8 Essential Types of Insurance Everyone Needs

No one ever plans to get sick or have an accident, but sometimes these things just happen. That’s why it’s important to have insurance – so that you’re not left with a huge bill that you can’t afford to pay.

In this article, we’ll talk about the 8 essential types of insurance and how they can benefit you.

types-of-insurance

8 Types of Insurance Everyone Should Consider Getting

Whether you’re a student, a senior citizen, or someone who just wants to be prepared for anything, let’s take a look at the different types of insurance available in Canada.

Life Insurance

If you’re the breadwinner of your family, life insurance is an absolute must, yet about 40% of Canadians do not own life insurance.

Life insurance plans in Canada cover the policyholder for a set period of time, usually until they reach the age of 65 or 70. The death benefit pays out a lump sum to the beneficiaries, which can be used to pay off debts, cover funeral costs, esteem taxes, or simply help with everyday living expenses.

What is more, a solid life policy can even insure against business loss and continue to support a family after the policyholder’s death.

There are two main types of life insurance in Canada:

Term Life Insurance

Term insurance covers you for a set period of time, usually between five and 30 years. It’s the most affordable option, but it doesn’t build up any cash value.

Permanent Life Insurance

Permanent insurance covers you for your entire life. It’s more expensive than term life insurance, but it does build up cash value over time that you can borrow against or cash in.

Health Insurance

With the rising costs of health care, having health insurance is now more important than ever.

There are two types of health insurance packages:

Public Health Insurance

Provided by the government and available to all Canadian citizens and permanent residents, public health insurance covers hospital services, medical services from a licensed physician, and some prescriptions.

In Canada, health insurance is provided by provincial and territorial governments. Each province and territory has its own plan, which covers residents for medically necessary hospital and physician services.

If you’re a Canadian citizen or permanent resident, you’re automatically covered by your province or territory’s health insurance plan. If you’re a temporary resident, you might be covered by a health insurance plan, but it depends on your visa type.

Private Health Insurance

This type of coverage is provided by private companies and covers services that are not covered by public health insurance, such as prescription drugs, dental care, and vision care.

When it comes to private health insurance, you can usually find the following two types of insurance:

Employer-sponsored health insurance: offered by some employers and usually covers the employee and their families.

Individual health insurance: purchased by an individual and usually covers the policyholder only.

Car Insurance

Let’s begin by clarifying that car insurance is mandatory in Canada, which is probably why it has the biggest share of the whole insurance market – 40%.

Car insurance covers the cost of damage to your car, as well as the costs of any injuries or property damage that you or your passengers may suffer in an accident. It also covers you if your car is stolen or damaged by weather events such as hail, floods, or fires.

Individuals can choose from the following two types of car insurance policies:

Liability Insurance

Liability insurance covers the costs of any injuries or property damage that you or your passengers may suffer in an accident for which you are at fault. It does not cover the cost of damage to your own car, though.

Collision and Comprehensive Insurance

This type of insurance covers the cost of damage to your own car, regardless of who is at fault in an accident. It also covers the cost of any repairs that are needed as a result of weather events or theft.

Property Insurance

Property insurance protects you from the financial losses that can result from damage to your home, apartment, or condo. These types of policies also cover the contents of your home, such as your furniture, clothing, and appliances.

Property insurance is essential to individuals who operate with multiple real estate assets, but regular homeowners can also benefit from it too. In the event of major devastations such as floods, fires or any other type of home-wrecking catastrophe, property insurance kicks in and takes care of the costs.

types-of-insurance

Renters Insurance

Renters insurance is for people who rent their homes. It covers your personal belongings in the event that they are damaged or stolen. What is more, this specific type of insurance also provides liability coverage in the event that someone is injured while visiting or residing on your property.

While renters insurance is not required by law, it’s still a good idea to have, especially if you live in an apartment or condo, which is subject to thefts.

Umbrella Insurance

Umbrella insurance is a type of liability insurance that provides coverage above and beyond the limits of your other protected insurance policies, such as your car insurance or homeowners insurance.

For example, if you are sued for damages that exceed the limits of your car insurance policy, umbrella insurance would cover the additional costs.

Umbrella insurance is also not mandatory but may come in handy if you have assets that could be at risk, such as a home or a car.

Travel Insurance

Travel insurance usually covers medical expenses, trip cancellation, and other losses that can occur while you are travelling. You might have stumbled upon travel insurance policies in Canada while browsing for credit cards, but it’s definitely not enough.

It’s important to note that travel insurance is not the same as health insurance, which only covers medical expenses. However, travel insurance doesn’t cover everything – there are usually exclusions for pre-existing medical conditions, as well as for risky activities such as bungee jumping or sky diving.

However, most travel insurance products cover evacuation and immediate transportation home, trip interruption or cancellation and lost or delayed baggage.

Some types of travel insurance also cover missed connections, rental car collisions, and even pet emergencies.

Pet Insurance

Pet insurance usually covers the cost of veterinary care for your pet, but it can also cover anything from routine check-ups to emergency surgeries, depending on the type of coverage.

Much like human health insurance, pet insurance comes in different forms with different coverage levels and deductibles. Some policies even cover preventive care, such as vaccinations and spaying/neutering.

Pet insurance is a good idea for pet owners, especially those with dogs or cats, as veterinary bills can be very expensive.

Specific Insurance Types in Canada for the Most Meticulous Among Us

Now that we’ve covered the basics, let’s check out some more options for those of you looking for comprehensive protection.

Flood Insurance

A type of insurance that covers the cost of damage caused by floods.

There are two types of flood insurance: government-sponsored and private. Government-sponsored flood insurance is typically cheaper, but it only covers residential properties and not commercial ones. Private flood insurance is more expensive but covers both residential and commercial properties.

A similar type of coverage would be earthquake insurance, which naturally, covers the costs caused by earthquake damage.

Unregistered Motorist Insurance

If you live in a province with a high number of uninsured drivers, such as Quebec or British Columbia, this coverage type could be a life-saver. Should you be subject to injuries caused by an unregistered motorist, this handy little insurance type can cover the costs.

Broad Insurance

This one is among the most popular types of policies in Canada. It’s a mix between auto and home insurance and it covers a wider range of risks than either one alone.

It’s a bit more expensive, but worth it if you own an expensive car and house.

Mortgage Insurance

This is something that you might want to consider if you have a high-risk job or if you’re self-employed. Mortgage insurance protects your lender in case you can’t make your mortgage payments and it also allows you to get a lower interest rate.

Title Insurance

This is one of the most detailed types of insurance in Canada. Simply put, it protects you from losses that might occur if the title to your property is inaccurate.

For example, if you buy a house and it turns out that the previous owner still has a mortgage on the property, you could be sued for foreclosure. Title insurance would cover the costs in this case.

Disability Insurance

A type of insurance that covers the cost of your living expenses if you become disabled and unable to work.

There are two types of disability insurance: short-term and long-term. Short-term disability insurance typically covers up to 26 weeks, while long-term disability insurance can cover you for years or even until retirement.

Critical Illness Insurance

This is one of the smartest investments, yet, one of the most neglected insurance products. Critical illness insurance pays a lump sum if you are diagnosed with a critical illness, such as cancer, heart disease, or stroke.

This type of insurance can be used to cover the cost of treatment, living expenses, or anything else you might need.

Mobile Insurance

Mobile coverage is becoming increasingly popular as the price of smartphones continues to rise.

This one covers the expenses in the event that your mobile device is stolen or damaged, making it one of the most useful types of insurance coverage in this day and age.

Cycle Insurance

If you ride your bike commonly, cycle insurance is a must.

Should you happen to experience a bicycle accident or if your bike gets damaged or stolen, this type of insurance will cover the costs.

How to Buy Insurance?

Did you pick your favourite? Great! Let’s talk about how to purchase it.

types-of-insurance

 

Financial Advisors

The first step would be to speak with a financial advisor.

They will help you understand what types of insurance are available and which ones make the most sense for you based on your needs.

Insurance Broker

Another option would be to contact an insurance broker.

Insurance brokers are licensed professionals who work with multiple insurance companies to find the best coverage for their clients.

Insurance Company

You can also purchase insurance policies directly from an insurance company.

The downside of this is that you only have access to the products offered by that particular company, and you won’t be able to compare rates.

Wrapping It Up

As you can see, there are many different types of insurance available to Canadian residents.

While some types of insurance are more common than others, all of them serve a purpose and can be very helpful in the event that something goes wrong.

FAQ

Is mortgage insurance mandatory in Canada?

No, mortgage insurance is not mandatory in Canada. However, if you are self-employed or have a high-risk job, your lender may require you to purchase it.

Is car insurance mandatory in Canada?

Yes, car insurance is mandatory in all Canadian provinces and territories.

How much liability insurance should I have in Canada?

The minimum amount of liability insurance required in Canada is $200,000. However, it’s recommended that you purchase at least $500,000 worth of coverage.

When should I get life insurance?

Most financial advisors recommend that you purchase life insurance when you have dependents or if you have a mortgage. You can look for different types of insurance if you do not fit into these categories.

ABOUT AUTHOR

When Biljana first started off her career, she was focused on economics, which was also her area of professional study. However, in time, she started to familiarize herself with the concept of insurance, which instantly struck a chord, allowing her to constantly upgrade her knowledge and eventually become an insurance aficionado. When she's not writing, she loves to go on hikes and explore various natural surroundings.

Latest from this author

How Much is Boat Insurance in Ontario? 2022’s Guide To Smooth Sailing What Is a Third-Party Insurance for a Car in Canada? How Long Does an Accident Stay on Your Record in Ontario? How to Get Renters Insurance in Canada?

Leave a Reply

Your email address will not be published.