Insurance

Insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the insurance; the insured, or policyholder, is the person or entity buying the insurance policy. The amount to be charged for a certain amount of insurance coverage is called the premium.

A common question is why do I need insurance? If you own things that will be very hard to replace without facing severe financial hardship, you need insurance. You just have to get some stuff stolen from your home, or damage your car, or become disabled, or die to justify having insurance.

Personal insurance

 * Accidental death & dismemberment insurance
 * Annuities
 * Dental insurance
 * Disability insurance
 * Extended health insurance
 * Life insurance
 * Long term care insurance
 * Travel insurance

Property and casualty insurance

 * Auto insurance
 * Deposit insurance
 * Home insurance
 * Mortgage insurance
 * Tenant insurance
 * Title insurance

What things should I insure?
How's your health? Could you afford to lose it? If you become sick or disabled, temporarily or permanently, would you be able to support yourself?

How about your life? If you were to die suddenly, what kind of financial hardship would result? Would there be dependents left without basic support? Would your burial costs impose undue hardship on others?

What if you own a car, home, or other personal possessions outright? Start by thinking about which of these are the most valuable. If these valuables were damaged or lost by accident or theft, would this lead to severe financial hardship?

What isn't worth insuring?
Insurance companies expect, in aggregate, to make money on the insurance that they offer. Generally, insuring things that you can easily afford to replace is a waste of money. For example, extended-warranty contracts on minor items are insurance, and it is likely not worthwhile to purchase such contracts for a DVD player or microwave oven. Also, collision insurance on a car may not be needed once it is several years old.

What kinds of insurance should I probably avoid?

 * Mortgage life insurance. An alternative to consider is term insurance.
 * Flight insurance - The odds of being killed in a plane crash are between 1 in 1.13 million for the bottom 25 airlines with the worst records and 1 in 13.57 million for the top 25 airlines with the best records.
 * Insurance on outstanding credit card balances. This can be expensive for the coverage you get and may be redundant if you have adequate life and disability insurance.

As with everything, there are exceptions. The individual should examine his own situation to determine whether or not he needs these types on insurance.

Insurance quotes
While price matters, it's not the only concern. The price may be right but the insurance issuer may not be if you can't get anywhere on a claim. Make sure that your insurance, especially long term relationships such as with life, disability, or long-term care, is with healthy companies. Company financial ratings are provided by A.M. Best, DBRS, Moody's and Standard & Poor's.

For general information on buying insurance, see Getting an insurance policy -- Financial Consumer Agency of Canada.

Organizations offering formal complaint registration and resolution procedures

 * General Insurance Ombudservice
 * Canadian Life and Health Insurance Association
 * Financial Services Commission of Ontario
 * Registered Insurance Brokers of Ontario
 * Provincial Insurance Council (Alberta)
 * Provincial Insurance Council (British Columbia)
 * Provincial Insurance Council (Manitoba)
 * Autorité des marchés financiers (Quebec)
 * Provincial Insurance Council (Saskatchewan)

Suggested reading
Moshe A. Milevsky and Aron A. Gottesman, Insurance Logic, Captus Press, 2005.