Insurance 101: How insurance works in Canada

Learn the basics of insurance in Canada and how to get the coverage you need for your home, car, or business.

March 28, 2024

As a newcomer to Canada, there’s likely a lot on your to-do list. Planning where to settle down, finding transportation options, starting a new career — it’s an exciting, busy time. As you begin this new chapter, take sometime to learn about the basics of Canadian insurance for your home, car, and business so you can confidently pick the right coverage for you and your new life here.

Q: Why do I need insurance?

A: Insurance helps protect you and your loved ones from certain financial risks. As a legal contract between you and your insurance company, your insurance policy helps cover costs if something unexpected happens to your:

  • Vehicle
  • Owned or rented home
  • Belongings
  • Business

Q: How does insurance work?

A: Your insurance company estimates how much it costs each year to accept the risk of insuring your home, car, or business, and charges you a premium based on the type of risk and how many losses your insurer thinks they’ll have to cover in the upcoming year for risks similar to yours. Depending on your insurer, you’ll pay for your policy through a monthly or annual premium in exchange for financial protection against loss or damage of the insured property.  

Your insurer collects all the premiums from every customer into one large pool of money and uses those funds to pay out the losses for those who make insurance claims in that year.

Q: How much insurance do I need?

A: Your insurance policy renews every year, so if you’re renewing your policy or purchasing a policy for the first time, you need to continuously reevaluate your needs to make sure you have the right coverage. Work with a licensed insurance broker to compare coverage options and find the best option possible.

Here are some questions to ask yourself when shopping for insurance:

  1. What coverage is mandatory for my car, home, or business?
  2. What’s the replacement value of my property?
  3. What risks are unique to my location, vehicle, or business?
  4. What am I already doing to reduce risks?

Q: How can I save on insurance?

A: Work with a licensed insurance broker to compare exact coverage options from different insurance companies and find any discounts you may qualify for. Here are a few other ways you can decrease your insurance rates:

  • See if paying a higher deductible will decrease your premium
  • Learn how making a claim may affect your insurance rates and be extra cautious to keep a clean insurance record
  • Take extra steps to prevent damage and theft to your home, car, or business (Tip —installing a security system or anti-theft device may qualify you for an insurance discount)
  • Bundling multiple insurance policies with one insurer could qualify you for additional savings or discounts for being a loyal customer  
  • See if you qualify for group discounts through your school, employer, or association

Insurance is an important tool to help protect your investments and reduce stress — so try not to stress too much when shopping for it! Make shopping for insurance as easy as possible by finding a licensed insurance broker near you to get all your questions answered.

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