Insurance Basics

You pay a fee called a premium and in exchange, the insurance company agrees to pay you a certain amount of money if an event covered by your policy happens during the term of your policy.

Your insurance policy includes the details of insurance protection, such as exactly which events are covered and for how much.  The insurance policy is a contract between you and the insurance company. Insurance can protect you and your loved ones from financial loss if something unexpected happens.

For example:

  • Automobile insurance could pay the cost of repairs to your vehicle if you have an accident
  • Life insurance could provide your family with money to support themselves when you die
  • Home or tenant insurance could pay the cost to repair your home if there is a fire in your house, condominium or apartment

Do I need insurance?

The decision to get insurance depends on your situation and your stage in life. For example, you may consider life insurance if you have a partner or if you decide to start a family, but if you are a single person with no dependents, you may not need it. Similarly, your provincial health plan may be enough to cover your basic medical needs, but if you travel outside of Canada often, you may want to get travel health insurance.  

There are many
types of insurance available to cover different types of risks. Automobile insurance is mandatory if you own a vehicle. Most other types of insurance are optional. However, if you think that you cannot afford the potential financial loss or damage, then you should consider buying insurance. 

Source: Understanding Insurance Basics, page 2-27, Financial Consumer Agency of Canada, 2012. Reproduced with the permission of the Commissioner of Financial and Consumer Agency of Canada, 2013.  

The FCNB does not endorse any designation or profession. You should always verify the personís qualifications before seeking advice. It is critical that you check an individualís registration or licence status, and the types of products or services they are registered or licensed to sell.

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