By Jennifer Pritchett, Associate Editor

The Bank of Canada’s decision to raise its key interest rate should be a call to action for Canadians to review their finances, says Easy Legal Finance Inc. president and CEO Larry Herscu.

“A rise in interest rates reduces peoples’ purchasing power and increases their outflow of cash, which is a concern if they are already in debt,” he says.

The Bank of Canada raised its basic interest rate by another quarter of a percentage point in early September, up from 0.75 per cent to one per cent, reports Global News. The increase followed an earlier rise in July, and some economists say more could come soon.

Prime rates are used as the basis for variable-rate mortgages and home-equity lines of credit, says the article.

The Bank of Canada insisted that future rate decisions will be guided by economic data releases and developments in the financial market, and pledged to pay particular attention to any potential risks for Canadians from higher costs of borrowing, Global News says.

The recent increases will undoubtedly impact the money Canadians have to service their debt and every interest rate increase beyond this reduces their cash flow, Herscu says.

“We know Canadians are already being squeezed — what happens if they are injured and unable to work, how do they fund their recovery?” he asks.

In light of this evolving situation around interest rates, Herscu says people need to ask themselves questions such as, “What will happen if I’m injured? What does my insurance cover?” and “How can I secure some financial relief?”

He suggests speaking to your insurance broker.

“Making that phone call to your insurance broker is a quick and easy way to protect yourself, and for a nominal cost, you can create a buffer by reviewing your current coverage and how much it would cost to add more,” he says.

Herscu says he’s found that many people know little about the insurance coverage they have and don’t have a good understanding of the time and costs associated with rehabilitation if they were involved in an accident.

“Many are unaware of recent benefits changes, the optionality of their policies and what kind of coverage they would have if they were in an accident,” he says. “Some don’t know how an increase to their monthly insurance premium could boost their coverage and offset the government legislative changes that were handed down last year.”

Ontario altered statutory accident benefits for auto insurance in June 2016, and the most significant change involved medical and rehabilitation care. This was combined with attendant care as a single benefit for both catastrophic and non-catastrophic claims, says the Financial Services Commission of Ontario (FSCO.)

The changes mean that for non-catastrophic injuries, medical and rehabilitation was combined with attendant care for a total benefit of $65,000, down from $86,000. For catastrophic injuries, medical and rehabilitation was combined with attendant care for a total benefit of $1 million, down from $2 million.

Herscu says for him personally to increase that capped coverage back up to $2 million, it only cost him $1 per month.

“And it only took 10 minutes on the phone with my insurance broker to provide me with my options and secure additional peace of mind,” he says.

It’s important for people to review their insurance coverage on a regular basis, Herscu adds.

“Then they are comforted to know they have plans in place, should something adverse happen to them,” he says.

Easy Legal Finance specializes in assisting people who have been injured in an accident by providing financial support so they can pay their bills while a lawyer fights for a fair settlement in their case.