Common Insurance Myths You Should be Aware Of
Two of the most common myths about insurance are that red cars cost more and that houses should be insured for their real market values. However, red cars do not cost more, and houses should be insured based on how much it would cost to reconstruct them. This cost could vary greatly from one area of the country to another, which means some homeowners are significantly under-insured or even over-insured.
Researchers recently conducted a survey with 2,000 participants to test policyholders' knowledge about insurance myths. To do this, they read each person 10 statements that were all false. Their research showed that men were more likely to believe insurance myths. However, the one exception was that women were more likely to believe that red cars were more expensive to insure. One of the biggest disparities in believing a myth was the myth that speeding tickets do not follow a person home if they are received out of state. More than 65 percent of men believed this myth was true, and less than 35 percent of women believed it. The following are additional myths, truths and statistics gathered.
Myth: Insurance coverage should be purchased for a home based on real market value. As mentioned before, the cost to reconstruct the home is the amount that should be insured. This amount should include both materials and labor. Of those surveyed, 55 percent of men believed it and 45 percent of women did as well.
Myth: An auto insurance company can cancel a policy if the policyholder causes a crash with extensive damages. When insurers drop policyholders because of the amount of claims, they wait to do so until the end of the policy's period. Half of all men and women surveyed believed this myth.
Myth: It is cheaper to insure a small car. Both mid-size and small minivans or SUVs are usually cheaper to insure. Since inexperienced drivers often select small cars, they are actually not the cheapest to insure due to a higher amount of claims. About 40 percent of women believed this, and nearly 60 percent of men believed it.
Myth: The Affordable Care Act means health insurance rates are based on preexisting conditions. The ACA actually prohibits insurers from increasing rates based on preexisting conditions. However, 40 percent of women and 60 percent of men believed this myth.
Myth: Comprehensive auto coverage includes everything. There are limitations with this type of coverage. It only covers smaller areas of certain incidents such as theft, animal collisions, vandalism and storm damage. About 30 percent of women and 60 percent of men believed this myth.
Myth: Thieves prefer stealing new vehicles. Thieves are more likely to steal older cars to sell for parts. About 40 percent of women and 60 percent of men believed this myth.
Myth: If a policyholder loans his or her car to a friend who crashes it, the friend's insurance company will cover the damage. Whenever someone else crashes a policyholder's car, the policyholder and his or her insurer must pay for the damage. Slightly less than 50 percent of women and slightly more than 50 percent of men believed this myth.
Myth: The ACA requires people to take advantage of employer-sponsored plans. Americans must have insurance, but there are no laws stating where they must buy it from. About 40 percent of women and 60 percent of men believed this myth.
Experts say that all of these misconceptions can lead to financial losses. It is important to always ask questions. To learn more, discuss concerns with an agent.