6 Myths about Insurance

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.