6 Myths about Insurance

Insurance myths

When it comes to coverage, don’t believe everything you hear. There are a lot of insurance myths out there! Knowing fact from fiction will help you choose coverage that’s right for you.

Top 6 Insurance Myths

My auto insurance policy includes coverage for both personal and business use.

FALSE

If you are self-employed and use your car for business travel – such as operating a delivery service or providing transportation through a ride-sharing service – your personal auto insurance policy may not cover you. A commercial auto insurance policy provides coverage for business purposes. You may also have the option to purchase a supplemental insurance product that extends coverage for ride-sharing.

The color of my car affects my auto insurance rate.

FALSE

Car color does not affect your insurance premium. However, other factors – including a vehicle’s model, make, year, and the driver’s experience and driving record – may impact auto insurance rates.

Loaning my car to someone also means loaning my car insurance.

TRUE

In most states, car insurance follows the vehicle. This means your insurance company could be responsible for damages caused by someone else if they’re driving your car. Policies and laws differ by state, so make sure you understand the rules of the road before letting a friend drive your car.

I don’t need renters insurance. My landlord has coverage.

FALSE

Your landlord’s insurance only covers the building, not your personal property inside of it. A separate renters insurance policy is required to protect your personal belongings, as well as for protection against personal liability, such as a guest’s injury in your home.

My insurance policy acts as a product warranty.

FALSE

Your insurance policy is not a warranty. If your roof wears out, for example, your insurance policy will not cover repairs – unless it is damaged by a covered event.

My homeowners insurance doesn’t have to cover my property’s full value.

TRUE

It’s only necessary to cover the replacement cost of your home – not your property’s land. Be aware that some mortgage companies may try to require new homeowners to purchase insurance for the entire loan amount, which may be more than the replacement cost.

 

BONUS: 4 more Life Insurance Myths, Busted!

Buying life insurance is an important financial decision, so we want to make sure there are no misconceptions standing in the way of you getting—or keeping—the right coverage.

I have coverage through work; I’m OK.

FALSE

While it’s a nice benefit to have, life insurance through work is a perk, not a plan. If your family relies on your income to make ends meet, most group coverage (what your coverage through work is called) won’t be enough. Why? Because you’ll be deceased for a long time. We’re not trying to be funny here. Think about it. Most employers offer one or two times your salary in coverage, meaning your family could be OK for the first year or two. But what happens in year three and four and five … you get the point. An individual policy can round out your group coverage.

The house is paid off and the kids are out of college, I can get rid of my policy.

FALSE

A lot of people have suffered significant losses to their 401(k) s and other retirement-savings vehicles. That might mean you are still trying to make up for losses in your retirement nest egg. Add to that the fact that people can spend 20 to 30 years in retirement. Life insurance can ensure that if something happens to you, your spouse or partner will be OK financially in retirement even if you haven’t closed the gap in retirement savings.

I’m young. I have time to make a decision about getting coverage.

FALSE

We all think we have time. But, sadly, that’s not the reality. Take the story of Preston and Tara Newby. They were in their early 20s with one young son, and another on the way, when Preston was killed helping a stranded motorist. You can watch their emotional story here. Thankfully the young couple had life insurance and Tara was able to use the death benefit to rebuild her family’s life. Their story shows us that while we can hope for the best, we need to prepare for the worst.

I’ll buy term and invest the difference.

FALSE

On its face, this seems to make sense. When you’re young and in good health, you need the most coverage you can afford and term life insurance is the less expensive option. But what happens when that term ends in 20 or 30 years? The question becomes: Do I still need life insurance? What happens if you’ve become uninsurable during that time and find you need ongoing coverage to take care of a family member, for example? The solution might be a combination of term and permanent life insurance—the type of coverage you keep as long as you pay the required premiums.

Trust Your Source of Insurance Information

For more information about auto, home, life and other personal lines of insurance, call a AAA agent or 1-866-222-7868 to discuss your coverage options. We can help you separate fact from fiction and debunk any insurance myths you may have heard.

Start a quote today!