Home Insurance

Is it possible to over-insure your car and home?

By: LowestRates.ca Staff on December 28, 2023
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This article has been updated from a previous version. 

As interest rates remain stubbornly high, many Canadians are taking a long, hard look at their finances. While cutting down on grocery bills and cancelling unnecessary streaming services are quick fixes that help tighten the proverbial belt a notch or two, Canadians may also want to review their home and auto insurance policies to trim the financial fat.

Canadians pays among the highest for liability, property, and auto insurance out of all OECD countries, which prompts the question: is it possible to be over-insured?

Possibly. In 2023, both average personal property rates and auto insurance premiums have each gone up by 7.5% from 2022.

Now, more than ever, it’s important to actually open up those renewal notices and dig into the fine print to see just how much your coverage matches your needs.

Are you covered for more than you need?

Alyssa Davies, personal finance expert and founder of the website MixedUpMoney.com, tends to say yes.

“It might seem like you can never have enough protection,” she says. “But in reality, we may not need as much coverage as we are led to believe.”

When it comes to home insurance, she recommends taking an inventory of your belongings to determine the true dollar value of your assets can help lower premiums. “You could find that you don’t need nearly as much coverage as you have,” says Davies. “We often assume our belongings are worth a lot of money because they are valuable to us.”

Insurance policies aren’t tailored to individuals and a one-size-fits-all standard package policy could cover costs that some consumers don’t need, says Davies. “I had a friend who was paying an extra $500 per year for his outdoor shed because the company counted the square footage as requiring coverage in the case of a fire.”

Ask questions and look at the fine print, Davies advises. “You can do a lot of mixing and matching with insurance plans, but it takes advocating for yourself.”

How to avoid over-insuring your car and your home

To make sure you’re not over-insuring your vehicles – and in turn, paying too much for your needs – here are a few suggestions from popular personal finance experts.

1) Assess your needs

Canadians often default to standard policy insurance, even when what it covers is not needed, says Kyle Prevost, a personal finance educator.

It’s important to remember how home and auto insurance providers operate.

“The insurance provider’s job is to sell you as much of their product as possible, and it’s your job to know exactly how much protection you need,” he says.  

He raises the example of a two-car household – if you have one car that you use for your your commute and most errands, while the other mostly sits in the garage, there’s no reason why they should have the same insurance policy.

“A basic no-frills [policy] might be a great fit for the lesser-used vehicle, while a much more comprehensive package might be the smarter purchase for your commuter,” he says.

That’s why it’s important to define what your needs are, then compare quotes to get the best price for specific coverage.

2) Lower your deductible

If you don’t want to compromise your security but want to pay less is by raising your deductible, suggests financial wellness consultant Saijal Patel. “The higher the deductible, typically the lower the annual premium. Ask how different deductibles affect your premium and evaluate if the difference is worth it,” she says. “It often makes sense to pay a higher deductible if you’re unlikely to file smaller claims.”

3) Bundle your insurance

In addition to raising deductibles, consider bundling your home and auto insurance for a discount, says Patel. And while you’re on that, don’t forget to ask about incentives.

“Many providers give extra incentives to save,” she says. Going paperless, providing driving record data as part of usage-based insurance, and paying in full for the year rather than monthly can all chip away at premium costs. 

When it comes to property insurance, ask for every discount possible and install fire and burglar alarms to bring costs down even more, says Enoch Omololu, found of Savvy new Canadians.

“Every couple of years I call my insurer to see whether I can negotiate a loyalty discount while also checking to see what other brokers have to offer me,” he says.

4) Shop around

Shopping around is the easiest way consumers can lower their premiums, says Omololu.

“You’d be surprised at how different the available offerings are and the price points,” he says. “Our annual home insurance premium is almost $500 lower than the quote we were given by a different insurance company.”

All it took was a few phone calls to save that cash.

If you haven’t taken a good look through your insurance policies in a while, it’s more than possible that you’re paying too much for your needs. Before your next renewal date, make an inventory of your needs and compare rates online – your wallet will thank you.

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