The 10 most misunderstood insurance terms
Feb 2, 2016 3 minute read
We understand that navigating the world of insurance can be complicated. That’s why at BrokerLink, we’re here to act as your trusted insurance guide and to help you understand and feel confident in your coverage.
To make sure that everything you care about is covered, we have defined the 10 most commonly misunderstood insurance terms that you should know.
1. Broker: As your personal insurance expert, an insurance broker works for you. Using their extensive background knowledge and experience, they can help you determine your insurance needs, examine any risk and shop around for the best coverage and price. To learn more about the benefits of an insurance broker click here.
2. Insurer: The insurer is the insurance company that is responsible for providing the actual insurance coverage being offered. They determine insurance premiums and provide a range of deductible levels for your coverage needs. They also determine the policy coverages and exclusions, as well as handle the claims process.
3. Premium: is the amount you pay monthly or annually for insurance protection. There are several factors that determine your insurance premium including location, claims history, driving habits, age, insurance experience, employment and the characteristics of your home.
4. Deductible: is the amount that you, the policyholder, are required to pay out of your own pocket before your insurer will cover the remaining costs to pay for a claim. In some cases, you can increase your deductible to save money on your premiums. Different policies and coverages have different deductibles, so always check with your BrokerLink broker if you are unsure.
5. Sublimit: Your homeowners, condo or tenants insurance policy will have limits on how much reimbursement you will receive from the insurance company if you have a claim. Different claims have different limits. For instance, the maximum payout you would receive for sewer backup damage will differ from the amount received for a damaged roof due to a hailstorm. Your specific sublimit will be detailed in your policy documents. To confirm how much coverage is available, contact your BrokerLink broker.
6. Actual Cash Value: is the cost of replacing damaged or destroyed property, while factoring in depreciation and obsolescence. For example, a ten year old couch wouldn’t be replaced at current full value due to the decade of depreciation. Other items, such as scheduled antiques or artwork, may actually increase in value over time. To receive full coverage for these items, they may need to be listed specifically in your policy. Speak to your broker about special limits within some policies that offer coverage for jewellery and antiques.
7. Replacement Cost: Refers to the cost to replace damaged or destroyed property with an item of similar quality without considering depreciation. Using the example of the ten-year-old couch, a customer with replacement cost protection would be reimbursed the cost of purchasing a brand new couch.
8. Accident Benefits & Liability Coverage: Is mandatory coverage for all vehicle owners in Canada. Accident Benefits and liability insurance provides coverage for any incident involving your vehicle while it is being driven. This includes coverage for medical treatment, income replacement and other benefits to help if you are injured in an accident, as well as if someone takes legal action against you as a result of an accident. It also provides coverage to any property damage caused by the vehicle.
9. Comprehensive Coverage: Comprehensive car insurance coverage provides additional protection for your vehicle against damage including break-ins, flood and water damage, fire, vandalism and falling objects. Although it is not required by law, comprehensive coverage may be a good idea depending on what kind of vehicle you drive. If you are driving a leased or financed car, you may be required to purchase this coverage to protect the car owner or lender’s investment.
10. Collision Coverage: This optional coverage pays for damage to your vehicle caused by a collision with another vehicle, object (such as a tree, guard rail or debris) or by an upset (roll overs). If you are driving a leased or financed vehicle, you may be required to purchase this coverage to protect the car owner or lender’s investment.
Did you know that at BrokerLink, we offer a free policy review for customers and prospective customers at any time? If you want to review your policy or have questions about your insurance coverage, our brokers can help guide you through the insurance process and ensure you have the coverage you need to protect the things you love.