FREQUENTLY ASKED QUESTIONS (FAQs)

1. ASK YOUR INSURANCE BROKER
2. GENERAL FAQs
3. AUTO FAQS
4. HOMEOWNER FAQs
5. LIFE INSURANCE FAQs
6. TENANTS FAQS
7. PERSONAL UMBRELLA FAQS

ASK YOUR INSURANCE BROKER...

Q: Is provincial government legislation something new to the Alberta insurance industry?

A: No. Automobile Insurance has always been highly legislated by the provincial government. In fact, more so than in the financial service sector. Historically, insurance companies are unable to change auto insurance rates without government approval. And in Alberta, insurance companies pay a 3% tax on the approved premiums they collect. This tax goes directly into Alberta’s general revenues; it is not spent on road safety, or other programs that would reduce claim costs and ultimately, your premiums.

Q: My teen-aged son has taken professional driver education and is a responsible and careful driver. But he simply can’t afford his auto policy premiums, so he can drive to his part-time job and to his university classes. Why isn’t there more flexibility on a case-by-case basis?

A: Young drivers are up to three times more likely to be at fault in an accident, and historically young male drivers have had the highest rates. Insurance companies charge these groups higher premiums to offset the increased risk. Removing age, sex and marital status as factors to determine insurance rates, could result in more experienced, safer drivers paying higher premiums.

Q: What is causing the price of auto insurance to rise?

A: The main cause of rising insurance rates is the escalating claims cost for minor, non-permanent injuries such as sprains, strains and whiplash.

Q: The provincial government cap is $4,000. Is that all that I will get in payment for being hurt in a car accident?

A: Only the amount for ‘pain and suffering’ and only for minor injuries would fall under the cap. Coverage for healthcare, car repairs, and lost wages would continue without change from the present system. Insurance companies want to make sure that seriously injured victims get the financial support they need and deserve. In 2004, insurance companies will pay over $60 million to Alberta Health for people injured in car accidents. Many Albertans are unaware that personal injury lawyers claim a portion of the money awarded in claim settlements as their fee. This portion can be anywhere from 35% to 50%. Auto insurance rates and insurance company practices are closely regulated; however, lawyers do not have to disclose how much they earn from contingency fees.

Q: How are my premiums spent?

A: From every auto insurance dollar collected, Alberta insurers earn an additional 8 cents in investment income. From that total pool of income (premiums plus investment income), insurers pay 81 cents for claims, 21 cents in operating costs, and 3 cents in premium taxes to the provincial government. This means that for every dollar an insurance company brings in as premiums, it spends $1.05. This trend is unsustainable as insurance companies have a regulatory requirement to have sufficient reserves to cover claims.

Q: Okay. So now what do I do?

A: Our goal is to find you the best insurance coverage at the best rates. We can also provide service by offering you suggestions on how to control your insurance costs. Access Insurance Group is here to help you.

Q: We’ve all read about rising insurance costs due to world events. Why does that affect me here?

A: Four factors contribute to rising insurance premiums. First, the pool is depleted. Insurance works by ‘spreading the losses of a few among the many’. Insurance is a truly global industry and we are all affected by catastrophic losses. Closer to home, the Pine Lake tornado was one in a series of recent events that resulted in major claims payments. Others were September 11^th, Hurricane Andrew, and the Quebec ice storm.

The second factor is rising insurance premiums to insurance companies. Insurance companies also buy insurance to protect against huge losses caused by major disasters. Not only have the companies paid out huge claims as a result of events like the ones listed above, their own insurance premiums have increased dramatically.

Third, for every $100 you paid insurance premiums, $108 is paid out in claims and expenses. Vehicle repair costs increase 10% each year. Others cheat but we all must pay - over 35% of all auto accident claims and 26% of personal injury claims have some element of fraud amounting to an estimated $540 million in claims. About $45 of every auto policy premium is a direct result of auto theft. As vehicle prices rise, so do the costs of repairing and replacing them.

Lastly, insurance companies have a regulatory requirement to have sufficient reserves to cover claims. Up to now, past losses were offset by the investment income insurance companies were earning. Like you, insurance companies’ returns on investment have declined dramatically with the stock market downturn.

Q: Okay. So now what do I do?

A: Our goal is to find you the best insurance coverage at the best available rates. We can also provide service by offering you suggestions on how to control your insurance costs. Access Insurance Group is here to help you.

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GENERAL FAQs

Q: What kinds of questions should I be expected to answer when I am applying for an insurance policy? Why do insurers need so much information?

A: When you apply for an insurance policy, you will be asked a number of questions. The broker will ask you your name, age, gender, address, etc. In addition, you may be asked a number of other questions.

When an insurance company is deciding whether or not to offer auto insurance to a potential customer, it will want to know about the person's previous driving record, whether they have any recent accidents or tickets, and what type of car is to be insured.

Insurance companies have different programs for different customers. Adults with good driving records will generally pay less for auto insurance than will a young driver with traffic tickets. In order to determine which program you qualify for, an insurance company needs basic information about you.

Besides your age, gender and driving experience, information about the vehicle you drive, and how you drive it, is also needed to determine a fair price. For instance, a large luxury car costs more to repair or replace than a sub-compact. And, someone who commutes 30 miles each way is more likely to be in an accident than someone who rides the bus to work and drives only on weekends.

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Q: What happens to my insurance coverage if I miss a policy premium payment?

A: As your insurance broker, one of the ways we provide service is to inform you of important issues, such as this one, that can affect your ability to secure competitive insurance protection.

In recent months, we have noticed increasing incidents of Albertans who have had their insurance policies cancelled because they missed a payment. This is most common for those who have the convenience of regular pre-authorized withdrawals from their banks, but who have insufficient funds in their accounts at the time the premium payment is due.

Insurance companies have the right to cancel your policy for non-payment, including any pre-authorized withdrawals returned for non-payment. Many insurance markets will not accept a new customer who has had their policy cancelled.

The result has been that many people have now had to obtain their insurance through the high-risk market and see their premiums increase dramatically.

Q: How much insurance do I need?

A: It depends on your own situation. Many provinces require certain minimum levels of coverage. In general, be sure you have enough insurance.

Here are some steps you can take to reduce the danger of being seriously under-insured:

Call us. If you have questions or concerns about the limits in your policy ask us to show you how the amounts were calculated. This will also give you the opportunity to make us aware of any overlooked information.

Read your policy. Certain property or perils are best insured apart. Knowing what and how much is covered will help you insure properly. Ask us for an explanation if there is anything in your policy you don’t understand.

Provide updated accurate information. At each annual renewal of your policy, you receive a new Policy Declarations page showing the coverage limits and options. Review this information. It is important you tell us about any changes so your coverage limits can be adjusted to protect you.

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AUTO FAQs

Q: What are some practical things I can do to lower my auto insurance rates?

A: There are a number of things you can do to lower the cost of your auto insurance. The easiest thing to do is have Access Insurance Group do a comprehensive review of your policy.

It is not uncommon to find quotes on auto insurance that can vary by hundreds of dollars for the same coverage on the same car. When you shop, be careful to make sure each insurer is offering the same coverage.

Another way to lower the cost of your auto insurance is to look for any discounts for which you may qualify. For example, many insurers will offer you a discount if you insure multiple cars under the same policy. Be sure to ask us about their discount plans.

Another easy way to lower the cost of your auto insurance is to increase the deductible. Simply raising your deductible from $250 to $500 can lower your premium.

Eight Tips to Control Insurance Costs

Q: I have an older car whose current market value is very low - do I really need to purchase automobile insurance?

A: Most provinces have insurance laws that require drivers to have at least some automobile liability insurance. These laws were passed to ensure that victims of auto accidents receive compensation when their losses are caused by the actions of another individual who was negligent.

It is often the case that the cost of repairing the damages to an older car is greater than its value. In these cases, insurers will usually just “write-off” the car and give you a check for the car's market value less the deductible. Many people with older cars decide not to purchase any physical damage coverage.

Q: Suppose I lend my car to a friend, is he/she covered under my automobile insurance policy?

A: Whenever you knowingly loan your car to a friend or an associate, they will be covered under your auto insurance policy. Bear in mind that when you lend out your car, you lend out your insurance too. In the event of a claim, it will be your policy history that will be affected.

Q: What is the difference between collision physical damage coverage and comprehensive physical damage coverage?

A: Collision is defined as losses you incur when your car collides with another car or object. For example, if you hit a car in a parking lot, the damages to your car will be paid under your collision coverage. We can help you decide whether or not to carry collision coverage by weighing the cost of the collision insurance against the value of the car. It may not be worth paying $300 a year for collision insurance on a car worth only $1,500.

Comprehensive provides coverage for most other direct physical damage losses you could incur, including theft. For example, vandalism, theft or damage to your car from a hailstorm will be covered under your comprehensive coverage.

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HOMEOWNER FAQs

Q: What are some practical things I can do to lower the cost of my homeowners insurance?

A: There are a number of things you can do to lower the cost of your homeowners insurance. What’s the easiest thing to do? Have Access Insurance Group do a comprehensive review of your policy.

It is not surprising to find quotes on homeowners insurance that vary by hundreds of dollars for the same coverage on the same home. When you shop, be careful to make sure each insurer is offering the same coverage.

Another way to lower the cost of house insurance premiums is to look for any applicable discounts. Many insurers will offer a discount when you place both your automobile and homeowners insurance with them. Sometimes, insurers offer discounts if there are deadbolt exterior locks on all your doors, or if your home has a security system. Be sure to ask us about any discounts for which you may qualify.

Another easy way to lower the cost of your homeowners insurance is to raise your deductible. Increasing your deductible from $250 to $500 will lower your premium.

Q: What does homeowners insurance cover?

A: The typical homeowner’s policy has two main sections: one covers the property of the insured, and the other provides personal liability coverage for the insured. Anyone who owns or leases property has a need for this type of insurance. Usually, homeowners insurance is required by lenders to obtain a mortgage.

Q: What factors should be considered when purchasing homeowners insurance?

A: There are a number of factors Access Insurance Group takes into consideration in while doing your needs assessment.

1. We advise the amount and type of insurance that you need. The coverage limit of your house should equal 100% of its replacement cost. If your policy limit is less than 80% of the replacement cost of your home, any payment from your insurance company will be less than the full cost to replace your home -- you'll have to pay the rest out of your own pocket. Also, we advise if the personal property and personal liability limits are adequate for your needs.
    
2. We advise which, if any, additional endorsements you may want to add to your policy. For instance, do you want a personal property replacement cost endorsement, or a jewelry endorsement?
    
3. We advise if there are any gaps in coverage you might not have been aware of, explain the details of the policy's exclusions and limitations as well as recommend an insurance company that will live up to your expectations.

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LIFE INSURANCE FAQs

Q: How much life insurance should an individual own?

A: Popular opinion suggests an amount of life insurance equal to 6 to 8 times annual earnings. However, many factors should be taken into account when determining the right amount of life insurance for you and your family.
Important factors include:

• Income sources (and amounts) other than salary/earnings
   
• Whether or not you are married and, if so, what is your spouse's earning capacity
   
• The number of individuals who are financially dependent upon you
   
• The amount of death benefits payable from social security and from an employer-sponsored life insurance plan
   
• Whether any special life insurance needs exist (e.g., mortgage repayment, education fund, estate planning need, etc.)

Knowing the correct amount of life insurance to buy is not as simple as it appears. Access Insurance Group can help in determining the right amount of coverage for you. As independent agents, we are unbiased advisors that will help you avoid buying too much. We’ll show you appropriate optional coverages for your need and recommend a company that will best serve your interests.

Q: What about purchasing life insurance on a spouse and on children?

A: Sometimes, it may be advisable to purchase life insurance on children. But such purchases should not be made instead of purchasing appropriate amounts of life insurance on the family breadwinners.

It is critical that the income-earning capacity of the primary income earner be fully protected through the purchase of the required amount of life insurance. Life insurance on a stay-at-home spouse is often recommended to pay for household services lost due to this individual's death. In a two-income household, it is important to protect the income earning capacity of both spouses.

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TENANTS FAQs

Q: Why would I want to buy tenant insurance?

A: If you live in an apartment or a rented house, renters insurance provides important coverage for both you and your possessions. A standard tenant policy protects your personal property in many cases of theft or damage and may pay for temporary living expenses if your rental is damaged. It can also shield you from personal liability. Anyone who leases a house or apartment should consider this type of coverage.

Q: How does a tenant policy protect my personal property?

A: A tenant comprehensive policy provides or all-inclusive coverage. A named-perils policy only pays when your property is damaged or destroyed by any of the ways specifically described in the policy.

Tenant coverage applies to your personal property no matter where you are in the world. This means you're covered when you are on vacation as well as at home.

Q: Why do some apartment complexes require tenants to have tenant insurance?

A: Owners of apartment complexes buy insurance policies for their liability and to cover their buildings and personal property. However, these policies do not cover any of the tenant's property or liability. By requiring their tenants to have tenant insurance, the apartment owner is assured that the tenants will not mistakenly believe the apartment complex owner's policy will provide coverage for a tenant's property or personal liability. Although this type of requirement benefits that apartment complex owner, there are benefits to the tenant as well. We recommend that you purchase tenant insurance regardless of what your landlord requires.

Q: What if I share my apartment with a roommate? Do we both need to have tenant insurance?

A: Standard tenant policies cover only you and relatives that live with you. If your roommate is not a relative, each of you will need your own tenant policy to cover your own property and to provide you liability coverage for your own actions.

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UMBRELLA FAQs

Q: What is a personal umbrella liability policy?

A: The personal umbrella liability policy is designed to increase your liability protection. This single policy acts as an "umbrella" over all of your other personal liability policies -- home, auto, boat, RV, etc. -- so you have a higher personal liability limit than what would otherwise be available. In certain circumstances, an umbrella policy may provide personal liability coverage that is otherwise excluded from your other policies. For instance, an umbrella policy provides coverage anywhere in the world, whereas your auto policy usually provides coverage in only Canada and the US.

Q: How do I know if I need a personal umbrella liability policy?

A: It used to be that the only people who needed personal umbrella liability policies were wealthy individuals who had considerable amounts of personal assets that would be at risk in a lawsuit. However, even individuals with modest incomes and assets are often subjects of large lawsuits. Since they are less able than a wealthy individual to pay large damage awards, they recognize the need to have coverage limits greater than what can be obtained from their homeowner or auto policies.

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