Insurance basics: why buying the cheapest policy is not always the best option

What you need to consider when shopping for insurance is knowing what type of coverage you need and what your policy implies regarding limits and exclusions. Then compare the different options you have regarding the annual premium.

When looking for a business insurance policy like contractors insurance, you will see countless advertisements or websites advertising that they offer the lowest and cheapest insurance premium you can get. So naturally you gravitate towards that because, really, who wants to pay for insurance?

However, basing your purchase decision on which insurer has the lowest price is not necessarily the way to go. Most of the time, it’s not the best option at all. Instead, what you need to consider when shopping for insurance is knowing what type of coverage you need and what your policy implies regarding limits and exclusions. Then compare the different options you have regarding the annual premium. That’s why aligning yourself with a brokerage can make all the difference. Brokers do the shopping for you to find the right protection you need at the most affordable price available.

For example, let’s say you’re looking for a commercial auto insurance policy for your truck in Ontario. Like personal auto insurance, you can buy a basic business auto policy that includes only the minimum coverages and limits required by law and get a reasonably low premium. But if you don’t include optional types of insurance, like collision or accident coverage, which pay to repair or replace your vehicle if you’re at fault in an accident and wreck your truck, that basic business auto policy won’t work. Don’t pay to repair or replace it. Is it cheaper to go without collision coverage? Yes. But is it worth it if you are at fault for an accident? Clearly not.

What are the pros and cons of selecting the cheapest insurance?

Obviously, if you go for the cheapest policy you can find for your business, you’ll save some money and probably feel good about it. That is unless you need to file a claim and find that your insurance provider won’t cover your claim, or that policy’s minimum limit only covers a portion of the damage or loss you incur, leaving you to pay the rest out-of-pocket. .

However, there are times when a basic policy with low coverage limits may be right for your needs. It is not common, particularly in the construction industry, but there are exceptions. However, insurance should give you the confidence and peace of mind that your needs will be taken care of if an unexpected disaster strikes and that you’ll be able to get back to work quickly. But, if you don’t have enough insurance, is that your best bet?

It’s also worth noting that sometimes insurers will offer lower rates when they take on new customers. But it’s often an introductory offer that’s sure to increase at renewal, even if you haven’t filed a claim. Why? The premiums of many policyholders pay the claims of the few who have a claim. To make sure they have enough money to pay those claims, insurers can impose stricter rules when issuing new policies and reassess the premiums they charge for renewing policies.

Three ways to get the right insurance at the right price

There is no shame in going out of your way to find the cheapest policy you can find. After all, who doesn’t want to save money? Here are three things you can do to meet your insurance needs and keep your premium as low as possible:

  • Partner with a licensed broker. Aligning with a licensed commercial insurance broker to serve as your trusted advisor saves time, money, and clears up any confusion you may have about your policy. Zensurance has over 50 Canadian insurers in its network of partners and our brokers can review your coverage needs and find you a policy at a competitive rate. It is your broker who can make sure you are neither overinsured nor underinsured.
  • Identify risk management opportunities. Identify any risk management opportunities you can implement to decrease the likelihood of filing a claim. Even a small business with proper loss control and risk management strategies will always get a lower premium.
  • Look for insurance discounts. If your premium increases at renewal, your broker can work with you to see if you qualify for any discounts or savings opportunities. For example, some insurance companies will offer a no claims discount if you have not filed claims in the last six years.

Remember, minimum coverage equals minimum protection. Think about your business and its liability risks, talk to a broker, and make an informed decision before purchasing or renewing an insurance policy.

Jon Hogg is a Licensed Broker and Team Leader, Digital Solutions, Contractors at Zensurance, Canada’s leading digital business insurance broker. He gets a free quote for his insurance needs by visiting Zensurance.com/DCN.

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