We get it—sometimes it’s hard to separate insurance fact from insurance fiction. For example, did you grow up thinking that car insurance costs more if you drive a red car? What about if you live in an apartment—does your landlord’s insurance policy cover your stuff?
Let’s bust these common insurance myths and uncover the truth!
Myth 1: If you buy a red car, you’ll pay more for car insurance.
Busted! The color of your vehicle has absolutely no bearing on your car insurance premium. Rather, make, model and safety features are part of what determines what you’ll pay. Other factors—including credit history, zip code and discounts—are also taken into consideration. So, go ahead, buy the red car!
Myth 2: If your car is damaged in an accident, insurance will always cover a rental car.
Busted! Rental reimbursement coverage does not automatically apply after an accident. As an optional coverage, it must be purchased separately. A common misconception is that auto insurance automatically covers the cost of a replacement rental car. In reality, you need to select this coverage and apply it to your auto policy.
Myth 3: If your car is totaled in an accident, you’re off the hook for car payments.
Busted! Cars’ values depreciate quickly and your car can sometimes be worth less than what you owe on it. Fortunately, there’s a nifty coverage type called loan/lease gap coverage that will pay off the balance of your car loan in the event your vehicle is totaled and you owe more than what it’s worth.
Myth 4: Your landlord’s insurance policy covers your stuff.
Busted! While the building owner’s insurance policy should cover the structure, typically, you’ll need renter’s insurance to cover your personal belongings. For example, if there is a fire, your landlord’s insurance would help cover structural damage and your renter’s policy would help you replace personal belongings that are lost or damaged.
Myth 5: Homeowner’s insurance only needs to cover the market value of your home.
Busted! The cost to totally rebuild your home is usually much more than its market value. You’ll need to consider today’s construction and labor costs when thinking about homeowner’s insurance.
Myth 6: If your old stuff is destroyed, you get brand new stuff.
Busted! There is a difference between Actual Cash Value and Replacement Cost Value when it comes to replacing contents during a claim. If your 10-year-old television is destroyed in a storm, for example, you will need to have Replacement Cost coverage to be able to cover the cost of buying a new one. Otherwise, Actual Cash Value will cover what the television was worth, used, on the day it was destroyed.
Myth 7: You will always be paid the stated value for your “scheduled” items.
Busted! If you have a high value personal property item (say jewelry) and “schedule” it with a stated value of $10k and it’s lost or stolen, you may only be covered for the current Replacement Cost Value up to the stated value. Think of the stated value as the limit instead of a guaranteed dollar figure.
Myth 8: Your own car insurance covers you the entire time you’re driving for a ridesharing service.
Busted! There’s a period when your personal car insurance checks out before the rideshare company’s insurance checks in. Let’s say you’re cruising around, not doing much when you decide now is a good time to make a few extra bucks, so you turn on your ridesharing app. From the time you turn it on and are waiting for a ride request until the time you receive the request and are on your way to pick up a passenger, you may be underinsured. Different ridesharing companies have different coverages during this period, so a specific rideshare gap endorsement could help you out.
This post is for information purposes only. For specific coverage details, always refer to your policy. If the policy coverage descriptions in this article conflict with the language in the policy, the language in the policy applies.
Recent Comments