Coldstream Insurance plc Goldhawk House, Vale Road, London nw6 5jt

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Estimated cost of replacement* (£s)

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Pricing Your Policy

By Sally Praskey, Editor,

Insurance Canada ConsumerInfo

How do insurers decide what to charge for insurance? It's all based on something called "risk factors." The more risk involved in insuring you, the more you will pay for your insurance. That's where underwriters come in. They decide on what terms to accept a risk, and then price it accordingly. For example, why might you pay more for life insurance than your next-door neighbour does, even though you have purchased the same kind of policy?

There could be several reasons: perhaps you are a smoker and your neighbour is not; maybe your occupation is considered more dangerous than your neighbour’s (you're a stunt pilot, for example); maybe you like to indulge in what is considered a risky hobby, like skydiving; or perhaps you are much older than your neighbour, or your health is not as good. All of these are risk factors.

The same principle applies to your property. You may discover you're paying more for your home insurance than your neighbour is, even though you have the same kind of policy from the same company. Again, there's a logical explanation.

Perhaps you rent out the basement of your house, while your neighbour does not; maybe your house is larger in square footage than your neighbour’s; or you have some valuable jewellery listed on your policy that your neighbour does not. And so on.

When it comes to home insurance, underwriters price a house according to several risk factors: whether it's occupied by the owner or by tenants; whether it's a single-family dwelling or has multiple tenants; the size and style of your house; and its location (how far it is from a hydrant and fire hall, for example). That's why your country retreat might cost more to insure than your suburban bungalow. Generally, insurance is cheaper on an owner-occupied single-family dwelling, because it is considered a better risk.

In underwriting personal insurance, like property and automobile, the company has already decided what rules it will use to determine if an applicant is eligible for insurance. A risk either fits the company's criteria or it doesn't. If your particular risk doesn't qualify, you will have to modify it to meet the insurer's standards, or shop elsewhere for your insurance, and probably pay a bundle for it.

Life insurance works in a similar way. You will be asked a number of questions on your application to determine your risk status. Risk factors for life insurance include: your age, whether you smoke, your medical history, and your occupation (just how risky is it?). If the company decides you are an acceptable risk, it will agree to insure you. If not, it will refuse the risk, or will charge more to insure you.

There are certain risks that no insurer will agree to cover, because the odds are too great that a loss will occur; for example, a river overflowing and flooding your home, or a volcano erupting and destroying property. Likewise, you may not be able to buy certain types of travel medical or health insurance if you have what is called a "pre-existing condition" – an existing or previous illness that the insurer believes is likely to worsen or recur.

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What's Your Line of Insurance?

By Sally Praskey, Editor,

Insurance Canada ConsumerInfo

Nowadays, there are some 300 insurance companies operating in Canada selling many different kinds, or "lines" of insurance. Generally, most companies sell either "property and casualty" insurance (also referred to as "general" insurance) or "life and health" insurance, but seldom both.

Property and casualty insurance includes automobile insurance, property insurance (insurance for homeowners, condominium owners, and tenants), as well as a variety of commercial and business insurance. An important component of all of the property and casualty lines is liability insurance, which provides protection for an insured person who accidentally injures someone or damages someone else's property and is legally bound to pay for the damage.

Life and health insurance is primarily the bailiwick of the more than 100 life insurance companies operating in Canada, both domestic and foreign-owned. Life insurance provides funds to a designated beneficiary in the event of the policyholder's death. Some of the more common life insurance products include term, universal, and whole life insurance. Health insurance protects against financial loss due to illness, injury, or medical bills, and extends coverage, through a variety of products, beyond that offered by government medicare plans. In fact, medicare itself is a form of insurance, paid for by our tax dollars. Another aspect of health insurance, disability insurance, pays for income lost due to a disabling injury or illness. Often, life, health, travel medical, and disability insurance is provided through employers, but it can also be purchased by individuals. Without health insurance, we'd probably be afraid to set food outside our homes, let alone play sports or participate in any other activities. Even one broken leg could eat a big chunk out of our savings.

Many brokers, direct insurers, and direct sellers are now promoting insurance over the Internet, offering quotations and, in some cases, even selling insurance online. While this is a convenient service that will no doubt continue to increase in popularity, the watchword for consumers should be "buyer beware." As you will see from the articles posted on Insurance Canada ConsumerInfo, there are many options when it comes to buying insurance. The key is to get the right coverage at the best price. When shopping for insurance over the Internet, make sure you're comparing apples with apples. All policies are not alike, and the lowest price may not be the best coverage for you. It's important to ask the right questions before you buy your insurance, or you could be left high and dry at claims time.