Call Us (905) 212-7007
Fax Us (905) 212-9275

Email Us anytime 24/7

Archive for April, 2017

The Lowdown on deductibles — Economical Insurance.

Fri, 7th April, 2017 - Posted by - Comments Off on The Lowdown on deductibles — Economical Insurance.

 

The lowdown on deductibles

Written by Stephanie Fereiro  |  Published on: February 7, 2017  |  Categories: Insurance, Car insurance, Home insurance

_

Have you ever looked through your insurance policy and felt like you were reading another language? Understanding insurance terminology might seem intimidating, but we’re working on changing that. Let us break down “deductibles” for you.

What is a deductible?

In your insurance policy, the “deductible” is the amount that you agree to pay out of your own pocket before your insurer will step in and pay the remaining balance of a claim.

Picture this: A tree branch falls on the roof of your car, and the repair bill is $1,500. If your deductible is $300, you’ll pay $300 to the repair shop and your insurer will pay the remaining $1,200. If your car is totaled or not worth repairing, your insurer may pay you the actual cash value of your car instead — in this case, your deductible would be subtracted from the total payout.

You’ll usually have some say in the amount of your deductible, and the amount (as well as any rules or exceptions) will be clearly stated in your policy.

Do I have to pay a deductible every time I make a claim?

Not necessarily:

  • If your deductible is $0, you won’t have to pay for any portion of your approved repairs or settlement amount.
  • Some policies will waive your deductible when certain circumstances apply. When your total claim hits a certain dollar value, for example, you might not have to pay your deductible.
    • Picture this: After a fire, you make a home insurance claim of $50,000 for repairs. Your home insurance deductible is $1,000, but your policy states that this deductible doesn’t apply if a single claim adds up to more than $25,000. In this case, since the claim is more than $25,000, you don’t have to pay your deductible.
  • Some policies have different deductible amounts for different types of coverage, which means that you may or may not have to pay, depending on the coverage you use for that specific claim. And, if your insurer determines that your claim will be covered by more than one section of your policy, they’ll do the math and determine how much of your deductible you’ll need to pay.
    • Picture this: Your car insurance policy says that your deductible is $0 when an accident isn’t your fault and $500 when it is your fault. You get in a fender-bender on the way to work and your insurer determines the accident was the other driver’s fault, so they decide to fully cover the damage to your vehicle (up to your policy’s limit, of course) — so you pay $0. In this same situation, if your insurer determined that you and the other driver were equally responsible, you may only have to pay 50% of your deductible — in this case, you’d pay $250. But if your insurer determined the accident was entirely your fault, you’d be on the hook for $500.

Why do deductibles exist?

Now, you may be wondering why insurance companies build deductibles into their policies in the first place — and it’s a good question. Long story short, deductibles exist to keep insurance as affordable as possible.

Here are just a few ways deductibles work to save you money in the long run:

  1. Preventing fraudulent claims and reckless behaviour. If insurance policies didn’t have deductibles in place, some people could be tempted to damage their own things or act recklessly (two behaviours known as “moral hazards” in the insurance world) just because they know their insurer will protect them. This becomes less tempting when they know that part of the repair bill will come out of their own pocket. Over time, false claim payouts can lead to higher premiums for everyone who has insurance, and implementing deductibles is just one way of preventing them.
  2. Preventing minor claims. If an insurance company had to process a $50 claim every time someone found a tiny scratch on their car door, they would need to employ a lot more people — and that could drive up the cost of insurance, since the cost of processing these small claims would far outweigh the actual cost of the repairs. Deductibles help keep minor claims at bay.
  3. Keeping your money in your pocket. When you choose a deductible, you’re agreeing to either fully cover those smaller claims or cover a portion of your repair costs for larger claims. When your insurer doesn’t need to invest in processing those smaller claims or paying the full amount, they’re able to share those savings with you through lower premiums.

How do I know if I’ve chosen the right deductible?

The best way to figure out if your deductible is right for you is to ask yourself one simple question: Would you be comfortable paying the deductible amount out of your own pocket if you made a claim today? If you choose a lower deductible, you’ll be responsible for footing less of the bill if you make a claim — but the cost of your insurance could be a little higher. On the other hand, if you choose a higher deductible, the cost of your insurance will likely be lower — but don’t forget that you’ll be expected to pay the deductible if you make a claim.

Note: Rules and regulations can vary by province, and claims are handled according to the location where the accident occurs — not necessarily the rules in your home province. That means the amount you need to pay for your deductible could be different if you’re involved in an accident outside of your home province

Category : Uncategorized

Replacement Cost vs. actual cash Value.

Fri, 7th April, 2017 - Posted by - Comments Off on Replacement Cost vs. actual cash Value.

 

Replacement cost vs. actual cash value

Written by Stephanie Fereiro  |  Published on: February 16, 2017  |  Categories: Insurance, Car insurance, Home insurance

_

“Replacement cost” and “actual cash value” are two of the most common calculations insurers use to determine the amount a customer will receive if they make a home or car insurance claim. In other words, you could either be reimbursed for the cost to replace the lost or damaged item or its actual cash value, depending on what it says in your policy. So, what’s the difference? And how do these calculations really apply when you make a claim? Let’s have a look.

Replacement cost

If your policy says it will cover the replacement cost of an item that is lost or damaged, the dollar amount you’ll be paid is equal to the cost you’d need to replace that item with a new, similar product of like kind and quality. Since insurance is designed to get you back to the same position you were in just before a loss, your insurer will do some research and determine how much it would cost to replace the item with a new one that is as comparable as possible — no more, no less.

Actual cash value

If your policy is set up to cover the actual cash value of an item that is lost or damaged, the dollar amount you’ll be paid is equal to how much the item is worth today. This considers the original price you paid for the item, but it also considers depreciation (the natural decrease in an item’s value over time, usually due to wear and tear) and the physical condition the item was in on the day of the loss. Most insurance companies will use standard guidelines (known as “depreciation tables” in the insurance world) to determine an item’s actual cash value — or they’ll contact a professional retailer or appraiser to determine what a similar used item would cost to buy.

The premium you pay when you have an actual cash value policy may be lower since the reimbursement you’d receive in the event of a claim is generally much less than you’d receive with a replacement cost policy.

How do replacement cost and actual cash value work in real life?

Keep in mind that these examples are intended to give you a basic understanding of how actual cash value and replacement cost work. If you have specific questions about your policy, please talk to your licensed insurance broker.

Picture this: A pipe in your basement springs a leak and damages the sewing machine you purchased 30 years ago for $500. After consulting a professional sewing machine technician, your insurer informs you that the machine is damaged beyond repair. So, how much will you be reimbursed?

With replacement cost:

You’ll be reimbursed for the value of a new sewing machine of a like kind and quality to the one that was destroyed in the flood. In this case, you may be able to purchase a new sewing machine for around $800.

With actual cash value:

You’ll be reimbursed for the value of a similar 30-year-old sewing machine in the same condition as the one that was destroyed in the flood. In this case, you might receive around $80.

Picture this: A rear-end collision on your way home from work lands your two-year-old SUV in the shop. After receiving an estimate for the repairs, your insurer decides your vehicle isn’t worth repairing. How much will you be reimbursed?

With replacement cost:
While most car insurance policies only allow for actual cash value, some insurers may allow you to add special coverage to your policy that takes depreciation out of the equation (similar to how replacement cost works in home insurance). If this is part of your coverage, a settlement from your insurer could help you replace your SUV with a new version of the same model (or a comparable one) or you could receive a cheque for the amount you originally paid for it.
With actual cash value:
You’ll be reimbursed for the amount your insurer determines you would need to buy a two-year-old SUV of a like kind and quality, in the same condition your own vehicle was in immediately before the accident occurred. In this case, you may receive around $48,000 to put towards a new vehicle (instead of the $70,000 you originally paid for it).
Category : Uncategorized

Don’t be afraid to ask!

When it comes to insurance, there is no question too basic. If there is anything you don’t understand, don’t be afraid to ask us. We are here to help. Contact us today! »

Subscribe

Subscribe via RSS Feed Reader

Contact Us

Tel: (905) 212-7007
Fax: (905) 212-9275

Email Us 24/7