Consumer Insurance Buying Tips

No-one looks forward to buying or renewing insurance coverage, but here are some tips to make the process a little easier.

• Ask your insurance provider what the policy doesn't cover. The perils that are not covered are called "exclusions," and every policy has them. Find out what they are now, rather than at claims time. They are listed on your insurance policy (but how many of us bother to read that?) Therefore, ask your insurance provider to explain the exclusions before you buy the policy. That's what he or she is paid to do. In the case of life insurance, ask about guaranteed highest and lowest premiums, history of price increases, and interest rate assumptions.
• Generally, you get what you pay for. If you're shopping around, make sure you're always comparing apples with apples -- not all insurance policies are alike. And, while minor price variation among companies offering similar kinds of coverage is likely, if one insurer is charging substantially less, beware. It may not be the ideal company to deal with at claims time.
• Don't cancel your policy by not paying your premium. You will be considered a "bad risk" for default of payment, and charged a higher rate. If you decide not to renew your insurance, notify the insurer in writing.
• Don't switch insurance providers before your policy comes up for renewal, as you will likely have to pay a penalty for cancelling your coverage prematurely. The amount of the penalty will vary, depending on how many months are left on your policy when you cancel it. The more time remaining, the higher the penalty.The worst thing you could do is buy insurance from one company, and then change your mind and buy from another. The penalty in that case would be very high, since the policy has been in place such a short time.
• Don't switch insurance companies too frequently. For all its sophisticated technology, insurance remains a matter of trust and good faith. Therefore, insurers are not inclined to give the benefit of the doubt to those they do not know. If, on the other hand, you have established a good record with one company, it should stand you in good stead at claims time, or at least put you on firmer ground.
• Don't sweat the small stuff. In the case of home and automobile insurance, that means don't make too many small claims, because each one goes on your record, regardless of the size. Too many claims, even if they weren't all your fault, could result in non-renewal of your coverage.
• Review your insurance needs on a yearly basis. Your circumstances may have changed during the year, and some of these changes should be reflected in your insurance coverage. Don't wait for your insurance provider to ask – most don't.
• Don't intentionally, or even unintentionally, "omit" any details on your insurance application. For instance, if you tell your life insurer that you're a non-smoker, even smoking a few cigarettes a month could result in cancellation of your policy or, worse, denial of a claim. The same holds true if you don't come clean about a pre-existing condition on your travel insurance application. Likewise for automobile or property insurance. Insurers have access to several databases that they can use to check up on your driving and claims history, even if you move to another province, so honesty is the best policy.
• Take steps to prevent losses from occurring in the first place. This is called "risk management." It could be something as simple as installling deadbolt locks on your door to prevent burglaries, in the case of home insurance; or purchasing a car equipped with the latest safety and anti-theft devices. The more measures you take to protect yourself and your property, the less you will have to rely on your insurance, and the less it will cost you in the long run.

This material excerpted from The Insurance Book: What Canadians Really Need To Know Before Buying Insurance, by Sally Praskey and Helena Moncrieff