Frequently Asked Questions

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Here are some of the most frequently asked questions about financial services and insurance coverage. Click on the question to read the answer.

Financial Services

What is a mutual fund?
How is income tax collected on mutual funds?
How can I calculate my net worth?
When should I update my net worth?
How can I increase my net worth?
What is the “Rule of 72″?
How much should I be saving?
How can I maximize my RRSP contribution?

Insurance

Is my swimming pool covered by my home insurance policy?
My insurance policy covers all of the goods contained in my house. Why should I take out additional insurance for a specific item?
Is a home-based business covered under my residential policy?
Am I insured in the event of a power failure that lasts several days?
Is my insurance coverage adequate?
Do I need a will?
What is a power of attorney?
Your web site constantly tells me to count on you for the details. Is that really necessary?
Is there other coverage I should consider on my auto policy?
Is there other coverage I should consider on my home policy?
Can I be sued for more than the amount of liability insurance I purchase?
What happens to my auto insurance after an accident?
What options do I have for paying my home or auto policy?
What does “replacement” value mean?

Financial Services

What is a mutual fund?

A mutual fund is a pool of assets contributed to by investors who share similar investment objectives. The mutual fund is managed by professional portfolio managers and advisors in accordance with a disclosed investment strategy in order to achieve the mutual fund’s objective. Mutual funds provide a cost-effective way of owning diverse investments based on the knowledge and attention of professional money managers.

There is a wide variety of mutual funds available in Canada (some 4000) to help investors achieve their personal financial goals. For example, the investment strategy of any given fund can be designed to provide lower or higher risk options. This in turn provides opportunities for investors who plan to invest their money for longer or shorter periods of time. Some funds are designed to provide investors with regular income; others may provide capital growth and income. There are also funds that can be turned into cash easily if the need arises.

Funds can be invested entirely in the stocks of Canadian companies, Canadian bonds issued by companies, federal or provincial governments, or other Canadian assets. Some funds focus on foreign investments; still others are a blend of Canadian and foreign investments. For each mutual fund, a prospectus is filed with the relevant securities commission. A prospectus provides a detailed description of the mutual fund, including:

  • the recent performance of the fund in terms of earnings for investors
  • the composition of the fund e.g. bonds, equity (stocks), foreign content, real estate
  • the objective of the fund e.g. achieve above-average, long-term growth and capital protection
  • the investment style of the money manager

Disclaimer: commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

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How is income tax collected on mutual funds?

It is a good idea to find out what the fiscal repercussions will be when you select a mutual fund. A financial professional can answer many of your questions. However, it is recommended that you talk to a tax consultant, who will assess your personal situation.

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How can I calculate my net worth?

Your net worth is obtained by adding up your total assets (what you own) and subtracting your liabilities (what you owe). Calculate your Net Worth easily by using our online tool.

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When should I update my net worth?

Update your net worth calculation at least once a year in order to track your progress.

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How can I increase my net worth?

  • Improve the rate of return on your investments.
  • Invest more of your income by spending less and minimizing taxes.
  • Reduce your debt by paying off loan and credit card debt and accelerating your mortgage payments.

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What is the “Rule of 72″?

A simple rule of thumb for estimating how quickly your assets will grow. Take the number 72 and divide it by your rate of return – this will tell you how long it will take to double your assets. If you are earning 8%, your assets will double every 9 years, (72/8).

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How much should I be saving?

Get into the habit of saving a regular amount of at least 10% of your income each month and use the balance for your expenses. This is known as the “pay yourself first plan”. Have this amount regularly transferred to a separate account on a monthly basis.

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How can I maximize my RRSP contribution?

You should start by building a financial plan to ensure you:

  • Take care of your current financial needs and obligations
  • Provide for your short-term goals such as vacations, home renovations, etc.
  • Provide funds or insurance coverage for unexpected events
  • Secure a worry-free retirement

Once you have assessed all of your family’s needs, you can develop a strategy to maximize your RRSP contributions. The sooner you start investing in an RRSP, the greater your tax-free earnings will be.

Your RRSP will grow faster when you make regular contributions up to your maximum allowable amount. Your maximum allowable amount is shown on the notice of contributions issued by the federal government when you file your tax return each year. The amount is a percentage of your earned income for the previous year.

When the time comes to make your RRSP contribution, you may not have enough cash available to make the full contribution. You may want to consider a loan to make up the difference. There are loans specifically designed for investing in an RRSP. If you can pay off the amount you borrow in one year, borrowing money can be a great way to keep your RRSP growing. As an added benefit, you will receive a tax refund on your contribution amount that will help you pay back the loan.

Consult one of our financial professionals to help you build your plan.

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Insurance

Is my swimming pool covered by my home insurance policy?

Basic home insurance policies do not generally cover damage to above-ground swimming pools.

It is, however, possible to obtain additional coverage to protect yourself against anything that could damage your above-ground swimming pool, with the exception of normal wear.

Unlike most other insurance companies, the basic Intact Insurance home insurance policy covers damage caused to in-ground swimming pools.

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My insurance policy covers all of the goods contained in my house. Why should I take out additional insurance for a specific item?

Home insurance policies generally include limits with respect to valuable or unusual items. Such limits apply specifically to jewellery, furs, silverware, boats and certain collector’s items.

It is possible to increase the coverage for such items, or to eliminate certain exclusions, by adding coverage specifically for a given item.

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Is a home-based business covered under my residential policy?

No. Residential policies exclude business or commercial belongings, as well as professional liability.

Intact Insurance offers additional protection that covers the business you run from your home by extending your homeowner’s policy and adding professional liability insurance to the package.

For more information, contact one of our representatives.

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Am I insured in the event of a power failure that lasts several days?

Insurance policies do not generally cover the additional expenses incurred as a result of an extended power failure, unless the authorities order your area evacuated.

Intact Insurance offers additional coverage which enables you to pre-select an amount that you will be reimbursed per day, in the event of an extended power failure. This can be used to cover any of your incurred expenses, such as: lodging, heating wood, meals in restaurants, protection of your goods, etc.

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Is my insurance coverage adequate?

Have your needs assessed by a professional to determine the coverage you should obtain for material loss, death, disability, illness, etc. In the event of death, a life insurance policy may be essential for giving your dependants a replacement income or paying off your debts, such as a mortgage, or inheritance tax. Take the time to consider disability insurance since an inability to work can have serious financial consequences. Make sure that you have a policy that provides adequate coverage in the event that damage may occur to your home, your automobile and your other belongings.

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Do I need a will?

If you die intestate (without a will), your assets will be distributed according to provincial law – perhaps differently than you intended. You should review your will about every five years, or whenever there is a change in your family circumstances. You should consult your legal advisor to discuss your will.

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What is a power of attorney?

It is a legal document which allows you to confer responsibility on someone you trust to do certain things on your behalf, for example, rent an apartment or sell your car while you are on holiday or even if you become incapacitated.

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Your web site constantly tells me to count on you for the details. Is that really necessary?

Insurance and investment products are very complex. The wrong choices can severely affect your financial well-being. Most individuals do not have the expertise to adequately analyze their risk management and investments needs, so it is crucial to get professional advice on these matters.

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Is there other coverage I should consider on my auto policy?

Yes. There are a number of options for you to choose from that can enhance your auto coverage:

Options Description
Increased liability limits Up to a maximum of $2,000,000.
Collision coverage Covers damage to your vehicle in the event of an accident.
Comprehensive coverage Provides coverage for theft, fire, vandalism, cracked windshield and other perils.
Loss of use coverage Provides coverage for a rental vehicle while your vehicle is being repaired after an accident.
Rental vehicle coverage Extends physical damage coverage to rented vehicles in Canada and the United States.
Optional Benefits:
  - Income Replacement
  - Medical, Rehabilitation & Attendant
  - Care
  - Caregiver and Dependant Care
  - Death and Funeral
  - Indexation of Benefits
Can increase the maximum levels of accident benefits coverage on your policy. In addition, you can choose to index your accident benefits coverage to ensure it stays in line with the Consumer Price Index. If you have benefits available through your employer or elsewhere, you may not need to buy optional benefits. We can help you decide which optional benefits, if any, are appropriate for you.

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Is there other coverage I should consider on my home policy?

Yes. Home, condominium and tenant policies are generally issued with a standard set of limits and coverage. You may find that you need additional coverage to meet your specific circumstances. There are a number of options for you to choose from that can enhance your property coverage:

Options Description
Increased personal liability limit Up to $2,000,000 may be available.
Antiques & collectibles coverage Specifically insures these items so you can realize their true value in the event of a loss. Often an appraisal will be required.
By-laws coverage (for homeowners) Provides coverage for additional costs to repair or rebuild your home to comply with local laws. This is particularly important for older homes.
Earthquake coverage Can be added to your policy.
Coverage for:
  - Bicycles
  - Business property
  - Coin and stamp collections
  - Collectible cards and comic books
  - Jewelery and furs
  - Money and securities
  - Spare auto parts
  - Utility trailers
  - Watercraft
Increases the limits on these items, beyond your standard coverage, to suit your requirements. Contact us for details on your policy.

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Can I be sued for more than the amount of liability insurance I purchase?

Yes. Your amount of liability insurance is never disclosed to anyone during a lawsuit. If you are successfully sued for an amount greater than the limit of liability insurance you carry, you will have to make up the difference from your own personal assets. This could mean the loss of your home, investments, RRSPs and ultimately bankruptcy. That is why you should review your liability limits with an insurance professional to determine a limit that is appropriate for your circumstances.

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What happens to my auto insurance after an accident?

Your insurance policy will be reviewed after every loss. If the loss is not your fault, your policy will most likely receive no rate increase. If you are deemed to be responsible, your policy may be re-rated with a higher rate charged at renewal or, at worst, the policy will not be renewed and you will have to look for coverage elsewhere.

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What options do I have for paying my home or auto policy?

We have many different payment options available to you. They vary slightly based on which insurance company you choose. Most companies offer the following plans:

  • One Pay: payment in full by the policy effective date.
  • Instalment Plan: two, three or four equal instalments, with the first due on the policy effective date and the others due in set increments (usually 30, 60, or 90 day intervals). A small service charge usually applies to each payment. The number of instalments, payment interval and service charge vary slightly from company to company.
  • Electronic Funds Transfer (EFT) program: payments are automatically withdrawn from your bank account. A 3% charge is added to the full premium amount.

Some of the insurance companies we represent have programs available where no service charge applies to any of the payment plans offered.

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What does “replacement” value mean?

For home insurance, the replacement value guarantee allows you to replace the insured item with a new item of the same kind and quality if that object is destroyed or rendered unusable. In this case, the insurer does not apply any depreciation.

For automobile insurance, the owner of a new vehicle can also take out a replacement value guarantee. Various options are available in the case of a total loss, ranging from the reimbursement of the initial purchase price to the replacement of the destroyed vehicle with a new vehicle that has the same features.

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