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Insurance: Guide to types of insurance in Canada

If it’s time for you to dive into the world of insurance, and you don’t know where to start… don’t worry, you’re not alone! Learning about insurance can be daunting, especially when there are so many types of insurance available. If you’re feeling lost trying to decide what type of insurance is right for you and why you need it, read on to learn all about insurance products in Canada.

What is insurance and why do I need it?

In the most basic sense, insurance is a form of financial protection that ensures your payments are covered if you become ill or suffer damage or loss. In order for an insurer to cover these costs, you pay a premium that is usually collected monthly. While we all wish the world was a perfect place where nothing bad happens, this is unfortunately not the reality we live in. Accidents and disasters can happen, and it’s very important to be prepared for them so you don’t end up struggling to make ends meet. There are many different types of insurance (seriously, you can insure almost anything), but there are four main types of insurance that should be your priority: health insurance, life insurance, home or renters insurance, and auto insurance.

How do I get insurance?

If this is your first time comparing insurance policies and determining what’s best for you, it’s a good idea to work with a professional who knows his stuff. Three major professionals specialize in the world of insurance:

  • An insurance broker will assess your lifestyle and determine the most appropriate type of insurance for you and your family.
  • While insurance brokers are a great place to start, financial advisors take the next step by reviewing your finances, lifestyle, assets and goals to make an informed recommendation and plan for your insurance needs.
  • On the other side of the spectrum, insurance agents work for specific insurance companies and, while they only know about their company’s policies, they can help determine which ones are most beneficial.

Types of insurance

The types of insurance you decide to apply for really depend on your personal lifestyle. When deciding what types of insurance policies to apply for, think first about where you live, what you own, what you do for a living and what your hobbies are.

Health insurance

Perhaps the most important type of insurance is health insurance. Health insurance covers medical expenses for you and your family. One of the advantages of living in Canada is that the government covers most, but not all, medical expenses. Before looking to apply for supplemental health insurance on your own, talk to your workplace HR team to see if they offer benefits to cover these costs that the government does not cover. If you are self-employed or unemployed, you can also purchase independent coverage.

Disability Insurance

Disability insurance is designed to cover any loss of income due to an accident or critical illness. It essentially replaces a portion of your regular income if you are unable to work due to your medical condition.

Critical illness insurance

Similarly, critical illness insurance pays you a lump sum if you are diagnosed with a serious and life-threatening illness. This money can help pay for medical expenses or temporarily replace an income.

Car insurance

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

  • Collision insurance covers damage caused by an accident.
  • Liability insurance can cover any damage or injury caused to another vehicle or person as a result of an accident.
  • Comprehensive insurance covers any other damage that may occur to your car besides a collision, such as fire or theft.

Different types of coverage are required in some provinces, so be sure to speak with a professional to ensure you have the appropriate coverage for your area.

Home insurance

When you buy a house, you usually want to make it a permanent home by filling it with your favorite clothes, a comfortable bed, etc. And if home insurance can’t return your sentimental items after an accident or disaster, it can help cover the cost of damage to your home or belongings. Most home insurance policies cover natural disasters, losses, theft or other accidents such as water leaks. In order to qualify for a mortgage, you are required to apply for homeowners insurance. That being said, there are several types of home insurance:

  • Comprehensive home insurance covers all costs related to damage or loss of property or personal effects.
  • If you can’t afford comprehensive insurance,basic insurance allows you to choose what you want to insure, which ultimately costs less.
  • Personal liability insurance covers medical expenses if someone other than a family member is injured on your property.

Rental insurance

The idea of rental insurance usually doesn’t occur to tenants until it’s too late. Rental insurance generally covers your belongings in the property you are renting as well as your personal liability if someone is injured on your property. The advantage of rental insurance is that it is usually very affordable.

Life insurance

Life insurance is an important step for those starting a family. It allows you to pay money to your loved ones upon your death. If you die during your coverage period, your designated family members will receive a lump sum payment. You can choose between permanent life insurance, which covers you forever, and term life insurance, which covers you only for a certain period of time.

Mortgage insurance

If you’re ready to buy a home, you may want to start by learning about mortgage insurance. The idea of mortgage insurance is to protect the lender if you die before paying off your loan balance. The insurance company will then pay the balance of your mortgage so that the burden does not fall on your loved ones. Mortgage insurance is also ideal for people who are unable to make a large down payment on their home, as lenders are more likely to grant mortgages if they know they will get their money back one way or another.

Travel insurance

If you were to have an accident or become ill in another country, your health insurance in Canada would not cover these costs in most cases. If you are planning a trip outside the country (especially if you are staying for more than a few days), it is advisable to apply for out travel insurance so that you are fully covered in case of problems.

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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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