Frequently Asked Questions
For your convenience, we have assembled the answers to many frequently asked questions. If you are unable to find the answer to your question, please feel free to contact our office and one of our Professional Insurance Advisors will be pleased to assist you. Comments or suggestions on how we can continually improve the content of our website are welcome. Please e-mail us with your comments.
General Insurance
What does "replacement" value mean?Why did my premiums increase when I haven't had a single claim on my policy?
A friend of mine claimed more than she lost in a fire. She says the insurance company can afford the exaggeration. Isn't this fraud?
How big is fraud?
I have paid premiums for years. I finally now have a claim and the insurance company says I'm not covered. What's with that?
Can I be sued for more than the limit of my liability insurance?
What are my options for the payment of premiums?
What does "replacement" value mean?
For home insurance, the replacement value guarantee allows you to replace the insured item with a new item of the same kind and quality if that object is destroyed or rendered unusable due to an insured loss. The insurer does not apply any depreciation in this case. As with all policies, there are restrictions and limitations for this coverage to respond.
For automobile insurance, the owner of a new vehicle can also take out a Waiver of Depreciation Endorsement. Various options are available in the case of a total loss, ranging from the reimbursement of the initial purchase price to the replacement of the destroyed vehicle with a new vehicle that has the same features. This insurance protection is typically offered in the first two years when a brand new vehicle is purchased or leased.
A friend of mine claimed more than she lost in a fire. She says the insurance company can afford the exaggeration. Isn't this fraud?
This was most definitely fraud. What your friend doesn't realize is that she is taking money out of your pocket. One of the factors when calculating basic premiums is the cost of claims that will be paid. That number is based on what was paid before, plus a forecast built in for such things as inflation, natural disasters, fires, thefts, accidents, etc. Every claim that is exaggerated, even if only by a small amount, means that the amount used in calculating next year's premium is that much higher. Smaller claims mean significantly more than one would think. For every large claim, there are easily a thousand smaller ones. If each of those smaller claims was exaggerated by $100, that means $100,000 more was paid in claims than should have been. Following is a short list of fraudulent acts; there are a significant number more:
- Claiming for something that was never owned
- Claiming for something of a much higher value (eg: claiming for a Blaupunkt car stereo when a Pioneer had been stolen)
- Claiming to be hurt when there was no injury
- Claiming for lost wages when there was no time off work
How big is fraud?
The Property and Casualty insurers of Canada believe that at least 10% to 15% of household, automobile and commercial business claims are fraudulent - either completely fabricated or exaggerated. That equates to approximately $1.3 billion a year in fraudulent claims that must be paid from the premium of policy holders. The cost of insurance fraud rises another approximately $1 billion if police, court, arson-related fire-fighting and other social costs are considered.
Excerpted from Insurance Council of Canada 1998 "FACTS"
Can I be sued for more than the limit of my liability insurance?
Yes. The amount of liability insurance you have is never disclosed to anyone during a lawsuit. If you are successfully sued for an amount greater than the limit of your liability insurance, you will be required to make up the difference from your own personal assets. This could mean the loss of your home, investments, RRSPs and ultimately bankruptcy. You should review your liability limits with your professional insurance advisor who can help you determine what is appropriate for your circumstances.