Do you know what a deductible is? When you need to pay?

Have you ever looked through your insurance policy and felt like you were reading another language? Understanding insurance terminology might seem intimidating, but we’re working on changing that. Let’s break down deductibles.

What is an insurance deductible and how do deductibles work?

In your insurance policy, the deductible is the amount that you agree to pay out of your own pocket before your insurer will step in and pay the remaining balance of a claim (up to the policy limit).

Picture this: A tree branch falls on the roof of your car, and the repair bill is $1,500. If your deductible is $300, you’ll pay $300 to the repair shop and your insurer will pay the remaining $1,200. If your car is totalled or not worth repairing, your insurer may pay you the actual cash value of your car instead — in this case, your deductible would be subtracted from the total payout.

You’ll usually have some say in the amount of your deductible, and the amount (as well as any rules or exceptions) will be clearly stated in your policy.

Do I have to pay a deductible every time I make a claim?

Not necessarily:

  • If your deductible is $0, you won’t have to pay for any portion of your approved repairs or settlement amount.
  • Some policies will waive your deductible when certain circumstances apply. When your total claim hits a certain dollar value, for example, you might not have to pay your deductible.
    • Picture this: After a fire, you make a home insurance claim of $50,000 for repairs. Your home insurance deductible is $1,000, but your policy states that this deductible doesn’t apply if a single claim adds up to more than $25,000. In this case, since the claim is more than $25,000, you don’t have to pay your deductible.
  • Some policies have different deductible amounts for different types of coverage, which means that you may or may not have to pay, depending on the coverage you use for that specific claim. And, if your insurer determines that your claim will be covered by more than one section of your policy, they’ll do the math and determine how much of your deductible you’ll need to pay.
    • Picture this: Your car insurance policy says that your deductible is $0 when an accident isn’t your fault and $500 when it is your fault. You get in a fender-bender and your insurer determines the accident was the other driver’s fault, so they decide to fully cover the damage to your vehicle (up to your policy’s limit, of course) — so you pay $0. In this same situation, if your insurer determined that you and the other driver were equally responsible, you may only have to pay 50% of your deductible — in this case, you’d pay $250. But if your insurer determined the accident was entirely your fault, you’d be on the hook for $500.s

Why do deductibles exist?

Now, you may be wondering why insurance companies build deductibles into their policies in the first place — and it’s a good question. Long story short, deductibles exist to keep insurance as affordable as possible.

Here are just a few ways deductibles work to save you money in the long run:

  1. Deductibles help prevent fraudulent claims and reckless behaviour. If insurance policies didn’t have deductibles in place, some people could be tempted to damage their own things or act recklessly (two behaviours known as “moral hazards” in the insurance world) just because they know their insurer will protect them. This becomes less tempting when they know that part of the repair bill will come out of their own pocket. Over time, false claim payouts can lead to higher premiums for everyone who has insurance, and implementing deductibles is just one way of preventing them.
  2. Deductibles help prevent minor claims. If an insurance company had to process a $50 claim every time someone found a tiny scratch on their car door, they would need to employ a lot more people — and that could drive up the cost of insurance, since the cost of processing these small claims would far outweigh the actual cost of the repairs. Deductibles help keep minor claims at bay.
  3. Deductibles help keep your money in your pocket. When you set your deductible, you’re agreeing to either fully cover those smaller claims or cover a portion of your repair costs for larger claims. When your insurer doesn’t need to invest in processing those smaller claims or paying the full amount, they’re able to share those savings with you through lower premiums.

How do I know if I’ve chosen the right deductible?

The best way to figure out if your deductible is right for you is to ask yourself one simple question: Would you be comfortable paying the deductible amount out of your own pocket if you made a claim today? If you choose a lower deductible, you’ll be responsible for footing less of the bill if you make a claim — but the cost of your insurance could be a little higher. On the other hand, if you choose a higher deductible, the cost of your insurance will likely be lower — but don’t forget that you’ll be expected to pay the deductible if you make a claim.

Note: Rules and regulations can vary by province, and claims are handled according to the location where the accident occurs — not necessarily the rules in your home province. That means the amount you need to pay for your deductible could be different if you’re involved in an accident outside of your home province.

If you have questions or want to make changes to your deductibles, reach out to your licensed broker today.

Full Article by Economical Insurance:

https://www.economical.com/en/blog/economical-blog/february-2017/the-lowdown-on-deductibles?ck=ecocom|blog|p|2|en-CA


What you need to know about trip cancellation insurance.

Almost two-thirds of Canadians either don’t buy or are unsure if they have trip cancellation insurance before leaving on holiday, according to a recent study of 960 Canadians by Kanetix.ca.

Assuming that trip cancellation coverage costs no more than 10% of a trip, that’s an insurance premium of about $300 for the average vacation costing about $3,000.

For a significant number of Canadian travelers, that cost is too high, the Kanetix study found. Thirty-six per cent of survey respondents believe that cancellation insurance is too expensive.

The Kanetix study lists a number of other reasons why your clients are hesitant to purchase cancellation insurance.

For example, 28% of Canadians surveyed said they have it on their credit card.

“Value adds” on a credit card such as travel insurance and/or damage to a rental car are typically underwritten by the insurance company with which the consumer’s financial institution has an agreement, Kanetix observed in a follow-up email with Canadian Underwriter. “People should check their credit card agreement documents for the specifics — including the insurance company.”

Another 15% of Canadians said they already have trip cancellation coverage through their workplace benefits. However, that not all policies cover the same limits. “It’s always best to check what your employee group coverage is, versus purchasing privately,” Kanetix advises travelers.

Twelve percent believe that their travel medical policy includes cancellation coverage. But does it?

“They are separate coverages and must be purchased separately,” Kanetix notes. Unless an all-inclusive policy has been purchased, which bundles emergency medical, trip cancellation and baggage loss coverage into one policy, there’s a chance that your clients may not have the coverage they think they do.

It might be worth it for brokers to raise the matter with clients just for educational purposes alone. Thirteen percent of people in the survey had not even heard of trip cancellation insurance.

And then there are the skeptics: 18% of those surveyed said they were not confident a claim would be paid.

Whatever reasons a client may cite for declining trip cancellation coverage, there are plenty of opportunities for brokers to educate the client about the coverage, said Janine White, vice president of marketplaces and strategy at Kanetix.ca.

“For all that trip cancellation insurance covers, it’s an inexpensive way to protect the money you’ve invested into going on vacation,” Smith said in a press release announcing the survey results. “Whether it’s due to a death in the family, being called to jury duty, or a sudden injury or illness that prevents you from travelling, trip cancellation insurance can help you recoup travel expenses that are non-refundable or prepaid should you need to cancel your plans.”

Trip cancellation insurance can also provide coverage if the client is laid off from his or her job, if the home suffers a catastrophic loss like fire or flooding, severe weather, or if the Government of Canada issues a new “avoid travel” advisory, among other reasons why a client would want the coverage.

Full Article by Canadian Underwriter https://www.canadianunderwriter.ca/insurance/what-your-clients-need-to-know-about-trip-cancellation-insurance-1004159803/