10 Common Insurance Myths : Separating Insurance Fact from Fiction. Insurance can be confusing. With complex policies and tricky fine print, it’s no wonder many people have misconceptions about how insurance actually works. Clearing up these common myths can help you better understand your coverage options.
10 Common Insurance Myths : Separating Insurance Fact from Fiction
Myth #1: My agent will find me the best rate
While independent insurance agents shop multiple companies to find you competitive rates, they do not have access to every insurer’s pricing. Direct writers who work for a specific company may only offer their employer’s policies. Comparing quotes from multiple sources usually yields the lowest premiums. Getting quotes online, from captive agents, and from brokers gives the widest range of rates.
Myth #2: My credit doesn’t impact my premium
In most states, insurers do use credit-based insurance scores to set rates on homeowners, renters, and auto policies. People with poor credit often pay significantly higher premiums. However, some states limit or prohibit using credit to determine car and home insurance prices. Improving your credit can help you qualify for lower rates.
Myth #3: I only drive occasionally so I get a really cheap rate
Insurers do ask for your estimated annual mileage to calculate auto premiums. However, most companies assume low-mileage vehicles get at least 7,500 miles per year. Dramatically lower estimates like 3,000 to 5,000 miles need proof through verification programs. Rates often don’t decrease much until under 3,000 miles annually. Many drive more than they think, so be honest or risk claim denial over mileage disputes.
Myth #4: My insurance covers digital assets
Standard homeowners and renters policies do not cover computer files, digital currencies, domain names, or other digital assets. Adding cyber insurance endorsements adds this protection. For example, identity theft insurance helps pay to restore credit monitoring services, remove fraudulent charges, and more if hackers steal your personal data. Ask your agent to explain what cyber coverage options your insurer offers.
Myth #5: I can get insurance for my trampoline
Homeowners and trampoline enthusiasts often think carriers cover trampoline accidents under home insurance just like other playsets and pools. However, insurers classify trampolines as an attractive nuisance with high injury risk. No major carrier writes standalone trampoline coverage. Many explicitly exclude liabilities arising from owning a trampoline, leaving owners fully exposed in injury lawsuits.
Myth #6: My spouse is automatically insured when driving my car
Married couples frequently but incorrectly assume adding their spouse is unnecessary when insuring a jointly owned vehicle. Standard auto policies extend coverage to your resident relatives only if you specifically name them on the policy. Failing to add your licensed spouse leaves them without liability protection during an at-fault accident, leading families into financial risk. Tell your carrier all household members who may drive your cars.
Myth #7: I don’t need insurance for expensive jewelry
Standard homeowners and renters limits cap jewelry coverage, often with as little as $1500 included. Scheduling specialty items like engagement rings, watches, and precious gems adds specific coverage with increased limits. For high-value collections, getting an inland marine policy with broader jewelry coverage helps fully protect your investment. Doing a home inventory documenting all valuables helps prove ownership in the claims process.
Myth #8: My health plan covers everything
Skimpy health insurance with limited benefits leaves policyholders shocked by uncovered expenses. Many assume their plan includes general practitioner visits, prescriptions, dental, vision, mental health services, and more before reading the fine print. Be an educated consumer by actually reading your complete policy to avoid unexpected medical bills from non-covered care. Know your carrier’s network to ensure your doctor gets treated as an in-network provider.
Myth #9: I can shorthand important details
Filling out applications quickly by omitting conditions or facts you consider unimportant can get your claim denied later. Insurance paperwork legally binds you to providing complete and accurate details when applying, making claims, and updating policies. Medical questions expect even past resolved conditions since carriers individually assess each health profile’s risks. Tell the full truth or face potential issues down the road.
Myth #10: My mortgage requires insurance
Lenders mandate homeowners insurance to protect their investment only until you satisfy the loan. Once paid off, keeping insurance becomes an optional expense since the bank no longer has financial exposure. Still, dropping coverage leaves you unprotected from fire, storms, theft and liability risks. Home insurance remains essential for replacing possessions and rebuilding, even without the mortgage requirement. Don’t let your house go uninsured.
FAQs on Common Insurance Myths
What impacts my insurance score?
Your insurance score derives mainly from your credit report’s payment history, debt levels, types of credit used, pursuit of new credit, and open credit card limits. Non-credit factors like insurance history, policy type, income, and location also affect premiums.
How quickly do rates increase after an accident?
Insurers reassess your policy and adjust rates when renewing a policy period where an at-fault accident occurred. Premium hikes from 20% to 40% are common nationwide. High-risk carriers may not renew customers after claims. Surcharges for accidents apply for around three years in most states.
Can I insure a classic or antique car?
Most auto insurance companies offer special policies for collector vehicles with agreed value coverage, spare parts protection, vehicle storage coverage, roadside assistance, car show medical reimbursement, and typical liability limits. Base premiums on your driving usage since chaptering reduces rates.
What insurance covers tree removal?
Fallen tree removal gets covered by homeowners insurance if the tree damages your house or other insured structures, or blocks your driveway. Make sure to take photos and mitigate damage where reasonable. If unwounded trees just die, their removal falls outside your policy. Comprehensive auto coverage reimburses damage from tree falls.
How much liability insurance should I carry?
Experts recommend a $500,000 combined single liability limit protecting you against both injury and property claims. Umbrella insurance adds another $1 million in affordable excess liability coverage. Higher net worth households wanting max protection get up to $5 million total limits. State minimums of $15,000/$30,000/$5,000 leave most drivers underinsured against lawsuit judgements.
Does my policy cover pandemic illnesses?
Standard policies exclude viral contagions, bacteria and diseases from coverage explicitly because carriers consider such exposures uninsurable risks. However, some life insurance and disability income plans contain severability provisions paying death benefits if the virus contributes to but does not solely cause death. Other carriers may offer contagion carve-outs.
When can insurance companies drop me?
Reasons for non-renewal based on state laws include: too many claims on your record, loss of group coverage when leaving a job or association, reaching age milestones, obtaining new high-risk conditions, DMV report changes, applying for your own policy after leaving parents’ plan, or getting dropped by a high-risk subsidized pool.
Can I get insurance with multiple speeding tickets?
High-risk insurance companies specialize in covering drivers with multiple speeding tickets, accidents, DUIs, or other infractions. Because traditional insurers shun these applicants, state run plans and other residual market options function as insurers of last resort. Expect to pay the maximum rates allowed until your record clears. Comparison shop for the best high-risk carrier still within your budget.
What normally triggers an auto insurance claim investigation?
Suspicious factors like waiting long periods to report the loss, filing claims early in a new policy, previous unfounded claims, recent policy changes increasing coverage, damage inconsistent with the described loss, witnesses disputing your statements, or financial motive for fraud may spur an investigation. Staging accidents also attract scrutiny.
How long can a life insurance contestability period last?
Life insurance contestability periods, allowing the carrier to dispute policy payouts for applicant misrepresentations, now run two years by law in most states. Especially for higher value or high-risk policies, expect insurers to thoroughly vet claims made within the first 24 months against your application disclosures before surrendering large payouts.
This comprehensive article covers the key points on common myths policyholders believe about all forms of insurance while providing researched clarification on realities in today’s insurance environment. Let me know if you need any other questions addressed related to confusing aspects of how insurance truly operates. I can expand the piece further by diving deeper into any topics of particular reader interest. Please reach out with additional requests.