“Better worry than sorry” Yes, that’s right! You better take precautions because if you do not, you may regret it. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give rise to claims are known as perils. An insurance policy will set out in details which perils are covered by the policy and which are not.
General Info about Insurance
An insurer is a company selling the insurance; the insured, or policyholder, is the person or entity buying the insurance policy. The amount to be charged for a certain amount of insurance coverage is called the premium. The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer’s promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The potential causes of loss are also known as “perils”. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated.
You will find below the non-exhaustive lists of the many different types of insurance that exist. A single policy may cover risks in one or more of the categories set out below. For example, auto insurance would typically cover both the property risk (theft or damage to the vehicle) and the liability risk (legal claims arising from an accident). A home insurance policy typically includes coverage for damage to the home and the owner’s belongings, certain legal claims against the owner, and even a small amount of coverage for medical expenses of guests who are injured on the owner’s property.
Business insurance can take a number of different forms, such as the various kinds of professional liability insurance, also called professional indemnity (PI), and the business owner’s policy (BOP), which packages into one policy many of the kinds of coverage that a business owner needs, in a way analogous to how homeowners’ insurance packages the coverages that a homeowner needs.
Financial Services Commission of Ontario (FSCO)
The Financial Services Commission of Ontario (http://www.fsco.gov.on.ca/ ) is a regulatory agency of the Ontario Ministry of Finance that regulates insurance, pension plans, loan and trust companies, credit unions, mortgage brokering, and co-operative corporations in Ontario.
The Financial Services Commission of Ontario administers the following statutes and regulations:
- Insurance Act
- Compulsory Automobile Insurance Act
- Prepaid Hospital and Medical Services Act
- Registered Insurance Brokers Act
- Motor Vehicle Accident Claims Act
- Co-operative Corporations Act
- Credit Unions and Caisses Populaires Act
- Loan and Trust Corporations Act
- Mortgage Brokerages, Lenders and Administrators Act
- Pension Benefits Act
The Superintendent of Financial Services administers and enforces the Financial Services Commission of Ontario Act, 1997 and all other Acts that confer powers on or assign duties to the Superintendent. The Superintendent also exercises the powers and duties conferred upon the Superintendent by these Acts.
FSCO regulated or registered:
- 362 insurance companies
- 8,569 pension plans
- 166 credit unions and caisses populaires
- 57 loan and trust corporations
- 1,204 mortgage brokerages
- 2,692 mortgage brokers
- 8,800 mortgage agents
- 84 mortgage administrators
- 1,636 co-operative corporations
- 44,236 insurance agents
- 4,420 corporate insurance agencies
- 1,499 insurance adjusters
FSCO licenses and regulates insurers that provide insurance in the province of Ontario to ensure they comply with the law. All Ontario Insurance brokers have to be licensed with the Registered Insurance Brokers of Ontario (RIBO). You can contact RIBO at 416-365-3098 and 1-800-265-3097 or by visiting www.ribo.com
Beware of Fraud and Insurance Scam
The Canadian Anti-fraud Centre, the Financial Services Commission of Ontario, and the Ontario Provincial Police (OPP) are warning people who are seeking and obtaining any kind of insurance, especially – auto insurance, that fraudsters have been advertising fraudulent insurance premiums in Ontario newspapers and on websites. The victims of the scam are not aware that their automobile insurance is not valid until they are involved in a collision or are stopped by police.
The suspicious signs often are: unusually low rates; everyone is accepted; a phony, invalid insurance slip is mailed or emailed to buyers after they have sent their premium through Western Union or Money Gram.
Protect yourself by checking at www.fsco.gov.on.ca or by visiting www.ribo.com if the insurance company, agent or broker is registered in Ontario.
If you suspect you have or are about to purchase fraudulent insurance, please contact your local police service and the Canadian Anti-fraud Centre at 1-888-495-8501.
Auto insurance is a mandatory requirement in Canada. It protects the policyholder against financial loss in the event of an incident involving a vehicle they own, such as in a traffic collision. Coverage typically includes:
- Property coverage, for damage to or theft of the car;
- Liability coverage, for the legal responsibility to others for bodily injury or property damage;
- Medical coverage, for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.
Health care is mainly a constitutional, provincial government responsibility in Canada (the main exceptions being federal government responsibility for services provided to aboriginal peoples covered by treaties, the Royal Canadian Mounted Police, the armed forces, and members of parliament). Consequently each province administers its own health insurance program. The federal government influences health insurance by virtue of its fiscal powers – it transfers cash and tax points to the provinces to help cover the costs of the universal health insurance programs. Under the Canada Health Act, the federal government mandates and enforces the requirement that all people have free access to what are termed “medically necessary services,” defined primarily as care delivered by physicians or in hospitals, and the nursing component of long term residential care.
If provinces allow doctors or institutions to charge patients for medically necessary services, the federal government reduces its payments to the provinces by the amount of the prohibited charges. Collectively, the public provincial health insurance systems in Canada are frequently referred to as Medicare. This public insurance is tax-funded out of general government revenues, although Ontario levy a mandatory premium with flat rates for individuals and families to generate additional revenues – in essence a surtax.
Private health insurance is allowed, but mostly goes towards services not covered or only partially covered by Medicare, such as prescription drugs, dentistry and optometry. All Canadians are free to use private insurance for elective medical services such as laser vision correction surgery, cosmetic surgery, and other non-basic medical procedures. Some 65% of Canadians have some form of supplementary private health insurance; many of them receive it through their employers. Private-sector services not paid for by the government account for nearly 30% of total health care spending.
Critical Illness Insurance
Critical illness insurance is a form of health insurance that provides a lump-sum payment should you become seriously ill. Although they differ from company to company, typical illnesses and diseases covered by critical illness insurance may include:
- heart attack
- multiple sclerosis
- organ transplants
- kidney failure
Coverage can also vary according to the degree of severity of, or conditions associated with, an illness or disease. For example, if you are diagnosed with a type of cancer that is treatable and that results in minimal “down time”, you may not be eligible to make a claim. Coverage cannot be purchased for a pre-existing condition or illness. It is important to read your policy carefully. In addition, be sure to ask your insurance representative to provide you with a complete explanation of your coverage.
In determining your need for critical illness insurance, you should consider benefits that may already be available to you through other insurance policies, such as life insurance and group health insurance. For example, the benefits offered through your employer’s group disability plan may provide appropriate and adequate coverage in the event of a critical illness. You should also consider your personal circumstances and the added financial strain that could be brought about by dealing with a serious illness or disease. Public and private health insurance plans typically do not provide coverage for day-to-day living expenses such as travel to and from treatments, home care and child care.
Generally, the younger and healthier you are, the lower the premium (cost). However, the cost varies depending on your age, medical condition, the amount of coverage, the number of illnesses covered by the policy, and the insurance company.
You can make a claim if a physician, licensed to practice medicine in Canada and specializing in your particular illness, diagnoses you with a critical illness or disease covered by your policy. Generally, a lump-sum benefit payment will be made to you 30 days after the claim has been approved. There are no restrictions on how you use the money. Once your claim is paid, your critical illness insurance policy ceases.
If you die for a reason not covered by the critical illness policy, the premiums you paid may be refunded to your named beneficiary. Some plans will return the premium or a portion of the premiums paid during the life of the policy if the policy matures and no claim has been paid. You are entitled to collect the entire benefit even if you make a full recovery.
Life insurance provides a monetary benefit to a decedent’s family or other designated beneficiary, and may specifically provide for income to an insured person’s family, burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity.
Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies, are regulated as insurance, and require the same kinds of actuarial and investment management expertise that life insurance requires. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance.
Certain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as endowment policies, are designed to pay a lump sum after a specified term (on its ‘maturity’) or on death. Typical maturities are 10, 15 or 20 years up to a certain age limit. Some policies also pay out in the case of critical illness.
Having a concern or complaint about your life or health insurance
For a list of insurance companies that offer health insurance, visit the OmbudService for Life & Health Insurance website (http://www.clhia.ca/ ), or call (416) 777-2221.
The OmbudService for Life & Health Insurance (OLHI) is an independent service that assists consumers with concerns and complaints about life and health insurance products and services. If you are not able to resolve a concern or complaint about any life and health insurance product or service, including critical illness insurance, by dealing with your insurance company, you can contact OLHI, or call 416-777-9002 or 1-888-295-8112.
Under the Insurance Act,the Statutory Accident Benefits Schedule is responsible for providing the accident benefits which are available to everyone who has been injured in a car accident, regardless of fault for the collision. The most commonly-accessed accident benefits (but not limited to) are:
- Income replacement
- Non-earner benefits
- Caregiver costs
- Medical and rehabilitation costs (above OHIP)
- Special Attendant Care
- Housekeeping and Home Maintenance
- Death Benefits
- Travel Expenses
- Lost Education benefits for students
There are some other benefits, such as payments for lost education expenses, the cost of family visiting an injured person during his or her treatment, repair or replacement of eyeglasses or clothing damaged in the accident. The injured person can also be compensated for the non-monetary aspects of the specific injuries that have affected their life. The legal term for that is pain, suffering and loss of amenity.
For more information about unemployment insurance please visit the “Accident Benefit Claims” page in the “Everything About” – “Accident” sections of our website.
Employment Insurance (EI) provides temporary financial assistance to unemployed Canadians who have lost their job through no fault of their own, while they look for work or upgrade their skills. Canadians who are sick, pregnant, or caring for a newborn or adopted child, as well as those who must care for a family member who is seriously ill with a significant risk of death, may also be assisted by Employment Insurance.
There are several types of benefits available to Canadians, depending on their situation:
- Employment Insurance Regular Benefits are available to individuals who lose their jobs through no fault of their own (for example, due to shortage of work, seasonal layoffs, or mass layoffs) and who are available for and able to work, but can’t find a job.
- Employment Insurance Maternity and Parental Benefits provide support to individuals who are pregnant, have recently given birth, are adopting a child, or are caring for a newborn.
- Employment Insurance Sickness Benefits are for individuals who are unable to work because of sickness, injury, or quarantine.
- Employment Insurance Compassionate Care Benefits are available to people who have to be away from work temporarily to provide care or support to a family member who is gravely ill with a significant risk of death.
- Employment Insurance Fishing Benefits provide support to qualifying, self-employed fishers who are actively seeking work.
For more information about unemployment insurance please visit the “Unemployment” page in the “Everything About” – “Employment” sections of our website.
Workers’ Compensation is a form of insurance that replaces all or part of a worker’s wages lost and accompanying medical expenses incurred because of a job-related injury. It provides wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee’s right to sue his or her employer for the tort of negligence. The tradeoff between assured, limited coverage and lack of recourse outside the worker compensation system is known as “the compensation bargain.”
While plans differ between jurisdictions, provision can be made for weekly payments in place of wages (functioning in this case as a form of disability insurance), compensation for economic loss (past and future), reimbursement or payment of medical and like expenses (functioning in this case as a form of health insurance), and benefits payable to the dependents of workers killed during employment (functioning in this case as a form of life insurance). General damages for pain and suffering, and punitive damages for employer negligence, are generally not available in workers’ compensation plans, and negligence is generally not an issue in the case.
Workers’ compensation was Canada’s first social program to be introduced as it was favoured by both workers’ groups and employers hoping to avoid lawsuits. The system arose after an inquiry by Ontario Chief Justice William Meredith who outlined a system that workers should be compensated for workplace injuries, but that they must give up their right to sue their employers. It was introduced in the various provinces at different dates. Ontario was first in 1915, Manitoba in 1916, British Columbia in 1917. It remains a provincial responsibility and thus the exact rules vary from province to province.
In Ontario, the Workplace Safety and Insurance Board plays a preventative role ensuring workplace safety and remains solely concerned with insurance. The workers’ compensation insurance system is funded by employers based on their payroll, industry sector and history of injuries (or lack thereof) in their workplace (usually referred to as “experience rating”).
For more information on the subject please visit the “Workers Compensation” page in the “Everything About” – “Employment” sections of our website.
Casualty insurance insures against accidents, not necessarily tied to any specific property. It is a broad spectrum of insurance that a number of other types of insurance could be classified, such as auto, workers compensation, and some liability insurances. Crime insurance is also a form of casualty insurance that covers the policyholder against losses arising from the criminal acts of third parties. For example, a company can obtain crime insurance to cover losses arising from theft or embezzlement.
Property insurance provides protection against risks to property, such as fire, theft or weather damage. The term property insurance may be used as a broad category of various subtypes of insurance, some of which are listed below:
- Aviation insurance protects aircraft hulls and spares, and associated liability risks, such as passenger and third-party liability.
- Equipment breakdown insurance (also known as machinery insurance) insures against accidental physical damage to boilers, equipment or machinery.
- Builder’s risk insurance insures against the risk of physical loss or damage to property during construction. Builder’s risk insurance is typically written on an “all risk” basis covering damage arising from any cause (including the negligence of the insured) not otherwise expressly excluded. Builder’s risk insurance is coverage that protects a person’s or organization’s insurable interest in materials, fixtures and/or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from an insured peril.
- Crop insurance may be purchased by farmers to reduce or manage various risks associated with growing crops. Such risks include crop loss or damage caused by weather, hail, drought, frost damage, insects, or disease.
- Fidelity bond is a form of casualty insurance that covers policyholders for losses incurred as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees.
- Landlord insurance covers residential and commercial properties which are rented to others. Most homeowners’ insurance covers only owner-occupied homes.
- Marine insurance and marine cargo insurance cover the loss or damage of vessels at sea or on inland waterways, and of cargo in transit, regardless of the method of transit. When the owner of the cargo and the carrier are separate corporations, marine cargo insurance typically compensates the owner of cargo for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier or the carrier’s insurance. Many marine insurance underwriters will include “time element” coverage in such policies, which extends the indemnity to cover loss of profit and other business expenses attributable to the delay caused by a covered loss.
Home insurance provides coverage for damage or destruction of the policyholder’s home. In some geographical areas, the policy may exclude certain types of risks, such as flood or earthquake that require additional coverage. Maintenance-related issues are typically the homeowner’s responsibility. The policy may include inventory, or this can be bought as a separate policy, especially for people who rent housing.
Take the time to familiarize yourself with the exclusions outlined in your policy. If you come across something you don’t understand, ask your insurance representative for more information. Exclusions are specific hazards or situations for which your insurance company will not provide coverage. The common exclusions for which most insurance companies will not provide coverage are:
- Damage caused by wear and tear, rust, corrosion or gradual deterioration
- Water damage caused by flood, underground water or water that enters through cracks in your foundation
- Damage arising from the freezing of indoor plumbing. (If you are away from home for more than four consecutive days over the normal heating months, you must drain the plumbing or arrange to have your home inspected on a daily basis by a competent individual to ensure that heat is maintained. If, however, freezing-related damage were to occur despite such precautions, it might be covered.)
- Damage caused to the exterior of your home as the result of freezing, melting or moving snow or ice and heaving frost.
- Damage caused by snowslide, landslide and other forms of earth movement (e.g., earthquakes). However, damage from a fire or explosion caused by earth movement may be covered.
- Damage caused by insects and rodents (e.g., termites, squirrels, mice, birds).
- Intentional or criminal acts (fraudulent claims).
You may be able to purchase additional optional coverages, also known as “endorsements,” to protect against some of the above excluded perils. For example, you may want to consider purchasing a sewer backup endorsement if you live in a low-lying area, particularly one with combined storm and sanitary sewers. Ask your insurance representative for more information.
Title insurance is an insurance policy that protects residential or commercial property owners and their lenders against losses related to the property’s title or ownership. The word “title” is a legal term that means you have legal ownership of property. You obtain title to property when the owner signs the deed (transfer document) over to you. Title is then registered in the government’s land registration system.
For a onetime fee, called a premium, a title insurance policy may cover:
- Unknown title defects (title issues that prevent you from having clear ownership of the property);
- Existing liens against the property’s title (e.g. the previous owner had unpaid debts from utilities, mortgages, property taxes or condominium charges secured against the property);
- Encroachment issues (e.g. a structure on your property needs to be removed because it is on your neighbour’s property);
- Title fraud;
- Errors in surveys and public records; and
Title insurance is not a requirement in Ontario. The decision on whether or not you should purchase title insurance should be discussed with your lawyer, title insurance company or insurance agent/broker, to fully understand what type of protection title insurance can provide you, and to determine if other options exist. Once you get all the facts, you can make an informed decision based on your specific situation and needs. It is important to keep in mind that title insurance does not replace legal advice when purchasing property.
Liability insurance is a very broad superset that covers legal claims against the insured. Many types of insurance include an aspect of liability coverage (for example, coverage in the event of a claim brought by a person who slips and falls on somebody else’s property). The protection offered by a liability insurance policy is twofold: a legal defense in the event of a lawsuit commenced against the policyholder and indemnification (payment on behalf of the insured) with respect to a settlement or court verdict. Liability policies typically cover only the negligence of the insured, and will not apply to results of willful or intentional acts by the insured.
- Public liability insurance covers a business or organization against claims should its operations injure a member of the public or damage their property in some way.
- Directors and officers liability insurance protects an organization (usually a corporation) from costs associated with litigation resulting from errors made by directors and officers for which they are liable.
- Environmental liability insurance protects the insured from bodily injury, property damage and cleanup costs as a result of the dispersal, release or escape of pollutants.
- Errors and omissions insurance is business liability insurance for professionals such as insurance agents, real estate agents and brokers, architects, third-party administrators, lawyers, paralegals and other business professionals.
- Prize indemnity insurance protects the insured from giving away a large prize at a specific event. Examples would include offering prizes to contestants who can make a half-court shot at a basketball game, or a hole-in-one at a golf tournament.
- Professional liability insurance protects insured professionals such as architectural corporations and medical practitioners against potential negligence claims made by their patients/clients. Professional liability insurance may take on different names depending on the profession. For example, professional liability insurance in reference to the medical profession may be called medical malpractice insurance.
Credit insurance repays some or all of a loan when certain circumstances arise to the borrower such as unemployment, disability, or death.
- Mortgage insurance insures the lender against default by the borrower.
- Many credit cards offer payment protection plans which are a form of credit insurance.
- Accounts Receivable insurance also known as Credit or Trade Credit insurance is business insurance over the accounts receivables of the insured. The policy pays the policy holder for covered accounts receivable if the debtor defaults on payment.
Other Types of Insurance
- All-risk insurance is an insurance that covers a wide-range of incidents and perils, except those noted in the policy. All-risk insurance is different from peril-specific insurance that cover losses from only those perils listed in the policy. In car insurance, all-risk policy includes also the damages caused by the own driver.
- Bloodstock insurance covers individual horses or a number of horses under common ownership. Coverage is typically for mortality as a result of accident, illness or disease but may extend to include infertility, in-transit loss, veterinary fees, and prospective foal.
- Business interruption insurance covers the loss of income, and the expenses incurred, after a covered peril interrupts normal business operations.
- Collateral protection insurance insures property (primarily vehicles) held as collateral for loans made by lending institutions.
- Defense Base Act insurance provides coverage for civilian workers hired by the government to perform contracts outside Canada.
- Expatriate insurance provides individuals and organizations operating outside of their home country with protection for automobiles, property, health, liability and business pursuits.
- Kidnap and ransom insurance is designed to protect individuals and corporations operating in high-risk areas around the world against the perils of kidnap, extortion, wrongful detention and hijacking.
- Legal expenses insurance covers policyholders for the potential costs of legal action against an institution or an individual. When something happens which triggers the need for legal action, it is known as “the event”. There are two main types of legal expenses insurance: “before the event insurance” and “after the event insurance”.
- Locked funds insurance is a little-known hybrid insurance policy jointly issued by governments and banks. It is used to protect public funds from tamper by unauthorized parties. In special cases, a government may authorize its use in protecting semi-private funds which are liable to tamper. The terms of this type of insurance are usually very strict. Therefore it is used only in extreme cases where maximum security of funds is required.
- Livestock insurance is a specialist policy provided to, for example, commercial or hobby farms, aquariums, fish farms or any other animal holding. Cover is available for mortality or economic slaughter as a result of accident, illness or disease but can extend to include destruction by government order.
- Media liability insurance is designed to cover professionals that engage in film and television production and print, against risks such as defamation.
- Pet insurance insures pets against accidents and illnesses; some companies cover routine/wellness care and burial, as well.
- Pollution insurance usually takes the form of first-party coverage for contamination of insured property either by external or on-site sources. Coverage is also afforded for liability to third parties arising from contamination of air, water, or land due to the sudden and accidental release of hazardous materials from the insured site. The policy usually covers the costs of cleanup and may include coverage for releases from underground storage tanks. Intentional acts are specifically excluded.
- Purchase insurance is aimed at providing protection on the products people purchase. Purchase insurance can cover individual purchase protection, warranties, guarantees, care plans and even mobile phone insurance. Such insurance is normally very limited in the scope of problems that are covered by the policy.
- Travel insurance is an insurance cover taken by those who travel abroad, which covers certain losses such as medical expenses, loss of personal belongings, travel delay, and personal liabilities.
- Tuition insurance insures students against involuntary withdrawal from cost-intensive educational institutions
- Interest rate insurance protects the holder from adverse changes in interest rates, for instance for those with a variable rate loan or mortgage