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

As the country slowly begins to reopen and inflation begins to rise, many Canadians are taking a long, hard look at their finances. While cutting down on grocery bills and cancelling 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 pay more for liability, property, and auto insurance out of all OECD countries, including the United Kingdom, Germany, and Switzerland — which prompts the question: is it possible to be over-insured?

“In short, yes,” says Solomon Amos, founder of financial advisor search platform Advisorsavvy. Now more than ever, it’s important for Canadians to monitor their coverage as premium rates are fluctuating, he says, noting that personal property rates have gone up by as much as 3.6% in Q2 and auto insurance premiums have declined by 2.6%. 

“What’s enough coverage for you will depend on a variety of factors,” says Amos. “For most Canadians, basic policies will do the trick. It comes down to meeting your own specific needs within your budget and making sure you don’t take on policies or coverage you really don’t need. Insurance isn’t about paranoia, it’s about protection.”

The insurance provider’s job is to sell you as much of their product as possible

Alyssa Davies, founder of the award-winning personal finance website MixedUpMoney.com, agrees. “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, for instance, simple things like taking an inventory of your belongings to determine the true dollar value of your assets can help lower premiums, says Davies. “You could find that you don’t need nearly as much coverage as you have. 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.”

Canadians often default to standard policy insurance, even when what it covers is not needed, says Kyle Prevost, personal finance author and contributor to personal finance and investment website Million Dollar Journey. It’s important to remember how home and auto insurance providers operate, he says. “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.” Define what your needs are, then compare quotes to get the best price for specific coverage, he says.

You’d be surprised at how different the available offerings are and the price points

“For example, if you have one vehicle that you use as a commuter car, but another that gets used much less frequently, 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.”

Consider raising your deductibles, says Saijal Patel, financial wellness consultant and founder of Saijelle.com. “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.”

In addition to raising deductibles, consider bundling your home and auto insurance for a discount, says Patel. And 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. 

Shopping around is the easiest way consumers can lower their premiums, says Enoch Omololu, personal finance expert and founder of personal finance website Savvy New Canadians. “You’d be surprised at how different the available offerings are and the price points. 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.

Ask for every discount possible and install fire and burglar alarms to bring costs down even more, says Omololu. “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.”