Have you ever asked someone how much they pay for their insurance? It’s not that uncommon a question but it’s only half the question and the other half doesn’t often get asked. The follow up question should be about what kind of insurance they have and unfortunately most people aren’t sure.
Think of it this way. If you asked someone how much their taxes were you wouldn’t immediately feel that you weren’t getting a fair deal if yours were higher. You’d know that they likely had a different wage or property value which caused the difference.
The idea for this article came from a recent conversation our office had with one of our clients. They had just sent us a request to cancel their insurance policy as they were going to save over $100 a year with the online quote they’d just received.
It was an awkward conversation to have. Calling someone that had basically just fired us from being their insurance consultant but we felt they were owed one final piece of advice. We did a review of the new policy that had been arranged and discovered that it didn’t include a vital coverage.
As their vehicle was over 3 years old the new insurance policy only provided claims settlement on an actual cash value which was about half of what the car had been purchased for. When it was purchased new for $45,000 we’d added a coverage that removed depreciation from claims settlements for up to 4 years after it was purchased. This coverage becomes more important each year as the value of the car goes down and each year the cost of this coverage goes up. On this specific renewal the cost of the coverage was over $150.
That one coverage made the difference in the two policies but when it also can provide for an increase in a claim payment of over $20,000 it’s usually something our clients want to keep. The one in this example sure did.
Now I’m not saying we’ll always be the lowest price but you need to know what you are paying for just as much as you need to know how much you are paying. Apples and oranges costs are different and you can’t just assume they are all the same.
Automobile insurance changes are coming to your policy as of June 1st 2016. After your policy renews your coverages and benefits will reflect these new lower coverages.
Yes you read that right, the coverages in Ontario are being reduced and here is what you need to know about it.
First, let me be clear. Insurance companies don’t set the coverages that they offer. Every company from the largest multinational to the smallest farm mutual all use the same coverages and can’t change their rates at all on their own. They are overseen by the Ontario government through FSCO (Financial Services Commission of Ontario). They have determined that these changes are what is required for the welfare of Ontario drivers.
Secondly the main coverages that people think about when they do consider their insurance are not going to be changing much. Your third party liability (typically one or two million), the collision and comprehensive coverages or even the endorsements like loss of use will all still cover the same type of claims they have in the past. There is also very little change to the “No-Fault” charts that determine who is responsible during a claim and to what extent you will be considered at fault.
The changes are in the seldom considered Accident Benefits coverage. Although often overlooked when purchasing or renewing your insurance it can be the most important coverage you have and needs to be reviewed. I’ll cover each of these coverages below but I’ve titled each section with a brief summary so you can pick the ones that might affect you the most.
Medical, Rehabilitation and Attendant Care Benefit. (Applies to everyone unless you have another disability policy that provides you coverage for injuries sustained in a car that includes medical treatment, injury rehabilitation and payment for an attendant to look after you. Be careful as most people don’t know what type of insurance coverage they have from work.)
This used to be two separate coverages with a limit of $50,000 for the Medical & Rehab benefits and an additional $36,000 specifically for Attendant Care. Under the new coverage they have been merged into a single $65,000 limit available. This is good news for someone who only needed one of these two coverages but in most claims you will likely need both.
The first part of this coverage will pay for any necessary medical and rehabilitation expenses not covered by OHIP or a group insurance plan. They can include medication, assistance devices, transportation to medical appointments, required changes to your home or vehicle, employment counselling, psychological counselling and other basic cost like physiotherapy and chiropractic.
The second half of this provides Attendant Care coverage. This pays expenses related to having someone look after you at home or within a healthcare facility.
As you can imagine these costs can skyrocket even for smaller less serious accidents. You have the option to increase the new basic coverage from $65,000 up to $130,000 or $2,000,000.
These have all been examples of the coverages available for a claim deemed Non-Catastrophic (minor injuries such as sprains or whiplash plus serious injuries like broken bones and severe strains). If you only sustain minor injuries than the policy coverage is limited to $3,500 for the Medical, Rehabilitation and Attendant Care Benefits. If your injuries are classed as Catastrophic (loss of limb, para/quadriplegia) then you have higher limits available to you.
This coverage was again separated with Medical + Rehabilitation having a limit of $1,000,000 as well as Attendant Care also having this million dollar limit. Under the new wordings, the coverages have been combined but the limit has remained at $1,000,000. You have the option to increase this to $3,000,000 which considering the increased costs you will likely face over a lifetime seems essential.
Income Replacement Benefit.(Do you make more than $30,000 a year or how far will $400/week go?)
The basic policy provides coverage for 70% of your gross income up to $400 per week. If that would be an unlivable pay cut than you must consider an increase if you don’t have income replacement coverage elsewhere.
Although this coverage hasn’t changed with the new legislation it should be reviewed each year. Jobs can change, income levels can fluctuate and supplementary insurance policies can be changed or lapsed. If the basic $400/week isn’t sufficient for you than you have the option to increase to $600, $800 or $1000. Remember it is still going to be capped at 70% of your gross income regardless of what level you select.
Indexation Benefit(If inflation worries you).
This adjusts benefits to account for inflation. It’s not currently included and that is not changing with the new policy. You still have the option to have this added to your policy and it is adjusted in accordance to the Consumer Price Index of Canada.
Caregiver Benefit(If you have children, parents or anyone dependant on you for care).
There has not been a change to this coverage however it is still important to review this coverage from time to time as your life changes. The policy provides $250/week for the first dependant and $50 for additional dependants but only in the event that your injuries are Catastrophic. You have the ability to purchase a coverage extension to include serious plus minor injuries that qualify for this coverage.
Housekeeping & Home Maintenance Expenses.(If you are hurt and cannot look after your household do you need to hire someone else to do it?)
This coverage is also not changing however it should be periodically reviewed. Consider who does the cooking, cleaning, snow shoveling or lawn mowing and then think about them being too hurt to manage these duties. You have coverage right now for $100/week for Catastrophic injuries only. You can purchase an upgrade to this coverage so that it will also cover Serious plus Minor Injuries. Keep in mind the person you may be relying on to pick up these duties if you are hurt might be sitting beside you in the car and also might not be able to help out).
Dependent Care Benefit(Similar to the Caregiver Benefit above but for someone that is employed and injured)
No change to this coverage but again it’s a good idea to review this once in a while. The coverage provides nothing at the basic level but you can purchase up to $75/week for the first dependant and $25/week for additional dependents up to a maximum of $150/week.
Death + Funeral Benefits(If you don’t have money set aside for these costs already)
This coverage hasn’t changed and provides you a lump sum $25,000 payout to your spouse and $10,000 to each dependant as well as a $6,000 payment for funeral expenses. These can be increased to $50,000 spouse, $20,000 dependant and $8,000 funeral.
Tort Deductible(A reduction in a pain and suffering court award)
No change here. There is currently a deductible on claim settlements of $36,500 which increases with the inflation index. You can reduce this to $20,000 regardless of annual inflation.
So what does this all mean?
Obviously the main change to your automobile insurance is the Medical, Rehabilitation and Attendant Care Benefits. This is where your policy looks after your injuries and gets you back on the road to recovery so you want to be sure you’ll have the limits you need when you need them.
This also will likely have an impact on the number of lawsuits that are currently filed due to automobile accidents. When drivers have less coverage under their own policies it increases the number of people that will consider the courts as the only method they can be made whole again. Because of this we are also highly recommending an increase to your third party liability. Many drivers have been operating with a $1,000,000 limit or less for years. We feel that $2,000,000 should be the minimum coverage and you should consider higher limits or an umbrella liability policy.
These auto reforms also include some other changes that you should take note of.
A newly defined minor accident that cannot be used for underwriting (no price increase).
Lowering of fees on monthly payment plans for auto insurance.
Increase in minimum Comprehensive deductible to $500 (you may be able to buy this back down).
New snow tire discount.
Non-Earner Benefits. The six month waiting period for people who are not working to receive benefits has been reduced to four weeks. Conversely, benefits can now only be received for up to two years after the accident.
For all claimants except children, the amount of time that you can receive the Medical, Rehabilitation and Attendant Care benefit is now five years for non-catastrophic injuries, and it will be paid only as long as you remain medically eligible.
For more information on all of these changes make sure to speak to one of our insurance brokers. No one expects to have an accident and regardless of whose fault it is, these are the coverages that you will first have access too. It will be too late then to determine if you have enough coverage so think about it today.
Although relatively new to the insurance automobile landscape, telematics is not new technology. It has been used in Quebec for several years and in Europe even longer. Formula One race teams even use it to help monitor and improve their performances.
The devices which are now available to our client are small and easy to install. They perform the following tasks.
A high frequency motion sensor will monitor how a vehicle is driven and capture that information.
Data is transmitted via a SIM card
Where and when the vehicle is driven is captured with the GPS unit
This device and the costs to operate it are included in your insurance premium.
After the device has been installed in your vehicle it will begin to collect data on your driving. This data is sent securely to the company where your driving style is assessed. Feedback on your driving habits is available to you online or with one company, a smart phone application.
The driving habits that are monitored to determine your score; speed, acceleration, braking, cornering, time of day and your vehicles GPS location. One of our companies does not record the time of day and another doesn’t capture the GPS location.
Not all vehicles are equipped to work with the telematics device. Most vehicles that were manufactured since 1996 are equipped with an OBD port which is what this unit plugs into.
A new policy will automatically include a partial good driver discount. This can be improved if proof of good driving is confirmed after the device has been installed. If however your driving behaviour is not consider good you may not receive an additional discount and the initial discount may be removed.
Including the initial 10% discount, with good driving you can earn up to an additional 15-25% discount (depending on company).
We currently represent two separate companies that have an automobile insurance policy offered with the installation of a telematics box. One is a special line only offering insurance to driver 24 and under and the other to all drivers that qualify.
If you are interested in learning more about telematics or would like a quotation to see what your premium could be, please call our office and ask for one of our brokers to assist you.