Do you like the word guarantee?

BY ANDREW STEWART

The word guarantee is a powerful word. It’s meaning is not lost on us and can draw our attention immediately. Its definition is to provide a formal assurance or promise, especially that certain conditions shall be fulfilled relating to a product, service, or transaction. I’m sure we’ve all been ushered a guarantee of some sort in our lives or maybe we’ve bestowed one or two guarantees of our own.

One of the greatest guarantees in sports history happened when the Indian Pacers evened the 1998 Playoff series at 3-3 with a three-point win over the Chicago Bulls. Mike shrugged it off and said “I don’t care what happens today, don’t care what happened in the other series. We will win Game 7.” His Bulls did win Game 7 and eventually derailed the Utah Jazz in the finals in six games.

Sports is one thing, but what if we could have a financial guarantee? That’s exactly what we get from life and property-casualty insurance companies.

Home insurance
Do you know how much it would cost to rebuild your home after severe damage? An important number to check in your home insurance policy is the replacement cost. This is the amount of insurance provided to rebuild your home from the ground up if it were devastated by fire, weather events, or other perils. Replacement cost covers the cost to rebuild and does not include land. Guaranteed replacement cost means your home is covered for the full cost to replace your dwelling without depreciation, even if it exceeds the replacement cost limit in your policy.

Auto insurance
When you buy a new car, no one wants to think about it getting stolen or having a total loss car accident. But you should think about it during the first year, the average depreciation for new cars is around 30% to 40%, according to the Canadian Black Book. OPCF 43 (Ontario Policy Change Form 43) is a coverage enhancement that can be added to your car insurance policy. It removes your insurance company’s right to deduct depreciation from the value of your vehicle for a loss or theft claim. With this endorsement, your insurer will pay the lowest of the actual purchase price, manufacturer’s suggested retail price at the time of purchase, the cost of replacing your car with a new car of the same make or model.

Life insurance
Life insurance is the Cadillac, Tesla, BMW, Mercedes, and Audi of guarantees. Within this one product we have guaranteed cash value, guaranteed issue, guaranteed coverage, guaranteed premium, and most importantly guaranteed peace of mind.
Guaranteed cash value life insurance policies are cash accounts that gradually build over time as part of a permanent life insurance policy. As you pay premiums, a guaranteed life policy’s cash account grows with interest, tax-deferred, as a sort of enforced savings account. Guaranteed cash value policies can help you pay for emergencies or temporary needs.

Guaranteed issue life insurance, or guaranteed acceptance life insurance, is a typical life insurance policy that does not require you to answer health questions, undergo a medical exam, or allow an insurance company to review your medical and prescription records. Here’s the catch. Guaranteed issue life insurance always has a waiting period. If you die during the waiting period, your beneficiaries will not receive the policy’s death benefit. With most policies, the waiting period is two years. With some, it’s three.
Guaranteed coverage and premium are self-explanatory. But it is another instance that shows how much risk the insurance companies are taking on by making this promise.

Segregated funds
Segregated funds are investment products sold by life insurance companies. Segregated funds provide a guarantee to protect part of the money you invest normally 75% to 100%. Even if the underlying fund loses money, you are guaranteed to get back some or all of your principal investment. But you have to hold your investment for a certain length of time (usually ten years) to benefit from the guarantee. You will pay an additional fee for this insurance guarantee.

So next time you make a purchase or an investment, ask yourself what guarantees am I getting?