MONEY: Know your insurance plans

Know your insurance policy. Don’t wait until disaster strikes to find out about your coverage.

Exclusions and limits
Many home insurance policies have exclusions and limits. “A standard policy may cover water damage from a burst pipe but not an overland flood.’

Commission or kickbacks
Insurance brokers work on commission and might even be getting kickbacks for selling you products. Ask them what their compensation model is – they’re legally required to disclose commission rates. “If you have a concern, contact the regulatory body to your province. Before you sign a contract, consult the Canadian Legal Information Institute (canlii.org) to see if any lawsuits have been filed against them. If the company’s notorious for refusing to pay, look elsewhere.

Claim refusal
When an insurance provider refuses your claim, you don’t always have to take them at their word. “Many customers are put off by the enormous amount of paperwork involved in appealing. Get a lawyer involved early on.”

Claim deadlines
That said, it pays to understand the most common reasons for claim denials. Know the deadlines – an auto insurance claim should usually be submitted within seven days of an accident (unless you’re in hospital). And don’t forget to file under the correct policy.”If your golf clubs were stolen out of your car don’t claim the loss with your auto insurer, they’d be covered by your home insurance.”

Disability insurance
One in four Canadians will be disabled for three months or more before age 65. Depending on your age, your future income-earning ability may be worth more than your house, making disability insurance critical.

Critical vs LTD coverage
Know the difference between critical illness and long-term disability (LTD) coverage. Critical illness only pays out a lump sum if you get one of a list of diseases, while LTD gives you coverage on monthly basis for the rest of your working life.

Term vs Life insurance
Your mortgage provider may offer you insurance that handles your payments if you die, but this coverage decreases as you pay down the premium. It’s better to buy term life insurance privately, where the death benefit stays the same over time.

Pet insurance
Considering pet insurance? Be aware that certain breeds of dogs prone to health problems –like pugs or bulldogs–won’t be covered for their “pre-existing” medical conditions.” Set aside $50 month in a pet emergency fund instead.

Consider increasing your coverage
Skimping on auto coverage isn’t worth it, especially if you run into an 18-wheeler. Increasing your limit from $1 million to $2 million only costs an extra $50 or so per year. Installing a security system, updating your wiring and pipes and getting rid of old appliances are three surefire ways to reduce your home insurance premiums by up to 20 per cent.

Renewal reductions?
When your policy comes up for renewal, ask how to save money without cutting year coverage. ‘The longer you go without making a claim, the greater the discount your insurer can offer you.

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