Insurance: Understanding the Complexity from an Insurance Specialist

understanding the cost of insurance

Having spent 15 years in the insurance industry before moving into the government grant funding space, I’d like to offer former colleagues some support and help those of us outside the industry, understand insurance. In very general terms, insurance is a very big branch of contract law. That contract was decided upon before something happened and is so long and complicated because it has to encompass every possible scenario that one might find themselves in. Its goal is to protect the insured party. There are many forms of insurance available to protect you personally as well as your business. This article will dive into insurance and what you need to know in order to get the most out of it.

Insurance can give you Piece of Mind

If you aren’t full of positive feelings regarding insurance, you have likely not needed to use it. Auto insurance is mandated by the province. Home insurance is mandatory if you carry a mortgage. Life insurance is important if you have anyone who relies on your income, or who would be financially devastated if they had to fund your funeral. After 16 years in the industry, I have found the greatest pain point is with auto insurance. However, auto insurance has saved thousands of people’s financial well-beings and helped curb the anxiety of stressful situations such as theft, accidents, and vandalism. You might not know you need auto insurance now, but you will certainly be glad you have it when you need it.

Understanding Insurance Pricing

When you receive an insurance estimate, it encompasses all possible scenarios that you would need insurance. In my personal experience, this has included:

  • Accidental damages, such as stone chips and windshield cracks
  • Accidental damage to vehicles
  • Circumstantial damages, including fences, hydro poles, guardrails, swimming pools, storefronts , yellow poles at drive-thru windows, and other property damages
  • Clean up costs related to accidents
  • Environmental related damages, such as tornados and floods
  • Catastrophic injuries – some that can be fixed and some whose costs are driven by the pursuit of some compensation for diminished quality of life.

Prices are not solely covering the cost of repairing vehicles, but also collateral damage, including expenses to help people recover from or be compensated for devastating injuries.

Insurance Premiums are Driven by Statistics

Insurance companies are not aware of each driver’s specific skill level, beyond their traffic record. Instead, insurance companies use statistics to try to appropriate more of the costs to the average driver.

Insurance companies aren’t making money on auto insurance in Ontario.

Auto insurance is a losing entity. Insurance companies aren’t making money on auto insurance in Ontario. By the time they pay all the claims and the employees to manage them, there is a very significant deficit. This differs from British Columbia insurance, which is handled by the government. In Ontario, the insurance companies seek to equalize on their other products without rate reductions mandated by a government trying to concede to popular public opinion.

Insurance is a reality of the world we live in: so much can happen in our day to day lives that we need to protect ourselves and our assets against the randomness of life. I completely understand why people are frustrated with insurance when they only look at their monthly or annual premiums, or hear the odd anecdote in the news. Once you start to think of insurance in the broader picture, it’s much easier to understand the value it brings – not only as financial protection but also peace of mind. Being properly insured allows you to focus your energies (and finances) on other pursuits.

The Value of Proper Insurance for Businesses

Just like all of the varieties of personal insurance, there are a range of options for business owners to protect their assets. It’s important for small business owners to understand that there are minimums that they should carry to protect their business assets. What type and how much you need varies by industry and business type. For example, a construction business will need to carry workplace safety insurance in addition to corporate general, but a service business may be exempt from WSIB. Additionally, most Canadian government funding programs require a business to carry a minimum amount of insurance (usually $2M per occurrence general corporate liability insurance). If you are unsure of your existing policy or if you are adequately covered you should contact your existing provider for an assessment.

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