bout de papier, Vol. 5, No. 1 (1987) — Spring 1987 // Printemps 1987, p. 48
This year almost every reader of bout de papier will purchase or renew some form of insurance benefits. The annual cost to the average family for all types of insurance will be over $2,000.!! and this is before any business insurance costs are tallied.
For the average Canadian, almost 10% of take-home pay is spent on insurance benefits. I am going to list some of the many forms of insurance and you can add up the costs for yourself:
1. Car insurance
2. Home or apartment insurance
3. O.H.I.P.
4. Group insurance plan at work
5. Life Insurance
6. Creditor insurance on your bank loan
7. Mortgage insurance
8. Warranty costs (car, appliances, furnace, etc.)
9. Credit card coverage (as part of the annual fees)
10. Miscellaneous: such as Auto Club memberships and travel insurance.
Insurance is taken for granted as a necessity of life and as such we all pay our premiums faithfully each year, when in many cases we are not sure of what we have purchased. For instance, did you know that many of you have probably never seen an automobile insurance policy? It is called an S.P.F. #1 (Standard Policy Form) and is usually in the form of a 20-page booklet. That represents 20 pages of “small print” which include information, provisions, definitions and exclusions that are critical to each and every person who drives an automobile.
To give you an idea of some common misconceptions about automobile insurance, the following are examples of potentially disastrous situations:
1. No grace period for premium payment. A London, Ontario motorist had to pay $30,764.00 because his claim occurred 18 hours after his renewal date and his premium had not been paid.
2. Policies must be issued to the registered vehicle owner.
An Oshawa motorist was responsible for a $20,000.00 injury claim because the insurance policy was issued in the name of his girl friend in an attempt to reduce his insurance costs. As she had no “beneficial interest”
48 bout de papier Vol. his vehicle, the claim was denied and the premiums were subsequently refunded
3. Impaired driving • invalidates collision coverage.
A Toronto motorist who “had a few beers” had to pay $18,670.00 to replace his new car because the collision section of his policy is not valid when driving while impaired.
These are three rather simplistic situations in which any one of us could find ourselves, and they stress the importance of knowing exactly what coverage our insurance provides. As car insurance is the most common form of insurance benefits, the following tips may prove helpful when you make your purchase decision.
Coverages:
Liability: The Province of Ontario requires a minimum liability limit of $200,000. This is far too low, when compared with recent court settlements, and a minimum of $1,000,000. coverage should be purchased. Recent legislation has allowed family members of a claimant to sue for damages as well as the “injured party” (for example, loss of enjoyment of a father) and we expect even higher court settlements in the future. The good news is that the higher liability coverage limits are very inexpensive — ranging from $8. to $48. in additional premium per year.
Collision: Insurance companies are losing money and the statistics show that much of their cost is related to small claims where the expenses often exceed the actual claim value. As a result, most companies have revised their rate structures to make a $250. deductible more attractive than the $100 deductible. I have seen cases where the difference insured ($150.) has actually cost more than $150. We recommend a $250. deductible on your collision benefits and, in any event you should get quotations on both benefit levels before making your buying decision.
Comprehensive: Fire, Theft, Vandalism and Windshield claims are also subject to the high costs and frequency found in the collision coverage. Most insurers have already increased their deductible to $50. from $25. and future changes are likely in an attempt to lessen the effect of the many vandalism claims. One positive effect is that insurers are also becoming very sophisticated in the prevention of fraudulent claims which have become an increasing concern over the past few years. (Those of you who are interested should request information on “All Perils” coverage which lowers your premium through higher deductible levels, such as $250., $500. or $1,000. on both collision and comprehensive benefits.)
For the average Canadian, almost 10% of take-home pay is spent on insurance benefits.
Other Benefits:
Loss of Use: This benefit provides up to $500. for a rental car if your vehicle is laid up for repairs following a claim. Reimbursement would also be made for taxicabs and the cost of other means of transportation. If you must have the use of a vehicle on a daily basis, the $25/year cost of this coverage is well spent.
Family Protection Endorsement: The Unsatisfied Judgement Fund no longer exists, and this endorsement to your automobile policy, in part, replaces the benefits the Fund formerly provided. This is a must buy at a cost of approximately $30/year.
Waiver of Depreciation Endorsement: This endorsement applies only to new car owners during the first 24 months of vehicle ownership. In it, the insurance company agrees to pay the full original cost of your vehicle without assessing charges for “wear and tear”.. For a premium in the area of $30/year you will, in most cases, be able to buy a new car to replace the one damaged.
Your insurance counsellor can give you full details on these and other coverages, and you should check your policy to make sure what is included
All in all, automobile insurance is fairly simple since all persons residing in Ontario have the identical policy and only the limits and “add on” benefits vary. When you shop for your insurance, beware of the above items and beware of such phrases as “Champion Risk, 6 Star Driver, Super Discount, and Golden Plan”. The bottom line cost is your main objective. Choose a solid insurer with a good claims record on payments and, when you have the best price, pay your premiums monthly if there are no interest or carrying charges. A pre-authorized cheque plan is perhaps the best investment of all.
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Originally published in bout de papier, Vol. 5, No. 1 (1987) — Spring 1987 // Printemps 1987, p. 48. Read the rest of this issue →
