Misconceptions, myths, wives tales–call them what you will; they are all around, and insurance is no exception. Whether these “rumors” started as a miscommunication, or an opinion that was passed down from generations and got twisted along the way, there are certain things that we believe as true when it comes to insurance. While some of these are just silly (like car insurance misconception number five), several are just a lack of education and awareness. So, let’s set the record straight.
Common Car Insurance Misconceptions
Misconception #1 – Purchasing Minimum Coverage is Enough
Truth: Most states in the U.S. do require liability insurance for vehicles at 25-50-10, which means $25,000 for bodily injuries for one person, $50,000 for bodily injuries for everyone involved in the accident, and $10,000 for damages caused to the other person’s property; however, consider the medical bills, cost of property, and the potential lawsuits to follow the accident. Liability insurance may seem like the best way to go due to cost, but it’s important to understand liability is the bare minimum, and it won’t cover the majority of costs in any moderate to extreme car accident. Furthermore, you may have to purchase no-fault or personal injury protection (PIP) coverage to cover most of your incurred costs due to an accident.
Misconception #2 – Full Coverage Car Insurance Will Protect Me
Truth: Despite the common use of terminology, there is no such thing as TRULY full coverage insurance. It’s common for those who purchase full coverage to believe they’re protected; however, you need to understand how your premiums and deductibles work to truly know how you’re covered. You may have liability, comprehensive, collision coverage with uninsured, underinsured, and medical additions, but if your limits are not high enough, you may not be covered in some situations, which can be daunting to discover after the matter.
Misconception #3 – Anyone Who Drives My Car Is Covered With My Policy
Truth: A common misconception is to think that if you have car insurance, it covers anyone operating your vehicle. Unfortunately, this isn’t entirely true. Depending on your car insurance coverage, you could have a policy that protects your car, the driver, both, or none of the above. You need to understand your policy completely before you assume your best friend or family member can zip off in your car and expect to covered in the unfortunate event of a car accident.
Misconception #4 – Personal Car Insurance Covers Accidents During Professional Use
Truth: Personal car insurance is just that: personal. If you use your personal vehicle for professional use like ride sharing or company traveling, your personal policy may not cover it. In fact, it probably doesn’t. You need to contact your insurance agent to discuss how your current coverage protects you and if you need to get further coverage for business purposes.
Misconception #5 – Vehicle Color Can Raise Rates
Truth: We’ve all probably heard the “red car raises rates” routine. This, fortunately, is not true. The color of the vehicle is not used to set car insurance premiums, which means if you want a red car, get one. You deserve it.
Common Home Insurance Misconceptions
Misconception #6 – Flood Damage Is Covered
Truth: You need to understand how your insurance policy covers your home from flood damage. Also, how your home floods is just as important. A river that overflows its banks and damages your basement you most likely won’t be covered by your policy. On the other hand, if there is a torrential downpour of rain for an extended period of time, there’s a good chance you’re covered. Insurance agents and companies are changing how policies cover homes, but it’s best to know how you’re covered instead of assuming.
Misconception #7 – My Home is Insured For Its Market Value
Truth: You need to understand if your home is insured for what it would cost to rebuild or market value. This is an extremely common misconception among homeowners, and it can be devastating to expect a larger amount of money from an insurance claim and receive less.
Misconception #8 – The Law States I Must Have Home Insurance
Truth: If your home is paid in full or you don’t have financial assistance through a mortgage, you do not have to carry home insurance. Although this is true, it’s strongly suggested you insure your home. It’s a high risk to not have home insurance in case of an unfortunate event or accident.
Common Life Insurance Misconceptions
Misconception #9 – Life Insurance Premiums Rise As I Get Older
Truth: Life insurance premiums do cost more as you age, but that’s before you sign up to get insurance. If you get life insurance when you’re 30, the premiums won’t be as high as it would if you wait to get insurance when you’re 50. When you purchase the insurance does affect the premium.
Misconception #10 – No Kids = No Need For Life Insurance
Truth: It’s common to hear discussions around life insurance focus on how it protects your family in the case of your unfortunate passing. So, if you are single, young, and without kids, do you need life insurance? In most situations, you probably don’t; however, there are two big reasons why you should consider acquiring life insurance: student loan debt and funeral costs. Did your parents co-sign your student loans? If you pass, they are left with the burden of repaying them. Also, funeral costs average around $10,000 at the time of this post. Finally, life insurance policies are less expensive to purchase when you’re younger than when you’re older.
Misconception #11 – I Should Buy Life Insurance For My Children
Truth: You can do this; however, it can be expensive. For the most part, life insurance is a way to protect your family financially if you were to pass unexpectedly. In some cases, those with life insurance that don’t have kids keep it to cover their student loans in the event of their passing. If you want to purchase life insurance for your child, add them to your current policy instead of getting them one of their own. The cost will be less, and you’ll still have coverage for them.
Considering what you’ve learned, do you need to take some form of action regarding your insurance coverage? If so, you can find a trusted auto, home, or life insurance agent near you on BriteBee.com!