Understanding your insurance coverage
If you’re like many Albertans, you have a variety of insurance products. But you may not fully understand exactly what they protect you against, and what they provide for. It’s difficult to identify if you have any insurance gaps or duplications unless you take the time to really understand what you have and what you need. A gap in insurance coverage leaves you at financial risk if a circumstance arises where you need insurance and it’s not there. And paying for duplicate or unnecessary insurance can significantly reduce your monthly cash flow and ability to save for the future.
So how do you begin to make sense of your insurance? Here are four simple steps:
1. Figure out exactly what coverage you currently have
Gather and read copies of all of your insurance policies that are in effect. Include insurance for your home, automobile, life and disability, long-term care, and anything else you may have. Pay special attention to the coverage circumstances, costs, and pay-out details. Make sure you are not paying twice for similar coverage.
2. Identify insurance coverage or discounts that may be available to you through your employer
There may be opportunities that you’re not taking advantage of.
3. Think carefully about your insurance coverage needs
If you are the primary income provider for a family, your insurance needs will be different from a single university student. If you own a business, do you need insurance for that? If something happened to your car, how would that affect you or your family? What if something happened to your house? To your health? To your income? Or to another member of your family? Think about the financial and emotional implications.
Once you are comfortable that you understand your insurance needs, look again at what you currently have and identify any gaps that need to be filled.
4. Include insurance costs in your financial plan
Make sure that you fully understand the cost of your insurance products and the protection that they provide. Include all annual or monthly insurance costs in your budget. Identify how often you will review your existing insurance policies to make sure they are still right for you. Some policies you may want to review annually, others every five or ten years.
It’s often a good idea to discuss insurance options with your financial advisor. Once you know that your insurance needs are met, you can relax with the confidence of knowing that you and your family are well prepared.