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When it comes to reading the small print in financial contracts, very few people actually bother to read the document in whole. Whether the paperwork relates to business or personal finance, being able to have comprehensive understanding of the information included is inherent to making the best financial decisions possible. For those who cannot fully understand the language, and/or those who have difficulties with reading may suffer financial consequences if they sign a contract that is not in their best interests. For those who have competent literary skills, many tend to lose interest after a couple of pages and discontinue reading the contract.

According to the Canadian Council of Learning, almost half of Canadian adults have low literacy skills. This non-profit organization estimates that 12 million people in Canada are below the internationally accepted standard of literacy that is required to effectively cope in a modern society. The Organization for Economic Co-operation and Development defines literacy in five different levels; they report that the average Canadian score is 2.5 within this range. The five different levels are:

•    Level One: Very poor literacy skills. Individuals operating at this level of literacy may not be able to correctly determine medicine dosage as given on the packaging, for example.
•    Level Two: The ability to deal with only simple, clearly defined materials that involve uncomplicated tasks. Individuals operating at this level of literacy may have developed everyday coping skills but are challenged with the acquisition of new skills. Individuals at this level may find it difficult to learn new job skills, for example.
•    Level Three: The ability to adequately cope with the skills required for everyday life and work in an advanced society. Individuals at this level of literacy have about the same level needed to finish high school and enter college or university.
•    Levels Four and Five: Very strong skills. Individuals at this level of literacy can successfully process complex and demanding information. Individuals who are in this range generally experience less unemployment, earn more money and rely less on government transfers.

There is no common denominator when it comes to literacy skills. People with low scores can be seniors or young adults, employed or unemployed, etc. Surprisingly, twenty percent of university graduates have literacy skills that score below level three. Many who score low have not completed high school, although some have pursued some form of post-secondary education.

It is important to fully understand and comprehend any and all forms of financial transactions. This includes life (and health) insurance policies. When purchasing life insurance coverage, make sure to read all written materials that are provided, and have a good understanding of what those materials mean. For individuals who may have problems understanding these types of documents, make sure you have someone who is trustworthy to fully explain the material before signing the contract. Individuals may also want to inform their insurance broker that they need further clarification of the contracts and policies as well.

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