There are plenty of myths surrounding the insurance business. When shopping for insurance, these myths can be costly for clients. In an effort to help clients better understand the insurance industry, Insure.com surveyed 2,000 adults and asked them whether a series of 10 insurance statements were true or false. Here is what they found:
Myth 1: "I should buy insurance coverage for my house based on its real estate market value"
- 52% think it’s true
- Tip: Buy coverage based on the costs to reconstruct the home. In many areas of the country, rebuilding costs are very different from real estate market value. An insurance agent can help calculate rebuilding costs.
Myth 2: "Red cars cost more to insure"
- 46% think it’s true
- Tip: Car color does not affect insurance rates and insurance companies do not use it in their calculation of rates.
Myth 3: "If I cause a crash with extensive damage to others, my auto insurance company can cancel me immediately"
- 44% think it’s true
- Tip: Most states have laws that prohibit insurers from canceling you mid-term due to a claim. Insurers generally have to wait until you policy period is up and then they have to send you a notice of nonrenewal. However, you can be canceled at any time for not paying your premiums
Myth 4: "Small cars are the cheapest to insure"
- 40% think it’s true
- Tip: Small and mid-size SUVs and minivans are the cheapest to insure. Small cars do not have the cheapest rates because they are often chosen by younger, inexperienced drivers who often submit more claims. Also, injury claims are higher than small cars.
Myth 5: "The Affordable Care Act (also called Obamacare) allows health insurance companies to base rates on medical conditions such as high blood pressure, heart disease and cancer"
- 36% think it’s true
- Tip: The Affordable Care Act prohibits health insurance companies from basing rates on pre-existing conditions. Health insurers cannot charge different amounts for men and women.
Myth 6: "Comprehensive auto insurance covers everything and anything"
- 32% think it’s true
- Tip: Comprehensive coverage pays for certain problems such as car theft, storm damage, animal collisions, and vandalism.
Myth 7: "Thieves prefer to steal new cars"
- 29% think it’s true
- Tip: Thieves prefer older cars because the market for their parts is bigger. Comprehensive coverage covers car theft.
Myth 8: "If my friend borrows my car and crashes it, their insurance will pay for damage"
- 25% think it’s true
- Tip: If your friend causes damage to your car, the claim goes on your auto insurance policy and can affect your rates.
Myth 9: "The Affordable Care Act requires me to take the health insurance plan offered by my employer
- 19% think it’s true
- Tip: The Affordable Care Act requires almost all Americans to buy a health plan but it does not say where you must get it from. If you do not have access to health insurance through work, make sure to mark your calendar for the open enrollment period for 2015.
Myth 10: "Out-of-state speeding tickets can't follow you home"
- 13% think it’s true
- Tip: Those tickets can follow you and it can affect your car insurance rates.