What are the major types of insurance?
Let’s start with the most simple, but hard to accept, truth. If you knew that something terrible was to happen and exactly when it would happen, you would be one in a billion, and would not require insurance. For the rest of us mortals, insurance is the way to protect our assets, health, future, finances and, most importantly, our loved ones.
Before jumping into the types of insurance, let’s quickly cover some important basics.
The parties involved in an insurance policy
There are usually 4 parties involved: The Owner, the Issuer, the Insured and the Beneficiary. Often times, one person can act as multiple parties.
The Owner is the person who owns the insurance policy, which means that they make all the decisions on it. Most of the time they are also the ones making the payments on the policy.
The Issuer is the insurance company or an institution which issues the insurance policy. They are the ones to whom the Owner pays premiums.
The Insured is the person or the asset that is covered by the insurance policy. In the event something happens to the person or the asset, the policy will come into effect.
The Beneficiary is the one that gets the payout when that “something” happens to the Insured.
Insurance policies usually work like this
The Owner has a contract with the Issuer which requests coverage against some possible event that could happen to the Insured. The Owner pays a monthly premium to the Issuer which the Issuer pools (with other owners’ premiums). In case that event does occur (with all conditions met), the Beneficiary gets the agreed financial payout.
Sounds pretty simple, right? So what kinds of insurance are out there?
Types of insurance
There are a lot. If anything has any value (monetary or sentimental), there is probably a policy out there to be purchased on it.
Let’s start with assets:
Auto insurance - covers your vehicle repairs and any damage caused to property, other vehicles, people (yourself included) in case of collisions or accidents.
Home insurance - policy that insures the property being mortgaged.
Tenant insurance - policy that insures tenant’s belongings within a rented property. This is usually purchased by the tenant, not the property owner, in addition to the home insurance the property owner has.
Art/Jewelry insurance - policy that insure your jewelry, art or other valuables from theft, loss or damage.
Title insurance - policy protects residential or commercial property owners and their lenders against losses related to the property's title or ownership.
Now, let’s talk about health (we will also refer to these as living policy, which means that payout happens while the insured is still alive):
Provincial Health Care Insurance - publicly funded access to universal healthcare. You pay taxes and the government pays for medically necessary health care services.
Critical Illness Insurance - contract which pays a lump sum to the Beneficiary if the Insured is diagnosed with one of the critical illnesses listed in the policy.
Short/Long Term Disability Insurance - insures the Insured person’s income against the risk that they become disabled and will not be able to perform the core functions of their work.
Health Insurance - health benefit policy either purchased privately or by your employer, which offsets the costs of medical and health-related expenses.
Long Term Care Insurance - living benefit which pays a weekly amount in the event you cannot perform two activities of daily living (example: eating, dressing yourself,…).
Pet Insurance - offsets the costs of medical pet care.
In this world nothing can be said to be certain, except death and taxes. So let’s talk about life insurance:
Life Insurance - policy is a contract which pays out a sum of money to the Beneficiary on the death of the Insured person.
Accidental Death and Dismemberment Insurance - policy that pays benefits to the Beneficiary if the cause of death of the Insured is an accident. This is a limited form of life insurance which is generally less expensive, or in some cases is an added benefit to an existing life insurance policy.
Next up - business and career insurance.
Directors & Officers Liability Insurance - a type of insurance that covers directors and officers for claims made against them while they serve on a board of directors or as an officer (or both).
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.
Errors & Omissions Insurance - professional liability insurance that protects companies and individuals against claims made by clients for inadequate work or negligent actions. Errors and omissions insurance often covers both court costs and any settlements up to the amount specified on the insurance contract.
General Liability Insurance - protects your company from liability and mitigates your company’s losses when there is a personal injury or property damage claim made by a third-party. An example of this is a customer or employee getting injured on your premises, or third-party property damage caused by an employee working for your company.
Key Person Insurance - helps your business recover from the loss or a disability of someone who is important to your company.
Product Liability Insurance - mitigates your company’s losses if you are found legally liable for claims of personal injury or property damage caused by products your business sells or supplies. Product liability claims may include products that cause bodily injury to the customer, products that cause property damage, and sickness caused by food or beverage products.
Business Interruption Insurance - covers the loss of income that a business suffers after a disaster. The income loss covered may be due to disaster-related closing of the business facility or due to the rebuilding process after a disaster.
Cyber Liability Insurance - covers financial losses that result from data breaches and other cyber events.
And lastly - travel insurance. It falls under multiple categories and often times is not necessary, as the coverage it provides is often included in one or multiple other policies we’ve described above, and which you are already paying for (this includes your credit cards). A travel insurance policy covers medical expenses, default of suppliers (travel/hotel/etc) and other potential losses incurred while traveling.
As we mentioned above, anything or anyone that has any monetary or sentimental value can be insured, so there definitely policies which we did not cover in this article. With that, always check with an insurance broker or a bank if you are looking to insure something but not sure if policies exist.
It’s better to be safe than sorry, so happy insuring!