Not everybody knows the ins and outs of insurance. At Smallwood and Small we don’t expect you to. We’re committed to ensuring you never feel misguided when it comes to finding a policy you feel comfortable with. In order to combat any apprehension, we’ve nailed down the six most common insurance misconceptions. We’re in the business to make our clients and readers informed consumers in order to make sensible policy decisions.
Common Insurance Misconceptions—True or False?
1. Flood and Earthquake insurance is automatically included with your home insurance policy: FALSE
- Coastal flooding concerns are increasing on the east coast. Don’t assume damage from a flood is covered in your homeowners’ insurance, because more often than not, flood damage won’t be included in your policy.
- Insurance companies don’t feel that they can cover you at reasonable rates in the event of a flood, so they leave that possibility out of their conditions.
- However, this doesn’t mean that you should forget about it. Insurance options are available for both flood and earthquake. Earthquake coverage is often obtainable through an endorsement and flood coverage is federally offered through the National Flood Insurance Program (NFIP).
2. If you lose or damage any items, your homeowners’ policy will reimburse you in today’s dollars: IT DEPENDS
- This comes down to two terms: the difference between actual cash value (ACV) and replacement cost.
- Replacement cost is the better end of the deal. The policy pays for the cost of fixing your home or replacing your personal items without any deduction if something has decreased in value.
- ACV only covers the amount the item is worth after taking into account the depreciation.
3. When operating a small business, you’re automatically covered if you use your homeowners and personal auto policies: IT DEPENDS
- It’s not definite whether these policies cover your small business endeavors.
- In order to eliminate any risk, talk to us about your situation. Smallwood & Small can advise you about any additional coverage you may need. Never assume anything.
4. I’m not held responsible if my friend (or anyone not included in your policy) wrecks my car: FALSE
- Make sure to limit the amount you let others use your vehicle. It doesn’t matter who was driving. If they aren’t part of your insurance policy, you are always held accountable.
- The incident will appear on your insurance record, and could result in a higher premium.
5. I’m not a millionaire, so I don’t need a personal catastrophe liability policy: FALSE
- Wealth has nothing to do with your chances of being involved in a serious accident.
- More often than not, incidents caused by common carelessness can quickly turn into a financial disaster and to people of any financial background.
- Consequently if you have a personal catastrophe liability policy and an incident does occur, you’re better able to deal with the financial responsibility if someone else is involved in the incident.
6. I do not need life insurance unless I have a family.
- You don’t necessarily need to be a parent to have someone depend on your income. Whether you own a home with another person or you’d simply like to leave money to a friend, relative, or charity, purchasing life insurance is a smart decision.
Don’t be fooled by insurance delusions. If you have questions, ask us at Smallwood & Small. We’re dedicated to guiding you through common insurance misconceptions. You can visit our website or call us at 1-800-745-8483.
Photo Credit: “Confused” by CollegeDegrees360. Licensed under CC BY 2.o