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Insurance Basics: How to Figure Out How Much Insurance You Need

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The world of insurance can be a complicated one even from the inside out. From the outside in, it can sometimes feel nearly impossible to work out exactly what type of insurance you need.

Here at Mackay Insurance, we have been serving our continually growing list of clients for more than four decades. Even so, there is still something new to learn about the insurance industry each and every day!

One of the most frequently asked questions we hear every day is, “How do I figure out how much insurance I need?” That is what we are going to talk about in this article.

Types of Insurance

You may find you need different types of insurance at different times in your life.

There are four basic types of insurance policies:

Of course, there can be many subsidiary types of insurance policies within each of these major insurance categories.

For example, homeowner insurance can also include renter insurance, cottage or seasonal home insurance, flood insurance and other related policies. Auto insurance also encompasses motorcycle insurance, recreational vehicle insurance, classic or vintage car insurance, RV and motorhome insurance.

Life insurance is its own separate arena with a variety of policies ranging from a simple term life insurance policy to complex whole life (permanent) life insurance.

Business insurance can span the gamut from commercial vehicle insurance to liability insurance to a specialized suite of insurance products geared toward large corporations, home-based businesses and nonprofit entities.

There are also various specialty insurance policies, such as travel insurance, high value/rare possessions insurance, health insurance, long-term disability insurance and pet insurance.

Insurance Basics You Should Know

Even if you don’t know much about insurance itself, you probably recognize the word “premium.” This is the fee you pay in order to receive insurance coverage.

Premium costs

Your premium can vary quite a lot based on a wide variety of factors. Some factors will be beyond your control. For example, the make and model of the car you drive, the neighborhood you live in, even your personal health history can influence how much you pay for insurance coverage.

But some factors will be within your control. For instance, you can bundle a variety of policy types together with a single insurance provider to receive a discount on your total policy premiums.

Deductible levels

You can also set your deductible level higher or lower to influence how much you pay in insurance premiums annually. Some insurance companies offer payment options that avoid finance fees—for example, making three payments instead of paying monthly.

A higher deductible will lower the premium, but you want to check pricing before simply going with a high deductible. If the premium savings for switching to a higher deductible is modest, you may prefer a lower deductible. An important question when choosing a deductible is what amount you could come up with comfortably if you had a claim. If the most you could come up with is $1,000, then a $2,500 deductible may not be a good solution for you even if the cost is lower.

Optional discounts

In addition to a discount for bundling multiple types of policies together under a single insurance provider, there are often other discounts you may qualify to receive. Examples include discounts for installing winter-rated tires during the winter months, security features of your car or home and being mortgage-free on your home. Even if you are not shopping to change insurance companies, periodically stop in to see your broker and talk through you circumstances and what discounts you may be eligible for.

Choosing Your Insurance Provider

Here in Canada, car insurance is regulated by each province or territory. For the most part, the coverage from different insurance companies operating in the same province will be the same. However, prices can vary significantly—different insurance companies specialize in different segments. It is worth checking options, and a broker who represents several insurance companies can do the shopping for you.

Other types of insurance, such as house insurance, are less regulated. There will often be core coverages that are the same between companies, and there can then be significant differences in the coverage that one company provides compared to another. As an example, Company A may offer flood insurance at your address, and Company B may not.

Customer service

You want to be sure the broker or insurer you select can communicate with you the way you like to communicate. In-person visits? Telephones answered by a live person? Email? Chat-based live customer service support? All options are available, but not always all from the same broker or insurance company.

Claims processing

Research what other customers say about working with this insurer and whether the insurer serves as a client advocate when claims are filed.

Get in Touch

Contact us online, or give us a call at 1-888-852-5552 for help with all your insurance needs!

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