The Truth About Insurance

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By Carla D Edwards


Many consumers purchase insurance without ever understanding what they really need or what they are buying. That can lead frustration and disgust for the insured. Following are a few of the most commonly heard myths:

Myth: I bought "full coverage" so I am covered.
Fact: "Full coverage" does not exist. In most states, only liability insurance is mandatory, but there are many other coverage options available for you to purchase. The coverages you choose are a personal and financial decision.

Myth: I only need the state required minimum liability coverage.
Fact: Although this is all that is required to drive the vehicle, it may or may not be enough to cover the damages you cause if you are involved in a severe accident that results in a lawsuit. Therefore, your personal assets could be at risk.

Myth: I need more than one estimate before my car can be repaired.
Fact: Although some companies may require more than one estimate, this is rare.

Myth: My insurance premium always increases if I'm involved in an accident.
Fact: Insurance rates are determined by a variety of factors: Information about you, your car, and your driving history all combined will affect your rate. Your rate can increase, decrease or stay the same.

Myth: Red cars are more expensive to insure.
Fact: Color is not one of the factors used to determine your rates. The year, make, model, body type, and engine size are the important factors.

Myth: Insurance companies can charge what they want for auto insurance.
Fact: Every state is requires insurers to file how they calculate rates and they cannot deviate from these filed rates. If a company desires to charge more, they must file for a rate increase with the state and wait for approval. Regulators review that information.

Myth: If someone else driving my car causes an accident, I won't be held liable.
Fact: You could be. In most states, the policy covering the vehicle is considered the primary insurance.

Myth: I should be paying the same rates as my neighbor.
Fact: No. Insurance rates are individually determined and because of this, each person's rate will be different.

Myth: My rate should go down since I am 25.
Fact: Younger and older driver typically have the most automobile accidents, however, age is only one factor in determining your auto rates. While this is generally true, other pieces of information may change that could cause your rate to stay the same or go up.

Myth: Renters insurance is too expensive.
Fact: Renters insurance is very reasonably priced.

Myth: The landlord has insurance that covers me.
Fact: The landlord usually only covers the building, not your contents.

Myth: I am healthy, I don't need life insurance.
Fact: The truth is that you are not insuring for the likely occurrence, you are insuring for the unlikely occurrence. Therefore, you can purchase the right kind of insurance (and a lot of financial security) for a healthy person for a very reasonable premium.

Myth: I don't work, so I don't need life insurance.
Fact: That may be true, but if you are a mother who is staying home taking care of young children, think how much it may cost to pay for childcare and housekeeping in your absence. It could be $30,000 a year. You should use that number as your salary to calculate your life insurance.

Insurance can be complicated. It's not something people deal with every day. The more informed you are, the better choices you'll make and a good independent insurance agent can help.



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