Insurance: The Guide to Types of Insurance in Canada

What is insurance?

In the most basic sense, insurance is a form of financial protection that guarantees your payments will be covered if you fall ill or suffer damage or loss. To obtain this coverage, you must pay a monthly or annual premium. Since claims and accidents can happen at any time, it’s important to take out insurance that covers your situation and your needs. There are several types of insurance, but the most important are: health insurance, life insurance, car insurance and home owner insurance (or tenant insurance). But let’s not forget disability insurance, critical illness insurance and many others.

How do I take out insurance?

There are several ways to take out insurance, depending on the type and your needs. First of all, you can compare (and take out) an online insurance product yourself, such as car or home insurance. You can also try our car insurance comparator and our home insurance comparator.

However, insurance is a rather complicated subject. If you’re comparing insurance policies for the first time, you may want to consult a professional. He or she can explain the different insurance products and their terms and conditions. But also to answer your questions. These professionals are generally grouped into two categories:

• An insurance advisor or agent works for an insurance company. He or she will be able to assess your needs and offer you insurance products from precisely that company.
• An insurance broker or damage insurance brokerage firm like YouSet has access to insurance from a number of insurance companies. He or she will be able to assess your needs and offer you the best insurance products for you and your family, at the best prices.

The different types of insurance in Canada

The type of insurance you decide to take out depends on a number of factors, including your personal and financial situation. When deciding which types of insurance policies to take out, think first about your financial obligations, where you live, your assets, your work and your hobbies.

The most popular types of insurance are :

• Car insurance
• Home insurance
• Travel insurance
• Life insurance
• Health insurance
• Short-term disability insurance
• Long-term disability insurance
• Critical illness insurance
• Mortgage loan insurance
• Credit card balance insurance

Here’s more information on each type of insurance…

Car insurance

Car 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 to other cars involved in accidents. The insurance premium depends on a number of factors, such as the probability that an event will occur based on your profile, and that a claim will be made as a result.

There are several types of auto insurance in Canada, each covering different elements:

• Civil liability insurance: compulsory coverage for damage to other people’s property and injuries resulting from accidents.
• Collision or upset insurance: optional coverage for damage caused by collision or upset (may be mandatory for financed vehicles).
• All risks except collision or upset: optional coverage for damage without collision or upset, such as theft, vandalism, fire, windshield replacement and weather damage.
• All-risk coverage: optional coverage that combines collision and comprehensive coverage (theft, vandalism, fire, windshield replacement and weather damage) in a single policy.

Automobile insurance laws in Canada differ according to province of residence. So it’s essential to familiarize yourself with the rules in force in your area.

To find out more, consult our guide to car insurance. Finally, don’t hesitate to use our car insurance comparison tool.

Home insurance

Although home insurance is not legally required in Canada, it is strongly recommended. What’s more, most mortgage lenders make it required for those whose homes aren’t fully paid off. Becoming a homeowner has many advantages, but it’s essential to protect your investment. What’s more, home insurance protects not only your home, but also your personal property and civil liability claims.

Home insurance isn’t legally required for tenants, but it’s still important. Why? Because the landlord’s insurance policy will not cover your personal belongings. Tenant’s insurance protects your personal belongings against the unexpected (theft, vandalism, water damage and fire) and gives you peace of mind.

Generally speaking, there are three types of home insurance:

• Basic home insurance: provides coverage limited to the risks listed in your insurance policy
• Comprehensive home insurance (all risks): offers broader coverage, including fire, theft, vandalism, natural disasters and civil liability.
• Extended home insurance: compromise between basic and comprehensive coverage.

To find out more, consult our guide to home insurance. Finally, don’t hesitate to use our home insurance comparison tool.

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’re planning a trip outside the country, you should take out travel insurance to ensure you’re fully covered in the event of a problem. Of course, you can buy travel insurance from a traditional insurance company like Blue Cross. But there are less expensive solutions…

First, you can purchase travel insurance through a personal insurance broker like soNomad. The latter offers a range of travel insurance options directly on its website, with no intermediaries involved, thus reducing costs. Find out more:

Then there’s a way to get similar protection (and free of charge) with credit card travel insurance. In fact, many credit cards offer comprehensive travel insurance when a trip is paid for in full or in part with the card. Find out more:

To find out more, consult our travel insurance guides :

Finally, don’t hesitate to use our travel insurance comparison tool.

Life insurance

Life insurance is an important step for those starting a family. Among other things, it allows you to pay money to your beneficiary in the event of your death. If you die during your period of insurance, your designated loved ones will receive a lump-sum payment based on the amount of insurance selected. There are several types of life insurance to choose from:

• Term life insurance: insurance protection limited in time.
• Whole life insurance: insurance protection that covers you for life, usually with a cash surrender value.
• Universal life insurance: life insurance protection and investment savings.

To find out more about life insurance or cash surrender value, consult our guides :

Health insurance

The most important insurance is generally health insurance (including drug 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 medical expenses (including prescription drugs), but not all. Before taking out supplementary health insurance, talk to your company’s human resources department or your group insurance provider. If you are self-employed or unemployed, you can also take out independent cover with an insurance company.

Short-term disability insurance

Short-term disability insurance (also known as “sick leave”) provides you with a temporary income if you are unable to work due to illness or injury. This insurance is often provided by your employer. Alternatively, you can take out this insurance individually. Disability insurance generally covers a period ranging from a few weeks to six months. It is designed to offset part of your salary and thus protect your short-term financial stability.

Long-term disability insurance

Long-term disability insurance replaces a portion of your income if you are unable to work due to your medical condition for a period that exceeds the duration of a sick leave. It is based on your inability to perform your job during the first two years. Secondly, it is paid on the basis of your inability to hold any other job on a long-term horizon.

Critical illness insurance

Similarly, critical illness insurance pays you a lump sum if you are diagnosed with a critical illness. Depending on your insurance policy, eligible critical illnesses can include cancer, heart attack, stroke, etc. This money can help pay medical expenses or temporarily replace an income.

Mortgage loan insurance

If you’re ready to buy a home, you may want to look into mortgage loan insurance. The purpose of mortgage insurance is to protect you in the event of job loss, critical illness, disability or death. The insurer (bank, insurance company, etc.) will then make your mortgage payments.

Credit card balance insurance

Credit card balance insurance is similar to mortgage insurance, in that it provides protection in the event of job loss, critical illness, disability or death. The credit card issuer will pay the balance owing on your credit card, in full or in part, depending on the conditions and illnesses that qualify.

Bottom Line

In short, insurance is both complex and essential to your financial stability. If necessary, contact your advisor or insurance broker to help you understand your current or future insurance products. Then try our car insurance comparator and our home insurance comparator.

Frequently asked questions about types of insurance