Insurance Myths
There are a variety of myths and misinterpretations about insurance. To help you separate fact from fiction, we compiled a list of insurance myths that we’ve heard frequently and provided brief explanations to help set the record straight. Call a trusted associate today if you have any concerns because of these myths.
Also, if you’ve heard any other potential ones, contact us so we can share them here. If you think these myths are interesting consider emailing them to a friend by clicking on the "email page" link bellow.
Auto
Myth No. 1 The color of my car affects my car insurance rates. Bright red cars, especially, are more expensive to insure.
Truth: The color of your car has no bearing on your rate. Red, yellow, purple, zebra-striped, it makes no difference.
Myth No. 2 "Full Coverage" includes rental and towing coverage.
Truth: Rental and towing coverage are individual riders that are generally added on separately and carry additional costs.
Myth No. 3 My driving history is the only factor that determines my car insurance rate.
Truth: There's a lot more to your rate than your record. Other factors include your age, type of car (typically, the better the crash-test score, the better your rate), the intended use of your car and theft rate in your area (urban areas or "port" cities usually have higher theft rates than do rural areas). Also, if you are a student, good grades can help reduce your premiums. Even your credit history can play a part in the overall evaluation.
Myth No. 4 Comprehensive insurance covers mechanical problems.
Truth: No. Comprehensive coverage pays for damage to your car that is not the result of a car accident. This includes such things as theft, vandalism, hail, fire and flood. But trouble with your transmission is on you.
Myth No. 5 If I stay ticket- and accident-free, my rate will go down.
Truth: Remaining ticket- and accident-free will help lower your rate over time, but other factors can keep that rate where it is or even make it go up. These include national and regional trends like the increasing costs to repair vehicles, rising hospital bills and more lawsuits.
Myth No. 6 Newer cars are always more expensive to insure.
Truth: Some newer cars are less expensive to insure than older ones are. It depends on the year, make and model. Check around.
Myth No. 7 Smaller, less expensive cars are cheaper to insure.
Truth: This depends on your coverage. For collision and comprehensive coverage, this is often not the case because smaller cars typically sustain more damage in an accident and have a higher rate of being "totaled" in a collision.
Myth No. 8 Buying insurance online saves me money.
Truth: Your insurance policy likely won't be important to you until you need to make a claim. Should you have a claim and find that you don't have the proper coverage, you may have to come up with the money out of your own pocket, and that could cost you far more than the savings you realized by purchasing a policy online. A good insurance agent can help you analyze your current policy and make recommendations so you have the best experience possible when you have to use your insurance. Additionally, many major brick-and-mortar insurers offer discounts that can be overlooked sometimes in an online purchase.
Myth No. 9 No-fault insurance “PIP” refers to an accident that is not the policy-holder's fault.
Truth: "No-fault insurance" simply means that your own insurance company pays for your injury-related bills, regardless of who is at fault. (PIP = Personal Injury Protection)
Myth No. 10 My car will be declared "a total loss" if it cannot be driven away after an accident.
Truth: Your insurance company will determine whether your car should be totaled. A total loss is declared when the repair costs exceed a certain threshold of the car's present value. That generally falls between 50 percent and 70 percent, depending on the insurance company.
Myth No. 11 If my car is totaled, my insurance will pay off what I owe on my loan.
Truth: When your car is totaled, your insurer will pay you the actual value of your car (before the accident), minus your deductible. You are still responsible to your lending institution for any amount outstanding on the loan or lease. The only way to cover the difference between the car's actual value and the amount you owe on the loan is to purchase gap insurance.
Myth No. 12 My insurance will cover me if my car is stolen or vandalized.
Truth: Unless you have comprehensive coverage, you are not covered for these things. A bare-bones policy in most states is liability-only and will only cover damage you cause to others' cars. If you want to fully protect your vehicle from damage due to accidents, weather, crime and acts of God, you should have collision and comprehensive coverage.
Myth No. 13 Thieves are more likely to steal new cars.
Truth: It's actually the other way around. Statistics indicate that thieves actually tend to steal older cars. There are two primary reasons: 1) They are easier to steal and 2) They're more valuable on the used-car-parts market, which is particularly strong, especially in a down economy.
Myth No. 14 If items are stolen from my car, they are covered under my auto policy.
Truth: Generally, it's your homeowners or renters policy that protects anything stolen from your car.
Myth No. 15 Drivers of sports cars get more tickets and thus pay higher insurance premiums.
Truth: Not necessarily. A lot of other factors determine premiums. (A 35-year-old Corvette owner with a good driving record will probably pay less in premium than a 24-year-old Scion tC driver with points against his record.) According to a recent study by Quality Planning, a solutions consultant for automobile insurers, nine of the top 10 cars with the most traffic violations were non-performance models.
Myth No. 16 One speeding ticket will make my car insurance rates go up.
Truth: Sometimes this is true, but in many cases, you have to get two tickets before your rate goes up. Your driving history, the length of time you've been insured with a company and how fast you were going when you were cited can affect whether your rate increases or not. Keep in mind that a speeding ticket may not be the sole reason your rate increases, as several factors are considered when reviewing them.
Myth No. 17 My car insurance rates will be similar to my neighbor's rates.
Truth: Car insurance rates are individually determined, so factors such as age, driving record, type of vehicle and marital status are considered. Each person's situation is unique, and car insurance rates will vary because of this.
Myth No. 18 I can use Rental Reimbursement coverage to rent a car for my vacation.
Truth: Unless your insured car is in the shop as the result of an accident, you won't be able to use Rental Reimbursement to rent a car for vacation.
Home owners
Myth No. 1 Flood damage is covered by standard homeowner’s insurance.
Truth: Home insurance doesn't cover flood damage. A separate flood insurance policy must be purchased in addition to your standard policy in order to be covered.
Myth No. 2 My medical expenses are covered in case of injury.
Truth: The medical payment portion of your home insurance is designed to protect you if a guest gets hurt on your property. You and your family are not covered in case of injury on your own property.
Myth No. 3 Making an inventory list of your possessions is a waste of time.
Truth: An inventory list is the proof of your ownership. When you file a claim, you will be asked to list all the items that were lost. To make sure that you don't forget anything and to maximize your reimbursement, prepare the list of your possessions ahead of time.
Myth No. 4 The premium goes up every time a claim is filed.
Truth: A single claim may not result in a premium increase. However, filing multiple claims may increase your premium. Always estimate costs of repairs before filing a claim. If the cost isn't much higher than your deductible, then it is more reasonable to pay for it yourself, rather than filing a claim.
Myth No. 5 Home insurance covers all valuables, including jewelry and furs.
Truth: Home insurance has a limit on the amount of coverage for valuables. If particular possessions are worth more than that amount, you should purchase additional coverage for those items.
Myth No. 6 Home insurance covers damage caused by lack of maintenance, including mold.
Truth: Home insurance does not cover mold or other damages caused by poor maintenance. You are responsible for the maintenance of your home. That is one way to prevent major repairs and to keep your home safe for all.
Myth No. 7 Flood insurance is only for those who live in flood zones.
Truth: Floods can happen anywhere, not just in a flood zone. A standard homeowner’s insurance policy doesn't cover damage caused by flooding. Flood insurance will keep you covered.
Myth No. 8 To lower your insurance premium, you have to lower coverage.
Truth: Reducing your insurance coverage in order to save on your premium is a bad idea. You should always be adequately insured. To keep your premium low, learn what options you qualify for that might lower your premium. For example, you can increase the deductible or install a burglar alarm system.
Myth No. 9 Dwelling coverage amount is based on the purchase price of your home.
Truth: Your dwelling coverage should be based on the replacement cost of your home. It doesn't need to include the land part of your property. Replacement cost is usually calculated by multiplying the square footage of the home by current local construction costs.
Myth No. 10 You cannot buy a home without buying home insurance.
Truth: If you have a mortgage most lenders may require you to purchase home insurance, but it is usually up to the homeowner to get proper insurance.
Myth No. 11 Wind-driven rain is considered flooding.
Truth: No, it isn’t. Rain entering through wind-damaged windows, doors or a hole in a
wall or the roof, resulting in standing water or puddles, is considered windstorm - rather
than flood - damage.
Commercial
Myth No. 1 Not all businesses require insurance
Truth: Businesses may not be required to have insurance, but it should be part of their overall risk management plan. Insurance is intended to help a company or business get back on its feet following a loss. Without it, many businesses fail and never re-open their doors. By simply paying a small premium for a larger limit, insurance allows business owners the confidence and freedom to take calculated risks to grow and prosper.
Myth No. 2 My business doesn’t make a lot of money or have lots of assets. I won’t be sued.
Truth: Lawsuits can happen to any business or person. Monetary judgments have many ways of being collected including seizure of property and assets, garnishment of future earnings, liquidation of bank accounts and more. Make sure you have coverage to protect your current and future earnings from potential liability.
Myth No. 3 I set up a corporation, I am 100% protected.
Truth: Facts what they are, a corporation protects the officers and owners from actions or damages against the corporation. However, that corporate shield can be pierced or even stripped and a business owner held liable personally. A business and its owners are legally liable for any action that hurts others. Even if a company is incorporated, owners can be sued personally for their own actions in the company. They risk losing their personal assets and perhaps even their home if a liability lawsuit against them is successful. Without doing a case study, the smaller and newer the corporation, the more likely this could happen.
Myth No. 4 Nothing will happen to me.
Truth: This is a big one, it sometimes sounds like, “If something happened to me the business will take care of my family.” Most businesses don’t survive the death of a principle. Often, the business is dissolved to pay off obligations. This leaves the family and the employees of the business devastated. Have an exit strategy and contingent plan in place and fund it through business insurance.
Myth No. 5 It’s cheaper to buy all of your business insurance products from the same company.
Truth: Chances are you’re going to need a wide range of coverages to protect your business. Depending on what kind of work you do, you might need everything from commercial vehicle insurance and general liability to workers’ compensation. While it might be easier to buy all of these products from the same company, you could save big bucks by buying your policies from separate providers. Shop around to find the best deal, or ask your local agent for quotes from multiple companies.
Myth No. 6 I use my car for on the job duties. Because I’m not self-employed my personal auto policy covers me.
Truth: If your vehicle is used for anything but personal use, then you probably need to extend your personal auto policy to cover business use of your vehicle. Be sure you understand what is and what isn’t covered by your policy. The best way to find out is to review your policy and call us with questions.
