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A Guide to Types of Insurance in Canada

It’s time for you to dive into the world of insurance, and you’re not sure where to start—don’t worry, you’re not alone! Starting out with insurance can be a daunting task, especially when there are so many insurance types available. If you find yourself lost while trying to decide what type of insurance is for you and why you need it, keep reading for the low down on all things Canadian insurance.

What is insurance and why do I need it?

In the most basic sense, insurance is a form of financial protection that ensures payment coverage should you fall ill or incur damages or losses. For an insurer to cover these costs, you pay a premium that is typically collected monthly.

While we all wish the world were a perfect place where nothing bad happens, unfortunately, that is not the reality we live in. Accidents and disasters do occur, and it’s super important to be prepared for them when they do so you’re not left wondering how to make ends meet.

There are a ton of different types of insurance (seriously, you can insure almost anything) but there are four main kinds of insurance that you should make your priority—health, life, home or renter’s, and car insurance.

How do I get insurance?

If this is your first time comparing insurance policies and figuring out what works best for you, it’s a great idea to work with a professional who knows their stuff. Three main professionals specialize in the world of insurance:

  • An insurance broker will evaluate your lifestyle and determine what kind of insurance makes sense for you and your family.
  • While insurance brokers are a great starting point, financial advisors take it to the next level by viewing your finances, lifestyle, assets, and goals to make an informed recommendation and plan for your insurance needs.
  • On the other end of the spectrum, insurance agents work for specific insurance companies, so while they will only be knowledgeable in their company’s policies, they can help narrow down which ones make the most sense.

Types of insurance

The types of insurance you decide to get are really based on your personal lifestyle. When deciding on the types of insurance policies to get, first think about where you live, what you own, what you do for work, and your hobbies.

Health insurance

Arguably the most important type of insurance is health insurance. Health insurance covers costs related to medical expenses for you and your family. One of the great things about living in Canada is that the government covers most medical expenses, but not all.

Before looking into additional health insurance on your own, talk to your HR team at your place of employment to see if they offer benefits to help cover those costs that the government doesn’t. If you’re self-employed or unemployed, you can acquire independent coverage as well.

Disability insurance

Disability insurance is made to cover any loss of income due to a severe accident or illness.

It essentially replaces a portion of your regular income if you cannot work due to medical conditions.

Critical illness insurance

On a similar note, critical illness insurance pays a lump sum of money to you if you are dealing with serious, life-threatening diseases.

This sum of money can help pay medical expenses or act as a temporary income replacement.

Car insurance

Unlike many other types of insurance, auto insurance is mandatory to drive a car in Canada. The purpose of car insurance is to cover the cost of damage to your own car and other cars involved in accidents. There are three different types of car insurance in Canada, and they each cover different things:

  • Collision insurance covers any auto damage that occurs from an accident.
  • Third-party liability insurance can cover any damage or injury to another vehicle or person due to an accident.
  • Comprehensive insurance covers any other damage that may happen to your car outside of a collision, such as fires or theft.

Different coverage types are required in some provinces, so make sure to chat with a professional to ensure you have the proper coverage for your area.

Home insurance

When you buy a house, you typically want to make it a permanent home by filling it with your favourite clothes, a comfy bed, and more. And while home insurance can’t bring back your sentimental items after an accident or disaster, it can help cover the cost of any damages to your home or belongings. Most home insurance covers natural disasters, loss, theft, or other accidents such as water leaks.

To even qualify for a mortgage, you are required to have home insurance. With that being said, there are a few different types of home insurance:

  • Comprehensive home insurance covers all costs related to damage or loss of property or belongings.
  • If you cannot afford comprehensive insurance, with basic insurance, you’re able to pick and choose what you want to be insured, which ultimately costs less.
  • Personal liability covers the medical costs if someone outside of your family is injured on your property.

Rental insurance

The idea of rental insurance usually doesn’t cross renters’ minds until it’s too late.

Rental insurance typically covers your belongings in the property you’re renting as well as personal liability if someone was to injure themselves on your property. The great thing about rental insurance is that it’s usually very affordable.

Life Insurance

Life insurance is a significant step for those who are starting a family.

Life insurance provides money to your loved ones when you pass away. If you die during your coverage period, your designated loved ones will receive a lump sum of money. You can either choose between permanent life insurance, which covers you forever or term life insurance which only covers you for a certain period of time.

Mortgage insurance

If you’re ready to buy a home, you may want to look into mortgage insurance first. The idea of mortgage insurance is to protect the lender should you die before paying off your mortgage’s remainder. The insurance company will then pay the remainder of your mortgage to fall on your loved ones.

Mortgage insurance is also ideal for people who aren’t able to commit to a large down payment when buying their home because lenders are more inclined to give out mortgages if they know they will get their money back one way or another.

Travel insurance

If you were to have an accident or fall ill in another country, your health insurance in Canada could not cover those costs in most cases.

If you’re planning a trip outside of the country (especially if you’ll be staying longer than a few days), you will want to look into travel insurance, so you’re fully covered if anything goes wrong.

Come to discuss that topic in our Facebook Group!
Jean-Maximilien is an expert in Canada and France about Loyalty programs, Credit cards and Travel. He is the Founding President of Milesopedia.

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