10 Things You Thought You Knew About Insurance
Do you really know what it is in your insurance policy? How well do you understand what is really covered and what is one of those old wive’s tales about insurance? Are you an insurance guru or a policy passivist or do you even care? Here’s 10 insurance related things that you may or may not be aware of.
1. Homeowners insurance covers a house according to its real estate value.
Wrong! Homeowners insurance is based on how much it cost to rebuild the house (materials and labor) not how much the house is worth on the seller’s market.
2. Anyone can drive my car and be covered in the event of an accident because I have full coverage.
Not necessarily. Having good coverage does not mean you can loan your car to just anyone. It is going to depend on what state you live in and the particular policy you have. Before loaning out your car, check with your local agent to be sure that driver would be covered.
3. Small cars are cheaper to get insurance on.
In all reality, smaller cars can be more expensive to insure because the risk is higher and there tend to be more claims from drivers of small cars than large cars.
4. My house is automatically covered in the event of an earthquake.
If you purchased earthquake coverage then yes but most likely it is not because not very many people actually purchase this with their homeowner’s insurance.
5. I have full coverage on all of my cars.
Unless you are using a blanket to keep your cars warm at night there is no such thing as full coverage. Being fully covered means that in the event of an accident you have adequate limits that will pay for all medical expenses and property damage so that when it is all said and done you have no out of pocket expenses and won’t be sued for any remaining balances. Are your limits high enough to pay out for an accident that causes major injuries to a family of 5 including any necessary lifetime healthcare needs and loss of wages? If your limits are 15/30 and you’ve been told you have full coverage then you are what we call underinsured because if someone gets put in the hospital for a week you can bet your bottom dollar it will cost more than $30,000.
6. Insurance cost more when you are a smoker.
Home and auto insurance has no interest in whether or not you smoke. While your premium doesn’t go up because you smoke, likewise you don’t get a discount on your premium because you don’t smoke.
7. Only the person in the house that makes money needs life insurance.
Nonesense. The spouse of the breadwinner is just as valuable and if that person passes away unexpectedly then the breadwinning spouse is going to be left in the lurch to find someone to clean the house, take care of the kids and run the errands. He or she is going to have to hire someone to help out or even take time off from work to get affairs in order and life insurance helps.
8. Auto Insurance rates are better when you shop online.
Here’s why that is not really a good way to buy insurance – when you obtain a quote online those rates are based on the basics. It is not quite a “true” rate. Once the carrier obtains your driver’s license information and learns that you’ve run over 14 people and have tickets for drag racing they are going to increase your rate. Most of the time the rate you find online is not indicitive of what the “true” rate will be once all the paperwork is done and an underwriter has finished getting all the non-basic information they need from you.
9. I am covered under my Landlord’s insurance.
Normally a landlord’s insurance just covers the building itself and not the tenant’s personal items or liability. If the building burns down the landlord’s insurance will cover repairs or rebuilding the structure but it is not going to replace the tenant’s clothing or furniture.
10. It never floods in my town so I don’t need flood insurance.
The majority of lenders require flood insurance especially if they are regulated by the U.S. government. FEMA puts out a Flood Insurance Rate Map and depending on how you rank on that map your lender may or may not require it. If FEMA puts you in a flood zone you are going to have to have it whether you think you need it or not but if you own your home outright with no mortgage then you get to make that decision on your own.
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Kelly Spies
Executive Edge Insurance Services
320 E Yosemite Ave Ste 101
Merced, Ca 95340
209-385-EDGE
