Understanding the Basics of Insurance

Insurance can be a little confusing and honestly a little intimidating. That’s why we at HRC are here to help you understand the basics behind insurance.

 

What is insurance?

Insurance is a practice or arrangement by which a company or government agency provides a guarantee of compensation for specified loss, damage, illness, or death in return for a payment of a premium.

In other words, if something goes wrong in your life (car gets stolen, broken leg, house floods, etc.), insurance will be there to cover the cost with the right coverage.

Basic Terminology

To make this article a little more understandable, here’s a list of basic terminology and what they mean:

Agent:            

Someone who represents one insurance company and sells its insurance products to clients

Broker:

Someone who sells insurance products of several different insurance companies to clients

Claim:

Official notice you provide to your insurer requesting to be paid for a loss or event covered by your policy

Coverage:

Amount of protection you have purchased

  • Maximum amount of money the insurance company will pay you if you make a claim

Exclusions:

Things that are NOT covered by your policy

  • Make sure you read your policy very carefully to see what your policy covers

Insured:

Person(s) protected by a policy

Insurer:

Insurance company issuing the policy

Policy:

Legal contract between insured and the insurer. This includes:

  • Risks covered

  • Circumstances the insurer will pay the insured

  • Type of benefit

Policy Holder:

Persons(s) who own policy (usually the insurer)

Premium:

Amount you pay to buy insurance

  • Paid monthly/quarterly/annually

  • May change overtime

Risk:

Probability of an event occurring to the insured while policy is in effect

  • Loss

  • Injury

  • death

How Insurance Works

Insurance companies can be compared to a Casino. A casino must be able to cover every played chip on the floor. Like a Casino, insurance companies must have a certain amount of capital / money on hand for every policy they sell.

Insurance companies estimate an annual cost or “premium” to accept all risk of compensation for specified loss, damage, illness, or death. The insured pays a monthly or annual premium to the insurer in return for assuming all risks on the insured’s behalf. The insurer then puts all premiums in one large pool. This pool then gets invested and whenever a claim is made, the payment to the insured comes from the pool.

Why You Need Insurance

Insurance, in a nutshell, is a way of managing risks. While some insurance policies are mandatory if want to own a home or a vehicle, other policies can be purchased for extra protection to you, your family, and your possessions.

Insurance helps you:

  • Own a home

  • Own a vehicle

  • Maintain standard of living in case of medical condition

  • Cover health care costs in case of emergency

  • Provide for family in case of death

  • And plenty more scenarios

Few people would be able to cover costs such as car repairs, health care costs, or even legal expenses in emergency situations. This is where insurance can become your best friend to help cover the costs!

How Rates Are Calculated

Here at HRC we usually have to answer some pretty tough questions. One of the most asked questions we get is, “why are my premiums changing?” This can be explained over several reasons:

For home insurance premiums, rates will reflect:

  • Neighbourhood risk of sewer backup

  • Crime rate

  • Distance to fire hydrant / fire department

  • Value of property

  • Insurance history

  • Claims history on house

For Auto Insurance, rates will reflect:

  • Safety/theft statistics in area

  • Safety features and statistics of your vehicle

  • Year/make of vehicle model

  • Whether the vehicle is for personal or business reasons

  • Driving offense history

  • Years with licence

Rates may also change for all types of insurance due to possible qualifications for discounts. Government regulations, taxes, etc. may also change resulting in a change in premiums.

What Happens When I Need To Make a Claim?

  1. Call your insurer

  2. Claims representative will contact you for damage/losses

  3. Claims representative will discuss the options available on how to settle the claim

  4. Claims representative will look after your billing and paper work

  5. You receive payment according to policy

Myths

“Too many parking tickets will increase my premiums”

  • NO, parking tickets have no impact on your rates. (This doesn’t mean you shouldn’t pay them!)

 

“The number of car doors is the most important factor in determining my premiums”

  • NO, a single feature of a vehicle will not depict the premiums you pay. Claim history, vehicle value, likelihood of theft, repair costs, and more will determine your premiums.

 

“Auto insurance will not cover a stolen vehicle if a door was left unlocked or the keys were left in ignition”

  • In reality, the vehicle would normally be covered under comprehensive, perils, and specified perils policies. However, items in the vehicle that get stolen would only be covered under your home insurance policy.



Since the 1900's...

Born under the name George Hutcheson, Hutcheson, Reynolds & Caswell Ltd. began providing insurance policies in Muskoka since the early 1900s. Bernard Reynolds joined the firm in the 1940s and purchased the firm from George Hutcheson in 1967. Finally, in 1980, David Caswell joined the company's ranks to complete Hutcheson, Reynolds and Caswell. We have grown along with our name and provide the same dedication to superior customer service and top-notch insurance coverage that George Hutcheson was famous for over 100 years ago.