587-597-5478 heather@thinkinsure.ca
Death, Taxes & Insurance!

Death, Taxes & Insurance!

Benjamin Franklin said there were only two things certain in life: death and taxes. But I’d like to add a third certainty:  Insurance.

We can’t do much about death although advances in medical technology and better nutrition has done a great deal to prolong life.

As for taxes, they are imposed on us. Do the following comments sound familiar?

  • “Why do I have to pay school taxes. I don’t even have any kids?”
  • “I think the government should pay for it. They have lots of money.”
  • “I’ve paid into employment insurance all these years so I’m not going to look for a job until my benefits run out”

When it comes to insurance, these are just a few of the comments I’ve heard over the years.

  • “I’ve never had a claim why are my premiums going up?”
  • “I’ve been paying insurance for years and it’s my turn to collect”
  • “The insurance companies have lots of money so why shouldn’t I pad my claim?”
  • “Insurance companies are always just looking for a way to deny my claim and rip me off!”

Taxes and insurance both often feel like another $$cash grab$$, just a hand in our wallets for no perceptible return.  As far as taxes go the waste is in the way in which governments spend.   We do need to have some way to fund social infrastructure even if we think government should only be responsible for taking out the garbage and making sure sewage always runs downhill. Add to that our social responsibility says to set aside a little bit for those who are in need. So yes, some taxes make sense.

Insurance premiums come right out of our pockets and if a claim is never made, it does seem like a wasted expenditure.   Purchasing insurance is not always voluntary.  Mandatory automobile insurance is a good example although purchasing the minimum statutory requirement is not a good idea.   (As a side note, the statutory minimum auto insurance is not insurance at all, but a financial responsibility certificate. But that’s another story.) It is a personal choice as far as physical damage insurance is concerned, unless your vehicle is financed.  The banks need to secure their risk, be it for a loan or mortgage or lease on real property.   The choice is to walk everywhere and live in a tent, or buy/lease a vehicle and a house.

When we think about insurance or taxes there is a perception that this seemingly endless supply of money is coming from “them” when in fact every dollar actually comes from our contributions to “them” in the form of premiums or taxes.   There is one major difference between the two, and it’s huge. Insurance companies are typically privately-held or public companies that must operate at a profit. Unlike governments, Insurers are not allowed to borrow money to pay for increased costs and must meet a series of tests in order to remain licensed. 

The basic principle states that the premiums of the many pay the losses of the few. In order to remain viable and in compliance with solvency regulations insurers therefore need to set premium levels accordingly. An insurer going broke is not in a position to pay your claims when you do have one.

How are the dollars that you pay for your insurance every year spent? 

Insurance Dollar Averaged *IBC
Insurance Dollar Averaged *IBC

Insurance Bureau of Canada ** http://www.ibc.ca/on/resources/industry-resources/insurance-fact-book

Whether it’s taking your kids to school, driving on the roads, collecting employment insurance, or going to the hospital, the money has to come from somewhere. This also includes such things as repairing your car after a collision, redoing your basement after a flood, rebuilding your business after a fire or being sued and having your insurance defend you and pay for the consequences of your negligence.

The fact is that insurance in general makes it possible for members of society to be financially responsible in the event of unforeseen disaster. For this reason we are all protected, not just by the insurance we choose to purchase for ourselves, but by the insurance purchased by others in our society who share our roads, provide our services, and who manufacture and ship all of the myriad goods and commodities society requires.

Without insurance to backstop the risk, nothing would be built, manufactured, sold or shipped. The houses we live in, the roads we drive on, or the getting the sewage directed downhill and the clothes on our backs would not be provided. We would indeed be walking everywhere and living in tents, assuming we could make them ourselves.

The next time your insurance premium comes due, by all means complain, grit your teeth and call your broker to inquire about the best way to reduce the cost. An experienced broker will educate you and help you make an informed decision about how to best manage and finance your risk. 

When your tax bill comes due, complain and grit your teeth, then just pay it and appreciate the privilege of living in this country. Unlike with Insurance, there is nobody to really talk to who can be of much help.