Insurance is one of those things that you think you don’t need... until you do.
While no one wants to pay a monthly insurance premium, these policies are essential if you want to protect yourself from financial trouble and debt.
This is especially true if you’ve worked hard to build up savings and don’t want to see all your financial gains disappear because of a personal emergency. The key is getting insurance plans locked in early so you’re ready for any situation, no matter how challenging.
To get you started, here’s everything you need to know about the most important types of insurance plans you should consider and how your KOHO prepaid Visa account can make the insurance process easy.
Why do I need insurance?
Insurance is a pretty tricky concept to wrap your head around, particularly if you’re not excited about spending money on things that don’t have immediate, tangible benefits.
However, an insurance policy - whether it’s for your home, car, or life - is an investment in your future self. Much like your TFSA, RRSP, or GIC, you may not see the benefits of insurance right now, but, when the time comes, you’ll be happy you made that initial investment.
Even if you’ve been diligent about saving for the unexpected, not everyone will have the cash on hand to pay for a major home, car, or life expense.
That’s where insurance comes into the picture. It works in conjunction with your KOHO-powered saving efforts (keep up the good work!) to ensure that you don’t end up struggling to pay off major debt after an emergency.
"Insurance is one of those things that you think you don’t need... until you do."
What kind of insurance do I need?
Insurance, like saving, is a personal financial decision, so there’s no one-size-fits all solution to figuring out what’s right for you.
Up next, we’ll walk you through some of the most common types of insurance policies that Canadians use, but keep in mind that with KOHO Premium, you can always talk to an accredited financial coach about your unique situation in the KOHO app.
Canadians are required by law to have car insurance, so if you have a vehicle, you’re on the hook for this one.
Car insurance is essential for protecting you from the cost of repairing your vehicle if you get into an accident. It’s also vital when it comes to paying the cost of car repairs for anyone else involved in the accident, or for dealing with liability claims if your accident injured another person.
According to MotorIllustrated, the average cost of a new car in Canada is a whopping $40,490 as of 2019 - though used cars are substantially cheaper. Even if you have savings, having to cover the cost of one, or possibly two new cars is something most of us would rather leave to the insurance companies.
With car insurance, you pay an annual premium to cover the cost of any mandatory coverage required by your province or territory. You can also choose from different types of supplementary liability, bodily injury, collision, and damage insurance options for added coverage.
If you get into an accident and submit a claim that gets approved, your car insurance company will help you out. They'll either repair your car, replace it with a new one, or give you a cash settlement based on the pre-accident value of your vehicle. It’s as simple as that!
Home insurance & renter’s insurance
Homeowners take on a big financial risk in exchange for the joys of owning their own property. However, a fire, flood, major storm, or even a robbery can easily wrack up tens of thousands of dollars worth of damage in just a few minutes.
In these situations, home insurance is crucial, even though it’s not technically required by law.
With home insurance, you pay a monthly premium determined by the risk factors of your property. Should you ever need to make a claim, your insurance will assess the situation to ensure it’s included in your policy. Once your claim is approved, your insurance company will cover the cost of repairing your home, minus any deductibles you might have on your plan.
What about renters, you might ask?
Renters aren’t generally financially liable for damage to their apartment caused by a natural disaster or break-in. But they’re on their own when it comes to replacing any destroyed belongings, which can cost thousands of dollars.
Renter’s insurance helps cover the cost of replacing anything that’s damaged so you don’t have to pay out of pocket and tank your savings in the process.
"Insurance, like saving, is a personal financial decision, so there’s no one-size-fits all solution to figuring out what’s right for you."
Life insurance is one of the more overlooked types of insurance, especially among younger adults. For anyone with a family or dependents, however, life insurance is an absolute must.
With life insurance, you pay a monthly premium based on your age, health, and risk factors. In exchange, your insurance company promises to pay out a certain amount of money to your dependents, in the event of your death.
These payments are meant to help your family cover the cost of your funeral, mortgage, and other regular daily expenses in your absence. It’s not exactly the nicest thing to think about, but life insurance is critical for ensuring that your family is taken care of financially should something happen to you.
If you don’t have any dependents, you probably don’t need life insurance right now. With that in mind, should your family situation change, life insurance should be a top priority.
Budgeting for insurance
Insurance sounds great, if you’re the type of person that wants to protect themselves from an unexpected major expense (which should be all of us, by the way).
As you can imagine, insurance isn't necessarily cheap. This is why it’s critical that you adjust your spending habits to ensure you can cover the cost of your premiums without sacrificing your other savings goals.
Good news: Your KOHO account can help you do just that.
If you’re looking to take out a new insurance policy, the first thing you’ll want to do is use our ultimate budget template. That way, you’ll be able to create a budgeting plan that works the cost of your monthly premiums into your regular spending habits.
Then, you can go and check out what you’re spending your money on each month using KOHO Insights. With this information, you can quickly see ways to better manage your spending to give yourself some wiggle room for your insurance payments.
When it comes to actually paying your bills or insurance premiums, you can do that directly from your KOHO app. With a KOHO Joint account, you can also easily manage your family’s insurance plan premiums all in one place.
The right planning
Insurance in your younger years might seem like overkill. The benefits, however, can help build peace of mind in addition to a safety net for unforeseen emergencies.
Fortunately, your KOHO account can be a valuable tool to help maximize savings while planning ahead. With KOHO’s app, you can set your own financial and savings goals using our aptly named “Goals” feature, which is an easy step toward budgeting for monthly insurance premiums. Taking full advantage of KOHO’s RoundUps is also a great way to set aside money to cover premiums. And by upgrading to KOHO Premium, you’ll get access to a certified financial coach while earning more cash back on the categories your wallet cares about.