Do clients understand their insurance coverage? About half of Canadians (55%) review their insurance policies at least once a year, but new research suggests most don’t realize they need extra coverage.

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That’s because one-in-two Canadians (52%) won’t ask their providers to clarify details in their policies. They avoid this because they believe it’s too complicated (31%) and too time-consuming (31%). They’re also embarrassed by their lack of knowledge (23%) or are simply uninterested (19%).

But “if you come across terms or conditions you are unfamiliar with in your policyyou need to seek help,” says Dave Minor, a vice president at TD Insurance. This helps clients understand their rights and responsibilities as policyholders.

What’s even worse is 37% of Canadians admit don’t bother to review the fine print on their policies. As a result, 23% have found out too late they weren’t covered for something.

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Minor says people must always phone about insurance adjustments if they make life changes. He also outlines three scenarios that can show clients how home, auto and life insurance work:

1. Hayley bought a $5,000 antique dining room set for her home a few years ago. Unfortunately, it’s suffered water damage. She’s made her claim and met the deductible, but isn’t sure how much will be covered for the replacement set.

Replacement value ensures the contents of your home are insured for the amount it would cost to replace them. However, a standard home policy only covers actual cash value, which refers to what you would pay for a similar item at today’s costs, less depreciation. If Hayley has actual cash value coverage, her insurer might pay $3,800 because that is the replacement cost minus depreciation and deductible. If she had purchased extended replacement value coverage, her insurer would cover the purchase.

2. For his graduation gift, Duncan’s parents give him their 10-year-old station wagon to drive on weekends. The car is in average condition and is valued at $1,500. Duncan doesn’t have strong cash flow right now, and is weighing his options for insuring it at a low cost.

To save money on premiums, Duncan could increase his deductible. Since the car is old and will be driven relatively infrequently, Duncan could also consider dropping collision coverage. For example, if his deductible was $1,000, it may not be worth adding collision coverage to his policy since he would likely end up covering a majority of repair costs through his deductible. Instead, he can pay for any accident damage to his car out of his savings. Otherwise he could, over just a few years, end up paying more in premiums than his car is worth.

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3. Sarah and Daniel have just made an offer on their first home and are planning to start a family in the next few years. To ensure their family home is protected, they’re trying to decide if they should buy life insurance now or after they start their family.

Mortgage life insurance pays the balance of your mortgage to the bank if a person listed on the mortgage passes away, so loved ones are not left with debt. This type of insurance requires answers to just a few basic health questions. Premiums are then combined with your mortgage payments. Term life insurance, however, provides coverage for a set number of years and the payout is delivered directly to the beneficiaries who can decide what to do with it. Both policies would give the couple a flexible, low-cost way to protect their family and their home.

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