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What is Your Insurance Literacy? Know Your Policy (KYP)

KYP is an online campaign by the Insurance Bureau of Canada, designed to promote insurance literacy. When people buy insurance, they put money into a premium pool with many others. Some of that pool of money helps people who suffer an unexpected insured hardship due to loss from a home fire, vehicle collision or business interruption in that year. Payouts for these hardships are called claims. Insurers are required by law to have sufficient funds to pay for claims. To better understand this concept, read our piece on insurer solvency.

What is Your Insurance Literacy? Know Your Policy (KYP)​​

KYP is an online campaign by the Insurance Bureau of Canada, designed to promote insurance literacy. As consumers, many of us often spend more time researching purchases for household or personal items than we do researching our insurance products.

If you don't have insurance for your car, home or business, now is the time to ask questions and protect your most-valuable assets.
And, if you do have insurance, learning about your policy, coverage and limits should happen before any potential disaster strikes.

We encourage you to contact us, to review your existing policies, or start new ones, and ask questions to ensure you're properly protected. In the meantime, here are some tips.

What Is Insurance and How Does It Help?

When people buy insurance, they put money into a premium pool with many others. Some of that pool of money helps people who suffer an unexpected insured hardship due to loss from a home fire, vehicle collision or business interruption in that year. Payouts for these hardships are called claims. Insurers are required by law to have sufficient funds to pay for claims. To better understand this concept, read our piece on insurer solvency.

4 Steps in the Insurance Process

  1. Your insurance company estimates an annual cost or premium to accept the risk of covering your home, business or car. Premiums are based on how much money insurance companies think they will need to pay for the coming year's claims.
  2. On a monthly or annual basis, you pay a premium to your insurer for assuming this risk on your behalf.
  3. Your insurance company puts all premiums into one large pool. Your insurance is an annual contract, so the pool operates for only one year at a time.
  4. Your insurance company uses the pool of many premiums to pay for the losses of the few who make claims in that year

How to Read An Insurance Policy

Here are the four sections you can expect to see in an insurance policy:

Declaration

  • What risks are covered – a list of coverages purchased
  • Policy limits – limits of insurance, and deductibles purchased
  • The amount of premium due
  • Others who have an interest in the policy (e.g., mortgage holders, lenders)
  • A list of form numbers and endorsements that add to or alter the policy

Insuring agreements

  • What losses are covered
  • The subject matter of the insurance and description of the property covered
  • The perils insured against – circumstances when the insured may receive the proceeds of the insurance
  • For a claim to be valid, it must be covered under the insuring agreement and not stated as an exclusion

Policy conditions

Requirements the insured must fulfill to maintain coverage:

  • If the insured breaches a condition, the policy can become void or the insurer may refuse a claim arising out of the breach
  • Statutory conditions that the insured or insurer must comply with
  • Understand how the law affects your policy

Exclusions and special limits

  • Certain property and perils are excluded from coverage.
  • Other insured property may be insured up to a Special Limit.
  • Understand these exclusions and limits to avoid disappointment after a loss.

Thank you to the Insurance Bureau of Canada for this information.