Insurance fraud affects you, and you can help to reduce it.

INSURANCE FRAUD DRIVES UP PREMIUMS FOR EVERYONE

The insurance industry estimates that 10 to 15 cents of every dollar paid in premiums goes to paying fraudulent claims – totalling more than $1.3 billion each year.

This makes insurance fraud second only to the drug trade as a source of illegal profits in North America. Unfortunately, insurers have to pass these costs on to customers in the form of higher premiums. They also have to be more cautious in deciding what to insure, making it more challenging to get certain forms of insurance.

THE INDUSTRY IS FIGHTING THE PROBLEM

Insurers are doing much more than raising premiums to deal with the costs of fraud.  A number of industry associations are working together to fight the problem. The Insurance Bureau of Canada, The Canadian Automobile Association, and The Canadian Coalition Against Insurance Fraud are just a few of the  groups helping to promote public awareness, better business practices and improved investigative and enforcement techniques.

YOU CAN BE PART OF THE SOLUTION

It’s easy to sit back and say “There’s nothing I can do to stop fraud.” But there is something you can do. Insurance fraud is often the result of fairly routine manipulations of the system – a tow truck driver who recommends a garage and gets a commission for doing so, a service provider who bumps up a charge because they know the insurer is paying, or a paralegal who asks for a percentage of an insurance award. These may seem harmless to you, but they are part of the web of fraud schemes that are costing you money. When you see fraudulent activity, challenge the service provider directly or report the behaviour to the police.

A VICTIMLESS CRIME?

People who commit insurance fraud like to justify their actions by saying it is a victimless crime. But it’s not; the victims are policy holders who pay more, taxpayers who cover investigation costs and society as a whole which suffers the waste of healthcare resources.

Take the time to ensure that your most precious things are protected.

MOST POLICIES LIMIT PAYMENTS FOR INDIVIDUAL ITEMS AND CATEGORIES

It is common practice for policies that cover personal property to have special limits on the amount that will be covered for individual items or items within specific categories. If you require the full replacement or market value to be insured, you will have to arrange for additional insurance and pay the appropriate premiums.

The rationale behind this practice is to ensure that everyone is provided with a base level of insurance at reasonable rates and that those with high-value items cover their own extra costs. Examples include:

• Jewellery, watches, gems and furs

• Coin collections

• Silver and gold ware

• Money or bullion

• Business property

A THOROUGH HOME INVENTORY WILL TELL YOU WHERE YOU STAND

One of the best ways to know if your belongings are covered is to do a complete home-contents inventory and review it with your broker. A home inventory will help you itemize your losses if you need to make a claim, and it is a good way to test if your overall coverage level is right. You should include a list of contents, a brief description or photograph and an estimate of the replacement value of each item. Consider making a video of your rooms, cupboards and shelves and store it off-site. You can also take advantage of pre-made inventory tools such as the IBAC Home Inventory Form available online, at www.nbinsurancebrokers.ca.

WITH A PROFESSIONAL APPRAISAL, YOU CAN ARRANGE THE EXTRA INSURANCE YOU NEED

If you have high-value items that exceed the limits in your policy and you want to have them separately insured, you will likely have to have the items valued by a professional appraiser so that the insure knows what level of coverage to set.

Depending on the type of property and how much information you can provide, an estimate of value can be determined. There is a fee for this service.

TIPS ON FINDING A PERSONAL BELONGINGS APPRAISER

Start by asking your broker for a recommendation. Make sure that the appraiser you hire is professionally accredited, has relevant experience and will provide a written report that meets the standards of the profession.

INVENTORY

Why should you take an inventory of your home or apartment? An up-to-date inventory will help you to:

Purchase enough insurance to replace your possessions

Get your insurance claim settled faster

Consider adding pictures of your possessions, which can be done easily with a digital camera or walk through your home or apartment and videotape the contents. Remember to open closets. One advantage of videotaping if that you can narrate what you are filming.

And remember to keep your inventory away from your home.

More and more people are starting home-based businesses, for everything from marketing home-made products to keeping a home office for a consulting business.

From an insurer’s perspective this adds new types of risk to your home, and therefore, may require additional insurance.

RESIDENTIAL POLICIES PROVIDE LIMITED COVERAGE ON BUSINESS PROPERTY

Anything you use to carry on your home based business is subject to the limits of insurance as well as your other possessions and some things might not be covered at all.

• Dollar limits apply on business property, computer and software. This limit might be as low as $2000 in total, which would not cover even the most basic home office.

• Limits on what is covered might completely exclude any special equipment that you keep in your home for business purposes.

• Items that are covered for business use are only covered while in the home. So, for example, if the computer you use for your home-based business is stolen while on a trip, it will not be covered.

SOME HOME BUSINESSES MAY REQUIRE ADDED LIABILITY INSURANCE

The operation of your home-based business might mean that you have more people coming and going, and therefore, more risk associated with the activities in your home. If this is the case, not only will a basic liability limit of one million dollars likely not cover you, some insurers might refuse to cover a third party claim by a customer or employee who is injured in your home. If you think this situation applies to you, be sure to tell your broker about your home business and make sure your insurance company is made aware of your home-based business activities.

CONSIDER AUGMENTING YOUR POLICY TO GIVE YOU MORE SECURITY

If you have high value or business items that exceed the limits in your policy and you want to have them separately insured, you will likely have to have the items valued by a professional appraiser so that the insurer knows what level of coverage to set. Depending on the type of property and how much information you can provide, an estimate of value can be determined. There is a fee for this service.

LET YOUR BROKER KNOW

If you participate in a timeshare using your home, or you rent out your cottage, you must tell your broker. These activities represent an increase in liability and risk to the property and may require additional insurance.

Your home should be insured from the moment you take legal ownership – even if it is under construction. Your broker’s expertise is particularly useful at this stage when you really need to match policy features with needs.

Here’s a primer to get you started:

HOME INSURANCE COVERS THE BUILDING, ITS CONTENTS AND LIABILITY

There are usually three parts to your homeowner’s policy. For condominium owners and tenants, just the contents and liability coverage’s apply:

1. Building insurance covers the main dwelling, garage and any out-buildings.

2. Contents insurance covers the cost of replacing furniture, carpets and personal possessions. Valuables such as art, jewels and furs may require additional coverage. Note that most contents are insured even outside the home, for example, if stolen while you are on a trip.

3. Liability policies insure against the costs incurred if, due to negligence, you are held responsible for an act causing injury or property damage to others.

POLICIES RANGE FROM COMPREHENSIVE TO “BARE-BONES”

You can save money by scaling down your policy but be careful not to underinsure.

There are three general policy categories from which to choose:

1. Comprehensive policies cover the building and its contents for normal risks to which a home is exposed.

Some risks will be excluded, such as acts of terrorism or flooding.

2. Broad policies takes a blended approach by providing all risk coverage on big items as your dwelling and named perils coverage on contents.

3. Basic/Named Perils policies help you save by letting you carry more of the financial risk. You will be covered for just the perils that are specified, for example, fire, lightning and explosion.

TAKE THE TIME TO UNDERSTAND WHAT’S COVERED AND WHAT ISN’T.

Don’t assume that once you have a policy you are covered for everything. Ask your broker to explain the details.

WHY ARE INSURANCE VALUATIONS ON HOMES INCREASING?

Most comprehensive homeowners’ policies guarantee the replacement of your home and contents in the event of a loss. In order to provide that guarantee, the value of your home must be determined at the time the policy is purchased, and the policy must adequately cover your home to that value

WHEN AWAY FOR A SHORT TIME

If you will be away from your home for fewer than 30 days you do not need to inform your insurer. However, you do need to arrange for a competent person to look in on your home every day or two to make sure that everything is in good order. If a food freezer and a broken furnace result in frozen pipes and water damage that went unnoticed for several days, your insurer could refuse to cover the costs if no one was looking in on the house.

FOR LONGER ABSENCES

If you are away for more than 30 days your home is considered “unoccupied” because you plan to return. In this case you should contact your broker to determine whether you will need to inform your insurer and obtain a special permit to leave the house empty. You will still need to arrange regular checks on the property, and you might want to consider draining water pipes and installing a good security alarm.

IF THE PROPERTY IS EMPTY

A fully vacant property is one with no occupants and no contents. This may occur if a house sale is delayed and the property remains vacant until sold. In this case you need to obtain a vacancy permit from your insurer. This permit will maintain most of your coverage, except for risks associated with vacancy such as broken water pipes, broken glass or vandalism.

TRAVELING?

Personal items covered by your home, condo or tenants insurance are also covered when they are temporarily away from these locations, for example, when you are traveling. Items belonging to a dependent child temporarily living outside your home to attend school, for example, are also covered. Home-business items, however, require additional coverage.

ACTS OF GOD

Acts of God are considered natural disasters that could not have reasonably prevented or avoided. Most standard forms cover the hurricanes and tornados.

Lighting and hail are classified as named perils. Coverage’s for flood or earthquake, not automatic in standard policies, may be available in most cases for an additional premium. Flood coverage is likely to be more and diffi cult to obtain in areas susceptible to these perils.

DEDUCTIBLES

Deductibles are the amounts you pay to cover a loss before you are entitled to payment by your insurer. Just about every policy has a deductible, usually ranging from $500 to $5000. Deductibles are designed to discourage small claims, since the purpose of insurance is to protect you from catastrophic losses not minor inconveniences.

EXCLUSIONS

Quite simply, exclusions are items, perils or situations that are not covered by your policy. Your insurer might exclude anything from long-term mould damage to natural disasters, computer data or high-speed watercraft. Other common exclusions include avoidable damage from termites or rodents, water seepage, frozen pipes, intentional damage and high-value items such as art and jewellery.

LIABILITY–IN THE HOME AND AWAY FROM HOME

Although liability insurance is part of your homeowner policy, it also protects against third party claims for bodily injury and property damage caused (unintentionally) by you when you are away from home.

DEPRECIATION

Depreciation is a measure value of an item over time, taking into consideration wear or obsolescence.

VALUATIONS

Your insurer will likely want to conduct a valuation of your home in order to set the right replacement value and coverage level. Unlike an appraisal, this does not determine the market value of the property but rather the likely cost to rebuild the dwelling and other structures to original standards in the event of a complete loss.

OVERCOMING INSURANCE-ESE

Insurance involves technical terms that can be baffling. These terms help to make policies precise but don’t always help to make them clear. Don’t be afraid to ask your broker to explain

ALERT YOUR BROKER AS SOON AS PRACTICALLY POSSIBLE

If there is any danger or on-going damage occurring, your first priority should be to ensure your safety and limit the damage to your property. At that point, you should take care to act quickly and with the right information.

• Alert your broker and your insurer of an insured loss as soon as your situation permits

• Keep phone numbers available

• Alert the police of any theft or break-in

• Do not alter evidence of the loss, for example, by starting to clean up after a pipe bursts or altering the scene of a break-in. If you absolutely must alter anything take detailed pictures of the damage first

CONSIDER WHETHER OR NOT YOU SHOULD MAKE A CLAIM

First things first. Should you make a claim?

There are some situations in which you shouldn’t and your broker can help you decide.

• Is it covered? Remember that your policy has limits and exclusions that mean some losses are not covered.

Property belonging to your employer, for example, is probably not covered.

Damage from a fire that was set intentionally might not be covered and theft of a valuable painting could be beyond your insurance limit. Is it covered? Ask your broker first.

• If the loss is less than the amount of your deductible then you cannot make a claim.

• If your loss is covered and above the amount of your deductible, you might still not want to make a claim if your premiums will increase as a result.

Again, ask your broker for advice.

WORK WITH YOUR BROKER AND THE CLAIMS ADJUSTER

Once your claim has been made, the insurance company may appoint an adjuster to get a clear picture of the circumstances and extent of the loss. They may assist in securing repairs and can help with arrangements for accommodations.

They might also decide to limit the amount of a payment or to not pay at all – depending on the situation. If you are unsure about the role of your adjuster and the information they are using, be sure to contact your broker who can help bring clarity to the situation.

DON’T OVER OR UNDER-INSURE

Under-insure and you might be left carrying the cost of damage, theft or loss of property. Over-insure and you will be paying more than you have to. Your broker can help you find the right balance by examining your assets, your risk profile and your insurance history. They can also alert you to choices that could reduce your insurance costs such as installing an alarm system in your home.

SET DEDUCTIBLE AND LIABILITY LEVELS RIGHT

One way to control your premiums is to set a higher deductible, which means you accept more risk for covering small losses. Insurers tend to have deductibles ranging from $300 to $1000. Ask your broker to explain the cost implications of different deductibles.

If you drive in the U.S. you might want to consider higher liability coverage due to the higher levels of personal injury awards in that country.

STAY CLAIMS-FREE

One of the best ways to minimize premiums and obtain discounts is to avoid making claims. One of the best ways to do this is to reduce the risk factors that drive claims.

For your vehicle:

• Avoid car accidents by driving defensively and never while impaired

• Install an anti-theft system

• Never leave valuables in the car

• Keep your driving record clean’

In your home:

• Consider a home security system

• Install smoke and carbon monoxide alarms

• Clear the snow and ice off your walk

• Install good quality locks on your doors and windows

These are just a few examples of ways in which lowering the risk can mean lowering the cost to you.

SHOULD I CLAIM?

If you experience a loss that exceeds your deductible, ask your broker what the impact might be on your premiums if you make a claim. The best advice might be to absorb the cost yourself in exchange for lower premiums long-term.

Finding a broker who understands your needs is an important first step to being properly insured. Take the time to find someone you feel comfortable with.

THE VALUE OF OBJECTIVE ADVICE

Insurance brokers are business people whose success rests on your satisfaction with your coverage, price and service.  It’s in their interest to understand your needs and negotiate on your behalf for competitive premiums–even if it means approaching several companies to find the right solution. Because your broker doesn’t work for the insurance company, he or she can also assist you with objective advice if you have to make a claim.

GET INFORMED HELP WHEN YOU NEED IT MOST

The insurance industry has become more complex with its own language of terms, legal issues and subtle details. You need a knowledgeable expert at every stage of the process to interpret all the rules and what they mean for you. Your broker’s advice can also be invaluable as your insurance needs change and your requirements become more complex.

FINDING A LICENSED BROKER IS EASY

There is a well developed system of broker licensing in Canada so you can feel confident that your licensed broker is a certified professional. One of the best ways to find a broker is to ask family, friends and co-workers for a recommendation.  Or, if you have access to the Internet, visit www.nbinsurancebrokers.ca and follow the links to a broker in your community.

DON’T BE AFRAID TO ASK!

When it comes to insurance, there is no question too basic. If there is anything you don’t understand, don’t be afraid to ask us.  We are here to help.

FOUR GOOD REASONS TO INSURE:

In some cases insurance is mandatory – to obtain a mortgage for example or to drive a car. Otherwise, the choice is yours, but it’s a wise choice for four main reasons:

1. Reduces worry. With the right type and amount of insurance, you can be protected from the risks to property and person that are inherent in everyday life.

2. Makes it easier to obtain credit. Lenders may be more willing to extend personal or commercial credit if they know that proper insurance is in place.

3. Helps to prevent loss. Brokers and insurers work to help prevent loss with information and advice on road safety, anti-theft, fi re prevention and fraud reduction.

4. Frees up capital. Because insurance protects your assets, you do not have to put money aside in case of future losses. This security applies to individuals and businesses.

THREE MAIN TYPES OF INSURANCE:

In addition to life and health insurance, there are three main types of property and casualty insurance in Canada:

1. Automobile insurance in which vehicles and their equipment are covered in cases of accidents and theft

2. Property insurance in which home and business assets and property are protected from perils such as fire, theft and accidental damage

3. Liability insurance which protects people who are responsible for injuries or damages to third parties

TWO KEY PLAYERS: YOUR INSURER AND YOUR BROKER:

Insurance is sold in a number of ways, some of which make it easier for customers to get objective advice and rapid service. Some insurance companies will sell directly to customers through their sales forces or agencies. Brokers, on the other hand, are not tied to any one company, but are independent advisors whose best interest is long term customer satisfaction. Brokers can comparison shop across insurance companies to find good rates or special insurance products. Your broker can tell you more about the basics of insurance and can help you make sure your needs are covered.

A DEFINITION

Insurance is a contract in which the insurer agrees to compensate the insured for specific losses and specific perils.