As important as insurance is to all of us, it can often be confusing to understand. From home insurance and auto insurance to health insurance and life insurance, there are so many choices and particulars. There are also some myths surrounding insurance. You should familiarize yourself with them prior to purchasing insurance of any kind.
1. Your Home Insurance Covers Everything
Many homeowners believe that purchasing a home insurance policy will protect them from every unfortunate event that could possibly take place in or at their home. Unfortunately, that is not the case and there are many things that are not covered under a typical home insurance policy. Things like earthquakes, damage from power outages, and pet-related issues often need to be added to the policy with riders. Check with your agent so you know exactly what your policy covers and make changes if need be.
2. You Need Life Insurance, No Matter What
While life insurance is a very good investment if you have a spouse or dependents that rely on your income, it may not be necessary for people who do not. This includes retired individuals or children, as they do not commonly have steady income or people who rely on it. Before purchasing a life insurance policy, analyze your financial needs so you know what type of policy, if any, to purchase.
3. Keep Your Deductibles as Low as Possible Although lower deductibles mean you will pay less if a claim takes place, they also mean you will pay much more for your insurance premiums. Since the chances of a claim needing to be filed are relatively low when the overall picture is considered, you should think about raising your deductibles. The amount of money you save on your premiums can be quite astounding.
4. You Will Never Need Long-Term Care Insurance
Many people assume that the government or their private insurance will pay for long-term care if they need it. While Medicare or private insurance may cover short-term care after illness or injury, they will usually not pay for much beyond that. It is definitely in your best interests to purchase a long-term care insurance policy when you reach your 50s or even before, that way you will always be covered if any type of incident that requires long-term care should take place.
5. Umbrella Insurance is Not Necessary
Umbrella insurance is one of the most overlooked types of insurance out there, but it really should not be. Umbrella insurance provides additional coverage that goes above and beyond your normal insurance policies. This means if there happens to be a lawsuit against you and your house or business insurance limits are exceeded, umbrella insurance will pick up the additional amounts. An umbrella insurance policy is usually pretty reasonable to purchase as well, and will provide increased peace of mind.
6. Auto Insurance Will Pay for a Rental Car After an Accident
If you think your auto insurance policy will automatically pay for a rental car after you have an accident, you should double-check the specifics of your policy. Many auto insurances will not cover the cost of a rental car while your car is being repaired, and rental cars can often be pretty expensive. Think about adding the additional coverage for rental cars and towing to your policy, which should only cost you a few extra bucks per month.
7. Renter’s Insurance is Expensive
Renter’s insurance is actually pretty cheap in comparison to the price of replacing your belongings should they be damaged or stolen. This is why it is definitely a good idea to purchase renter’s insurance if you rent the home or apartment you live in. Whether you end up using the policy or not, it will still give you peace of mind knowing your belongings are covered.
8. Whole Life Insurance is the Best Life Insurance to Purchase
While whole life insurance has its benefits, like borrowing from the policy in the future, it is remarkably expensive in comparison to term life insurance. If you are considering purchasing life insurance, term is usually the best option for most people. Because the coverage is for a specific term, the premiums are much cheaper. Take the difference and put it into a retirement account, that way you still have money in the future.
9. You Don’t Need Flood Insurance
Many people think that because they do not commonly have floods in their area, they do not need flood insurance coverage. The truth is floods can take place anywhere and the damage they cause can be catastrophic if you do not have flood insurance. Consider purchasing a flood insurance policy, even if you think you do not need it.
10. Employer-Provided Disability Plans Will Replace My Income
Although the disability insurance plan that your employer provides may replace some of your income, it will probably not cover the entire amount. If you and your family rely on your income, it is a very wise idea to think about purchasing disability insurance above and beyond what your employer provides. That way, if you become disabled and unable to work, you do not have to worry about having insufficient funds to support yourself and your family. Now that you know some of the common myths surrounding insurance, you will be able to make more informed decisions when it comes to purchasing the right insurance policies. Just remember to always shop around before purchasing any policies. You want to be sure you get the best coverage for a fair price.
About the Author: Guest post from Payton Price. Payton writes about term life insurance for TermLifeInsurance.org.