Life is full of surprises, and sometimes these surprises can end up costing a lot of money. Think of insurance as a tool to help minimize large, unexpected expenses.
This protection does cost you money, but since it is a fixed, pre-determined, amount it can be budgeted for. There are many types of insurance like: as auto, home, life, and health, but they all serve the same purpose – to provide you with the peace of mind that you have a plan in place if the unexpected happens.
Let’s go over some key terms by looking at a scenario. You buy an auto insurance policy from an insurance company that costs two thousand dollars for a year of coverage. You are now considered the policyholder and the insurance company is the issuer.
The cost of the policy is also called the premium. The issuing company uses personal information like age, driving history, claims history, and amount of coverage requested to help determine the premium.
they will charge you for insuring your specific vehicle. The length of the policy is also known as the term. Months later you are in an accident and it will cost seven thousand dollars to repair your car.
Luckily, you purchased auto insurance and the accident is covered by your policy. You report the accident to ABC Company in what’s called a claim, asking them to help pay for the repairs.
The ABC Company issues you a cheque for 65 hundred dollars; this is called the benefit paid. You are required to cover the remaining 500 dollars out of pocket as the deductible.
The amount of the deductible and the maximum benefit the issuer pays was already decided when the policy was purchased. Because you had insurance, the accident cost you 25 hundred dollars instead of 7,000.
That’s2,000-dollars it cost to buy the policy, plus the 500-dollar deductible. As you can see, having insurance might save you a lot of money. But what if you didn’t file a claim during the term of your policy?
In that case, the issuing company keeps all premiums paid…whether you filed a claim or not. Because insurance can be expensive, let’s look at how you may keep costs down Don’t pay for coverage you don’t need.
Do you wear glasses, or does your family have a history of bad eyesight? If not, then paying for additional health coverage that covers eyewear might be a waste. Because the cost of insurance changes depending on what’s covered, try to avoid paying for coverage you don’t need.
And if your company, spouse, or common-law partner is paying for insurance, ensure that you are not paying twice for the same coverage. Explore opportunities for discounts.
Most companies that offer multiple types of insurance give you a discount for purchasing more than one type of insurance with them. This is called bundling.
Some companies may provide you with a discount if it helps lower the chance of a claim. For example, an auto insurance policy could include winter tires, an alarm system, or driver behavior monitoring.
Companies may also reward clients that have a history of not filing claims. Coordinate benefits from multiple policies. If you receive insurance coverage from more than one policy, file claims in a way that provides you the most benefit.
For example, you have dental coverage through your company’s benefits, as well as your partner’s company. Each policy allows you one free dental check-up every two years.
By coordinating your benefits between the two policies, you can get a free dental check-up every year instead. One year claiming the check-up through your company’s policy, the next through your partner’s.
Lastly, shop around. There are many different insurance companies out there all competing for your business. Get quotes from multiple companies and see which one best meets your needs and budget.
Once you have purchased an insurance policy, you still have work to do though. Events like starting a new job, buying a home, having a child, or getting married can change your situation drastically.
It makes sense to use these events as opportunities to review your insurance needs and budget, then make changes if needed. These types of events don’t happen too often. So, when your policy is up for renewal, take some time to see if your policy still fits.
If it doesn’t, make some changes, even if it means looking for a new insurance company. Remember, insurance is a tool. And just like buying a tool – shop around for the best price and make sure it gets the job done by meeting your personal needs.