brokers and agents are committed to high standards of customer service. If you have a complaint about the service you have received, you have a right to access your company's complaint resolution process. Your insurer, agent or broker can provide you with information about how you can ensure that your complaint is heard and promptly handled. Disputes involving claims settlement matters may be handled by the independent General Insurance OmbudService, where your complaint may be referred to an independent mediator.

Responsibility to resolve disputes
You should always enter into the dispute resolution process in good faith, provide required information in a timely manner, and remain open to recommendations made by independent observers as part of that process.

Right to professional service
You have the right to deal with insurance professionals who exhibit a high ethical standard, which includes acting with honesty, integrity, fairness and skill. Brokers and agents must exhibit extensive knowledge of the product, its coverage and its limitations in order to best serve you.

Right to privacy
Because it is important for you to disclose any and all information required by an insurer to provide the insurance coverage that best suits you, you have the right to know that your information will be used for the purpose set out in the privacy statement made available to you by your broker, agent or insurance representative. This information will not be disclosed to anyone except as permitted by law. You should know that insurers are subject to Canada's privacy laws.

HOW AND WHEN TO MAKE YOUR CLAIM

How you make your claim is as important as what you claim. The right time to make a claim is immediately or as soon as you are able, but you should also consider whether making a claim at all would be in your best interest.

Alert your broker as soon as practically possible
If there is any danger or ongoing damage occurring, your first priority should be to ensure your safety and limit the damage to your property. At that point, you should take care to act quickly and with the right information.

• Alert your broker and your insurer of an insured loss as soon as your situation permits.
• Keep phone numbers available.
• Alert the police of any theft or break-in.
• Do not alter evidence of the loss, for example, by starting to clean up after a pipe bursts or altering the scene of a break-in. If you absolutely must alter anything, take detailed pictures of the damage first.

Consider whether or not you should make a claim
First thing's first. Should you make a claim? There are some situations in which you shouldn't and we can help you decide.

• Is it covered? Remember that your policy has limits and exclusions that mean some losses are not covered. Property belonging to your employer, for example, is probably not covered. Damage from a fire that was set intentionally might not be covered, and theft of a valuable painting could be beyond your insurance limit. Is it covered? Ask your broker first.
• If the loss is less than the amount of your deductible, then you cannot make a claim.
• If your loss is covered and above the amount of your deductible, you still might not want to make a claim if your premiums will increase as a result. Again, ask your broker for advice.

Work with your broker and the claims adjuster
Once your claim has been made, the insurance company may appoint an adjuster to get a clear picture of the circumstances and extent of the loss. They may assist in securing repairs and can help with arrangements for accommodations. They might also decide to limit the amount of a payment or to not pay at all, depending on the situation.

If you are unsure about the role of your adjuster and the information they are using, be sure to contact your broker who can help bring clarity to the situation.

REDUCING YOUR INSURANCE COSTS

Nobody likes to pay insurance premiums so any chance to control or reduce cost is welcome. Your broker can help you minimize premiums by helping to define your insurance needs and by shopping around for the best policy.

Don't over-insure or underinsure
Underinsure and you might be left carrying the cost of damage, theft or loss of property. Over-insure and you will be paying more than you have to. Your broker can help you find the right balance by examining your assets, your risk profile and your insurance history. We can also alert you to choices that could reduce your insurance costs, such as installing an alarm system in your home.

Set deductible and liability levels right
One way to control your premiums is to set a higher deductible, which means you accept more risk for covering small losses. Insurers tend to have deductibles ranging from $300 to $1000. Ask us to explain the cost implications of different deductibles. If you drive in the U.S., you might want to consider higher liability coverage due to the higher levels of personal injury awards in that country.

Stay claims-free
One of the best ways to minimize premiums and obtain discounts is to avoid making claims. One of the best ways to do this is to reduce the risk factors that drive claims.

For your vehicle:

• Avoid car accidents by driving defensively and never while impaired.
• Install an anti-theft system.
• Never leave valuables in the car.
• Keep your driving record clean.

In your home:

• Consider a home security system.
• Install smoke and carbon monoxide alarms.
• Clear the snow and ice off your walk.
• Install good quality locks on your doors and windows.

These are just a few examples of ways in which lowering the risk can mean lowering the cost to you.

Reduce the effects of fraud
Insurance fraud affects you, and you can help to reduce it.

Insurance fraud drives up premiums for everyone
The insurance industry estimates that 10 to 15 cents of every dollar paid in premiums goes to paying fraudulent claims - totalling more than $1.3 billion each year. This makes insurance fraud second only to the drug trade as a source of illegal profits in North America. Unfortunately, insurers have to pass these costs on to customers in the form of higher premiums. They also have to be more cautious in deciding what to insure, making it more challenging to get certain forms of insurance.

The industry is fighting the problem
Insurers are doing much more than raising premiums to deal with the costs of fraud. A number of industry associations are working together to fight the problem. The Insurance Bureau of Canada, the Canadian Automobile Association, and the Canadian Coalition Against Insurance Fraud are just a few of the groups helping to promote public awareness, better business practices and improved investigative and enforcement techniques.

You can be part of the solution
It's easy to sit back and say, "There's nothing I can do to stop fraud." But there is something you can do.

Insurance fraud is often the result of fairly routine manipulations of the system: a tow truck driver who recommends a garage and gets a commission for doing so; a service provider who bumps up a charge because they know the insurer is paying; or a paralegal who asks for a percentage of an insurance award. These may seem harmless to you, but they are part of the web of fraud schemes that are costing you money.

When you see fraudulent activity, challenge the service provider directly or report the behaviour to the police.