Lack of knowledge and understanding about insurance is not uncommon. So, we’d like to help you make sense of the difference between myths, misconceptions, and facts about insurance.
When you apply for an insurance policy, do you opt for basic coverage without truly understanding the terms? You’re not alone. Unfortunately, this could lead to some headaches later if you suffer a loss. Here are some of the most common myths about insurance compared to the facts:
Facts About Insurance: Homeowners
Myth #1: “Home insurance is based on the market value of my home.”
Fact: The amount of homeowners insurance you need should be based on what it would cost to repair or rebuild your home. This type of coverage is called Replacement Cost Insurance. How much you paid for the house or the current market value has no bearing on the amount of coverage you need.
Myth #2: “Home insurance covers all my valuable items no matter how much they cost.”
Fact: Homeowners’ policies have limits on how much they will pay for valuables such as art, jewelry, or expensive tech equipment. The best way to make sure your valuables are fully protected, consider adding an endorsement or rider specifically for those high-value items.
Myth #3: “My home is protected against flood damage by my standard policy.”
Fact: A standard homeowners policy does not cover flood damage. You will need to add flood coverage to your existing policy or get a standalone flood insurance policy. Some insurance companies offer coverage for flood and water damage through FEMA’s National Flood Insurance Program. Remember, you don’t have to live in a high-risk area to benefit from flood insurance. About 20 – 25% of flood claims come from homeowners outside of high-risk zones.
Myth #4: “I’m required by law to have home insurance.”
Fact: State or federal law does not require homeowners insurance. However, if your home is financed, the lender will require that your home be insured. They want to protect their financial interest in the property in case of a loss. If your home is paid for, it’s still a good idea to have insurance to protect you and your family from financial loss if the home is damaged.
Facts About Insurance: Automobile
Myth #1: “I don’t need to insure my old, paid-for car.”
Fact: No matter the age of your car, you are required by law to have liability insurance if you drive the vehicle. But, if the car is old and paid for, you have the option of declining comprehensive and collision coverage. Keep in mind, however, that you’ll have to pay out of pocket for any repairs if the car is damaged.
Myth #2: “I won’t be held responsible if someone else driving my car causes an accident.”
Fact: If someone drives your car and causes an accident, you won’t get “points” on your record. But, your insurance would have to pay for the damages that result from the accident.
Myth #3: “Since I drive a company car, I’m covered.”
Fact: Being listed on your employer’s auto policy won’t protect you from a lawsuit if you cause a serious accident. The insurance on a company vehicle only covers the automobile itself. Although it provides some liability protection, it may not be enough to protect you personally.
Myth #4: “I only drive now and then, so I don’t need much insurance.”
Fact: Look at it this way. Risk is risk, and damage is damage. Even if you only drive once a month, if you cause an accident the resulting damages are not diminished because you are only an occasional driver.
Facts About Insurance: Life Insurance
Myth #1: “Only the primary earner in the family needs life insurance.”
Fact: The breadwinner of the family isn’t the only one whose contributions would be missed. For instance, what if your spouse is a non-working individual who maintains the home and cares for the children? If something unforeseen happens, paying someone to perform these tasks could be costly. In a family situation, both spouses should have life insurance to protect the other members of the family in the event of a tragedy.
Myth #2: “I have life insurance through my job, so I don’t need my own policy.”
Fact: In many cases, employer-paid life insurance is a good benefit to have, but the coverage may not be enough to truly protect your loved ones. You must also consider what happens to that insurance if you leave your job. Can you afford to pay for the coverage yourself if that option is available? Having your own policy gives you peace of mind knowing your family is protected regardless of your job situation.
Myth #3: “I’m single, young, and healthy, so I don’t need life insurance yet.”
Fact: It’s important to remember that life insurance rates increase as you age or develop health problems. The best time to buy life insurance is now while you’re young enough to take advantage of low premiums. Plus, you’ll be able to get higher coverage. Although you’re young and single, you may have parents or siblings that would have to cover your financial obligations if you pass away. Do you have student loans, credit cards, or other debts that would burden your loved ones? Life insurance will prevent that from happening.
Myth #4: “I’m too old and unhealthy to qualify for life insurance.”
Fact: Some insurance companies will provide insurance for people up to age 85. Health is more important than age when it comes to determining your qualifications for insurance. However, some individuals in their 60s or 70s get coverage even after having a past health crisis. One benefit of having life insurance is that older adults can add long-term care riders to their insurance policies. This allows them to convert part of the death benefits into living benefits if they are diagnosed with a terminal illness.
Sandifer Insurance Agency Takes the Stress Out of Buying Insurance
Buying insurance does not have to be stressful. If you’re having trouble sorting through the facts about insurance, give us a call. Our agency has over 40 years of experience in helping people get the right coverage at an affordable rate.
Reach out to us by phone, email, or online to take the hassle out of making this important decision. We understand how the myths about insurance can cause confusion, so we’re eager to clear things up for you. One of our agents will be happy to assess your needs and recommend a policy that best fits your insurance goals.
- fema.gov/– Flood Insurance