No, red cars don’t cost more to insure. This is just one of many insurance myths we’re debunking so you can better understand insurance.
- MYTH: Insurers make huge profit margins.
- MYTH: Only insurance companies pay for expensive legal settlements.
- MYTH: Natural disasters cause insurance premiums to go up everywhere.
- MYTH: It’s difficult to get paid for a claim.
- MYTH: It’s ok to claim a higher loss amount.
- MYTH: Auto insurers keep changing what is and isn’t covered.
- MYTH: Injured in a car accident? Your medical expenses are paid for by your provincial or territorial government’s health care plan.
- MYTH: Driving without a seatbelt doesn’t make me a dangerous driver, so my insurance premiums shouldn’t go up.
- MYTH: Disasters in other provinces are driving up my home insurance.
Stories about insurance are often just that.
Like any industry, insurance comes with its own myths and misconceptions about practices, policies, and premiums. We’ve debunked some common myths with key facts about the Canadian insurance industry as well as home, auto and business coverage.
MYTH: Insurers make huge profit margins.
FACT: On average, insurers make only a 8.7% profit margin. For every dollar Canadians pay in premiums, insurance companies pay out more than half in claims. Insurers mainly earn revenue through premiums and on investments they make.
Source: IBC 2022 Facts Book
MYTH: Only insurance companies pay for expensive legal settlements.
FACT: Everyone who buys insurance pays for legal settlements. Your premiums are pooled by insurance companies and used to pay for everyone’s claims. Money to pay for any large legal settlements comes directly from this pool. If claims costs increase, insurers need to adjust their premiums to keep pace.
MYTH: Natural disasters cause insurance premiums to go up everywhere.
FACT: Major catastrophes directly impact the areas where they occur. Elsewhere, they may have an indirect effect. Here’s how it works:
Insurers also buy insurance – known as reinsurance – to help cover unusually large losses.
Reinsurance companies operate around the world and pay when there’s a major disaster. If reinsurers predict a year with exceptionally high losses, they may raise their rates.
When reinsurers raise rates, insurance companies in Canada may have to pay more for their reinsurance and that, in turn, could affect what you pay.
MYTH: It’s difficult to get paid for a claim.
FACT: In 2021, Canadian property and casualty insurers paid out $37.9 billion* in claims. The payment of home, auto and business insurers helped individuals and businesses get the care they needed, replace lost income and repair cars and other property.
*Source: IBC 2022 Facts Book
MYTH: It’s ok to claim a higher loss amount.
FACT: Inflating an insurance claim is a crime. Insurers will pay you for your losses according to your policy terms, levels of coverage and deductibles. Your adjuster may review your receipts to ensure you receive appropriate value and service. When you claim an unjustified loss amount this is a crime that ultimately costs everyone.
MYTH: Auto insurers keep changing what is and isn’t covered.
FACT: Auto insurance is highly regulated by provincial and territorial governments who set mandatory and minimum coverage levels. Insurance companies can’t change mandatory coverage or premiums without government approval.
MYTH: Injured in a car accident? Your medical expenses are paid for by your provincial or territorial government’s health care plan.
FACT: Each year, auto insurers pay more for medical rehabilitation costs of injured Canadians than government health insurance plans, workers’ compensation plans and private health care plans combined.
MYTH: Driving without a seatbelt doesn’t make me a dangerous driver, so my insurance premiums shouldn’t go up.
FACT: Your insurance company pays your medical expenses so your premiums may increase if you’re convicted of driving without a seatbelt. Plus, you’re much more likely to sustain injuries in a collision when you’re not wearing a seatbelt.
MYTH: Disasters in other provinces are driving up my home insurance.
FACT: Local risk factors such as your home’s location, how much it costs to rebuild, how it’s heated as well as your claims history most affect the cost of your home insurance.
You might also be interested
Climate Proof Canada
We need to prepare our communities now from ever increasing severe weather events, like floods and wildfires. See what we’re doing to make climate change action work.
Find the insurance that fits your needs
Do you spend more time researching real estate, trips, running shoes and new countertops than researching insurance? You’re not alone. Learn how to find the insurance that fits your needs
Protecting your most-valuable assets
What you need to know to help protect your most-valuable assets.