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-totaling 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.
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 this 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.
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.
Insurance has many forms and functions but really just one purpose – to provide peace-of-mind.
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:
In addition to life and health insurance, there are three main types of property and casualty insurance in Canada:
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. Brokers can comparison shop across insurance companies to find good rates or special insurance products and assist in assessing your risk.
Your broker can tell you more about the basics of insurance in order to make sure your needs are covered.
Your broker works for you, not the insurance company. They are at your side when you buy or upgrade your insurance or if you have to make a claim.
Insurance brokers are business people whose success rests on your satisfaction with your coverage, price and service. It’s in their interest to understand your needs and negotiate on your behalf for competitive premiums even if it means approaching several companies to find the right solution. Because your broker doesn’t work for the insurance company, he or she can also assist you with objective advice should you have to make a claim.
The insurance industry has become more complex with its own language of terms, legal issues and subtle details. You need a knowledgeable expert at every stage of the process to interpret all rules and what they mean for you. Your broker’s advice can also be invaluable, as your insurance needs change and your requirements become more complex.
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.
If there is any danger or ongoing damage occurring, your first priority should be to insure your safety and limit the damage to your property. At that point, you should take care to act quickly and with the right information.
First things first. Should you make a claim? There are some situations in which you shouldn’t and your broker can help you decide.
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.
Your broker can help you with every step of the claims process.
Brokers can help find ways to control your premiums and still get the coverage you need.
No one 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.
Under-insure 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. They can also alert you to choices that could reduce your insurance costs such as installing an alarm system in your home.
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 $1,000. Ask your broker 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.
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.
These are just a few examples of ways in which lowering the risk can mean lowering the cost to you.
Ask your broker for more information about how to keep your premiums under control without compromising on coverage.
Don’t wait until it’s time to make a claim to get a full understanding of how your insurance works.
The following definitions explain a few of the major building blocks of home insurance.
Acts of God are considered natural disasters that could not have been reasonably prevented or avoided. Most standard forms cover the perils of hurricanes and tornados. Lightning and hail are classified as named perils. Coverages for floods or earthquakes are not included in standard policies. In some cases, earthquake coverage may be available for an additional premium, and is likely to be more expensive and difficult to obtain in areas susceptible to this peril.
Deductibles are the amounts you pay to cover a loss before you are entitled to payment by your insurer. Just about every policy has a deductible, usually ranging from $500 to $5,000. Deductibles are designed to discourage small claims, since the purpose of insurance is to protect you from catastrophic losses, not minor inconveniences.
Quite simply, exclusions are items, perils or situations that are not covered by your policy. Your insurer might exclude anything from long-term mould damage to natural disasters, computer data or high-speed watercraft. Other common exclusions include avoidable damage from termites or rodents, water seepage, frozen pipes, intentional damage and high value items such as art and jewelry.
Although liability insurance is part of your homeowner policy, it also protects against third party claims for bodily injury and property damage caused (unintentionally) by you when you are away from home.
Depreciation is a measure of the loss in value of an item over time resulting from wear or obsolescence.
Your insurer will likely want to conduct a valuation of your home in order to set the right replacement value and coverage level. Unlike an appraisal, this does not determine the market value of the property, but rather the likely cost to rebuild the dwelling and other structures to original standards in the event of a complete loss.
Your broker is an insurance expert, so you don’t have to be.
Take the time to ensure that your most precious things are protected.
It is common practice for policies that cover personal property to have special limits on the amount that will be covered for specific items or items within specific categories. If you require the full replacement or market value to be insured, you will have to arrange for additional insurance and pay the appropriate premiums.The rationale behind this practice is to ensure that everyone is provided with a base level of insurance at reasonable rates and those with high value items cover their own extra costs.
One of the best ways to know if your belongings are covered is to do a complete inventory of your contents and review it with your broker. A home inventory will help you itemize your property if you need to make a claim, and it is a good way to test if your overall policy limits are adequate. You should include a list of contents, a brief description or photograph and an estimate of the replacement value of each item. Consider making a video of your rooms, cupboards and shelves and store it off-site.You can also take advantage of inventory tools such as the IBAC Home Inventory Form available online, at http://www.ibac.ca/Pages/English/Consumers/Downloads.aspx.
With a professional appraisal, you can arrange the extra insurance you need
If you have high value items that exceed the limits in your policy and you want to have them separately insured, you will probably need to have the items valued by a professional appraiser so that you know what limits of coverage to purchase. Depending on the type of property and how much information you can provide, an estimate of value can be determined. There is a fee for this service.
Knowing the value of the contents of your home is vital to being properly insured. Your broker can help you find the tools and resources you need.
The short answer is yes, and the best way to know what is covered is to talk to your broker.
More and more people are starting home-based businesses, for everything from marketing homemade products to keeping a home office for a consulting business. From an insurer’s perspective, this adds new types of risk to your home, and therefore, may require additional insurance.
Anything you use in running your home-based business is subject to the limits of insurance and/or might not be covered at all.
The operation of your home-based business might mean that you have more people coming and going, and therefore, more risk associated with the activities in your home. If this is the case, not only will a basic liability limit of one million dollars likely not cover you, but also, some insurers might refuse to cover a third party claim by a customer or employee who is injured in your home. If you think this situation applies to you, be sure to tell your broker about your home business and make sure your insurance company is made aware of your home-based business activities.
Your broker can tell you more about the basics of insurance and can help you make sure your needs are covered.
Your home should be insured from the moment you take legal ownership-even if it is under construction. Your broker’s expertise is particularly useful at this stage when you really need to match policy features with needs. Here’s a primer to get you started:
Home insurance covers the building, its contents and liability
There are usually three parts to your homeowner’s policy. For condominium owners and tenants, just the contents and liability coverages apply:
Policies range from offering comprehensive to “bare-bones” coverage
You can save money by scaling down your policy, but be careful not to underinsure. Basically, there are two common types of protection.
Regardless of which policy you select, some coverages can be increased and certain items insured separately. Your broker will be happy to sit down with you to review your coverage needs.
Ask your broker to explain your options, and to help assess what’s best for you.
Your insurer considers an unoccupied dwelling riskier than an occupied one.
Depending on how long you are away from your home, you need to make arrangements to ensure your dwelling is checked regularly, especially through the heating season. In some circumstances, you may need to inform your insurer.
When away for a short time
If you will be away from your home for fewer than 30 days, you do not need to inform your insurer. However, you do need to arrange for a competent person to look in on your home everyday or two to make sure that everything is in good order. If a deep freeze and/or a broken furnace results in exploding pipes and water damage that goes unnoticed for several days, your insurer could refuse to cover the costs if no one was looking in on the house.
For longer absences
If you are away for more than 30 days, your home is considered “unoccupied” because you plan to return. In this case, you should contact your broker to determine whether you will need to inform your insurer and obtain a special permit to leave the house empty. You will still need to arrange regular checks on the property, and you might want to consider draining water pipes and installing a good security alarm system.
If the property is empty
A fully vacant property is one with no occupants and no contents. This may occur if a house sale is delayed and the property remains vacant until sold. In this case, you need to obtain a vacancy permit from your insurer. This permit will maintain most of your coverage, except for risks associated with vacancy such as broken water pipes, broken glass or vandalism.These permits can be obtained for up to three months.
Before you leave your dwelling unoccupied, check with your broker to be sure that you are covered.
Whether you are transferring your insurance from another province, seeking to change insurers or owning a car for the first time, the process of getting an insurance quote can be daunting. In general, the more the insurer knows about you and your driving record, the better off you will be, even if your record is less than perfect. Full disclosure at the beginning will save any risk of misrepresentation if you do need to make a claim in the future.
This is an area where your broker can be of particular assistance in helping you to navigate the terrain. There are three main categories of information required:
Getting your application right can have a significant impact on your premiums. Be sure to ask your broker for advice and help.
Liability insurance is mandatory, but you can adjust the level to make sure your needs are met.
Liability insurance covers the cost of damages (for accident benefits, medical costs, lawsuits and awards) in the event of personal injury or death from an accident involving the insured party. In other words, you are financially protected if you are held liable for an injury or loss by others arising from the operation of your vehicle.
Many provinces in Canada now have some level of no-fault insurance in which each person’s own insurance company pays for injury or damage up to a certain limit.This applies regardless of whether or not the insured person was at fault. In Quebec and Manitoba, for example, there is a pure no-fault. In Ontario, however, there is a threshold system in which the no-fault clause only applies up to a certain threshold of liability. So, if you are involved in an accident and injured, your own insurance covers the associated costs of treatment, living expenses, loss of work and pain and suffering. This means injuries that are not “serious and permanent” are covered by your own insurance. Your insurance also covers the associated costs of treatment, living expenses, loss of work and dependent care.
The recommended level of liability insurance coverage is usually about $1 million. There are some situations in which you might want to increase your liability limit depending on the use of your vehicle. For example, if you drive into the U.S. on a regular basis, where liability settlements are generally higher than in Canada, you might want to consider higher coverage. If you carpool to work or drive groups of children in your car to school or after-school events, you might want to increase your coverage to reflect the higher risks to which you are exposed.
Ask your broker for more information about liability insurance and how to obtain the right level of coverage.
Every policy is different, but there are some common situations to be aware of.
Your vehicle insurance policy likely has some flexibility built in to ensure you are covered in different situations. You should check your policy or ask your broker to be sure.
If you drive a rented car or any vehicle that is not owned by you, your existing policy automatically extends accident benefits and third party liability coverage to your rented car. These limits are the same as those on your own car. You can purchase additional coverage by way of an annual endorsement to your own policy that provides physical damage insurance for any rented vehicle during the policy term. It is important to note that this endorsement usually has a limit of $50,000. So, if you rent a luxury car, you should be aware that the cost of repairs are limited.This endorsement is simple to arrange and far more economical than the costly damage waivers offered by the rental companies.
Your insurance will apply if you take your car on short trips to other provinces or into the continental U.S., as long as you engage in normal use of the vehicle.
If you are relocating long-term or permanently, you must inform your insurer and arrange for new coverage that reflects the risks in your new location.
Under most insurance policies, you are not entitled to a replacement vehicle while your car is in the shop for normal maintenance or repair. If you lose the use of your car because of an accident, then you might be entitled to a loaned vehicle depending on the situation.
If you borrow someone else’s car, you are covered by the insurance on that car. However, if you are involved in an accident, the owner’s record, not yours, will be affected. If you borrow a car on a regular basis, ask your broker to arrange a special clause in your policy to cover your use.
Remember that when someone else is driving your car, you are still responsible for it. Any at-fault accidents or claims will go onto your driving record and affect your future premiums.
Ask your broker for more information about liability and how to obtain the right level of coverage.
Laws and regulations regarding auto insurance are administered by the Financial Services Commission of Ontario (FSCO), the government’s regulator of auto insurance. If you have questions about your rights, you may check the FSCO website, www.fsco.gov.on.ca.
Special policies can cover the risks unique to your business.
This form of insurance provides you with the funds required to protect your business’s financial position if your operations are interrupted by an insured loss such as a fire. Features and costs will vary considerably depending on whether you insure for named perils, a specific timeframe, specific costs or just a portion of the income you lose.This form of insurance is highly customizable and can include coverage for extra business expenses, rental income lost, gross earnings lost, payroll and professional fees.
A consequential loss is not caused directly by damage to property, but is a consequence of other damage. For example, a cold storage facility might experience significant inventory losses if an on-site transformer station failure cuts out electricity supply or a fire damages the refrigerators. A greenhouse operation or a winery might require constant temperature and humidity to be maintained. Consequential loss coverage would insure the resultant damage caused to stock by an insured peril that changes these factors.
Many named perils and broad commercial property insurance policies will exclude coverage of breakdown or damage to highly sensitive or specialized equipment including high-pressure boilers, control systems and computers, diagnostic equipment and more. Special machinery policies can be obtained to cover equipment for sudden and accidental breakdown, which is advisable if loss of use is a significant risk for your business.
It is common practice to protect company directors and senior managers from personal liability for actions that are the responsibility of the company they direct.While insurance does not remove their fiduciary duty, it does provide some financial protection from legal liability for a claim made against them for an alleged or wrongful act.A wrongful act is any error, misstatement, misleading statement, act omission, breach of duty or neglect allegedly committed or attempted. Errors and omissions insurance is usually used in professional services firms such as law, accounting and consulting to protect professional staff from the impact of errors and omissions in their work.
There are as many forms of specialized coverage as there are risks to your business. A broker can help you assess the probability of experiencing a loss and determine whether or not you should purchase specialized coverage. Talk to your broker to see if there are risks unique to your business that require extra protection. For example:
These are just a few of the special coverages available for special situations. Your broker can tell you more.
The right insurance is an important tool to protect any business.
Your commercial insurance should be designed to protect against the most prevalent risks, to the assets and capital in your business. Your broker can help you itemize and quantify those risks, and determine the level of coverage you should consider.
For example, a food services operation might insure against a major electrical outage that would result in spoilage of their inventory.
Consider the underlying risk drivers in your business An experienced commercial insurance broker can help you read the risks in your business, advise you on how to reduce some of the more manageable exposures and suggest an insurance mix that takes your risk tolerance and financial situation into account.
Let your broker help you plan and arrange the right insurance for your business.
A risk management program is the best way to systematically reduce the impact of risk.
An experienced commercial broker knows how to identify and manage many of the risk factors in your business and translate that knowledge into a costeffective risk management program. There are four key steps:
Your commercial insurance broker has the experience to help you manage the insurance risks in your business.