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How insurance works

How insurance works

Insurance is about spreading the risk. When you buy insurance, your money is put into a "pool" to help the few people who will experience a loss – like a fire or a collision – in that year. The cost, or price, of insurance is referred to as a premium – and it's based on how likely it is that you will collect from the pool by making a claim. Insurers take many factors into account when calculating your premium including your driving record, where you live, and what car you drive. Speak to your insurance representative about ways to reduce your premium – an example is, increasing your deductible, your insurance representative may have other suggestions for your particular case. It should be noted that when you increase your deductible, you are increasing the amount that you agree to pay for your loss. 

An insurance policy is a contract that only covers events, or losses, that are specifically listed in it. Insurance is meant to help you reduce your risk by helping you cope with the financial consequences of events that are unpredictable, sudden and accidental. It isn't meant to pay for every problem you face – for example, damage to your vehicle from lack of maintenance.


You really need auto insurance

Drivers who have been denied coverage are tempted to drive without insurance. Don't! Driving without insurance is a serious offence with harsh penalties including a heavy fine and in some cases, licence suspension. It's as important to drive with insurance as it is to not drive drunk or distracted.


What can I do?