Exposing Insurance Myths
If one thing about the information age becomes clearer all the time, it’s that access to too much information can be a bad thing… especially when it’s inaccurate. The insurance industry is often plagued by folks spreading myths or misinformation about policies and coverage as well as how the industry operates in general. Here’s the straight scoop on some of the more common myths.
MYTH: If injured in a car accident, medical expenses are paid for by the provincial or territorial government’s health care plan. FACT: Auto insurers pay more for medical rehabilitation costs in Canada than government health insurance plans, workers’ compensation plans and private health-care plans combined. Every year, insurers pay at least $2 billion for the medical rehabilitation of injured Canadians.
MYTH: Only insurance companies pay for high or excessive legal settlements. FACT: Insurance companies collect premiums from consumers and use these funds to pay for claims. Money to pay for large legal settlements comes directly from these funds, or directly from the pockets of each and every policyholder. If the cost of claims increases, insurers need to adjust the premiums to keep pace.
MYTH: Insurance companies keep changing the rules on what is and isn’t covered. FACT: Auto insurance is highly regulated by provincial and territorial governments who set minimum coverage levels. Insurance companies cannot change basic coverage or premiums without government approval.
MYTH: Being caught driving without wearing a seatbelt doesn’t make you a dangerous driver, so your insurance premiums shouldn’t go up. FACT: While you do not pose a danger to other drivers when you don’t wear a seatbelt, you put yourself at risk. If you are in a collision when you are not wearing a seatbelt, you are much more likely to sustain injuries. Your insurance company pays your medical expenses. The cost of the rehabilitative care for a whiplash-type injury is lower than the cost of treatment for injuries sustained as a result of being thrown out of a car during a collision. This is why your insurance premiums may increase if you are convicted of driving without a seatbelt.
MYTH: Insurance companies make a fortune on premiums. FACT: Of every dollar that insurance companies collect in premiums, 55¢ goes back to policyholders to pay for claims, 21¢ goes to pay operating expenses and 16¢ goes back into communities in the form of taxes. Insurers keep 8¢ as profit, as averaged over the seven years from 2007 to 2013.
MYTH: Natural disasters, s
uch as the floods in Alberta and Ontario, cause insurance premiums to go up everywhere. FACT: Major catastrophes have a direct impact only in the areas where they occur. Elsewhere, they may have an indirect effect. The most important factors affecting your home insurance are local risk factors, such as where your home is located, how much it would cost to rebuild and how it’s heated. Your claims history is also important.
Claims and Premiums
MYTH: You always get less than you ask for, so inflate your claim. FACT: Inflating an insurance claim is a crime. Insurers will pay you for your losses according to your policy terms, levels of coverage, deductibles, and other factors. Your adjuster may review your receipts and other details to ensure you receive appropriate value and service. Insurance crime increases insurers’ claims costs and, ultimately, costs everyone in the form of increased premiums.
Source: The Insurance Bureau of Canada