Insurance is one of those particularly vague financial concepts that don't get alot of attention. But we think that it's a very important topic for you to understand all about your finances, so we've simplified it for you!
What is insurance anyway? One source indicates that it is "a policy from a large financial institution that offers a person, company, or other entity reimbursement or financial protection against possible future losses or damages".
Some of you may not get that, so we'll give you an example. If you're a cyclist, you know there's a possibility that you might have a head injury from cycling down steep slopes, or even just down the street. So there's always this risk that you will be injured; even if the risk is small because you're a pretty good cyclist, the risk is still there. That's why most people wear helmets when they cycle, because helmets in this situation, act as insurance against a potential head injury.
In the same way, we pay insurance in order to offset future troubles we might have. Insurance helps to give us financial security. How does it do that? When we contribute to an insurance plan, we’re safeguarding ourselves against possible emergencies that we may encounter in the future.
Let's use another example. Let's say, a family member suffered a debilitating disease and has to stay in the hospital for several months – at the very least. Hospital costs are incredibly expensive; who’s going to pay for the costs involved? If he/she has insurance, the insurance company may pay a portion of it, depending on your plan, thus taking off part of the burden of payment.
How about insurance in Ontario?
The Ontario law requires that all motorists have auto insurance, so that's one less thing to worry about.
The Ontario Health Insurance Plan (OHIP) pays for a wide range of health services; however, it does not pay for services that are not medically necessary, such as cosmetic surgery.
We hope this cleared up any confusion around insurance!
The cashsmart Team