Common Insurance Misconceptions

It is common for customers to have some degree of misconception about their insurance coverage. Whether it’s homeowners, auto, or other services, insurance can be complicated. While it’s common to be confused about certain policies, it could cost you big if you don’t correct it before an accident or claim. Now is the time to get educated. You can still change or swap your coverage to meet your needs. Below are the most common insurance misconceptions and suggestions on what you can do if you were counting on something in the policy that isn’t true.


“Full Coverage”

“Full coverage” auto insurance is one of the most common insurance misconceptions around. The term is thrown around loosely, but in reality full coverage does not technically exist. You can have different degrees of auto insurance, from liability to added collision and comprehensive protection, but your vehicle is never technically “fully covered.” However, you can ensure you carry all the most important auto coverage options, listed below:

  1. Liability – This coverage option insures you when you are found responsible in an accident due to negligence.
  2. Collision – This type of coverage protects you in any instance where you collide with an object while driving, be it another vehicle, the road or objects around it, or even people. Collision coverage protects you whether or not you’re at fault for the accident.
  3. Comprehensive – This coverage protects your vehicle from instances not caused by a collision. Examples include any theft or vandalism on your vehicle, fires, animal collisions and severe weather.
  4. Uninsured Motorist – This coverage is designed to protect you should an uninsured motorist collide with your vehicle. Some people break the law and refuse to carry liability insurance while driving. If you get into an accident with one of these people, it may be hard to recover all costs, both from personal injuries and auto damage.
  5. Roadside Assistance – Not all policies include roadside assistance. If you drive frequently, especially in areas where it might be hard to receive local support should your car break down, roadside assistance is a good option to consider. Sometimes customers assume this option is included, or they may file a claim for reimbursement if they need roadside insurance, but it’s best to make sure before you hit the road.
  6. Rental Car – Certain auto policies include options where a rental car is provided if your car is in the shop for several days. This can also include other circumstances where you can’t drive the vehicle you own. Often this is not included in a policy, or it’s only offered in extreme scenarios, so it’s best to check on it before you count on this option.

Remember, if you’re not sure what exactly your auto policy covers, now is the time to call Square State Insurance. We’ll help explain your current options as well as what potential upgrades to your coverage might cost.


Homeowners Coverage And Floods

One of the most common insurance misconceptions comes in the definition of a “flood.” Some people refer to flooding as that of a sewer backup into the basement, but this is not technically what the insurance industry considers a flood. Instead this is water backup coverage, and most standard homeowners policies cover this type of damage up to a point. You can improve your rates if your basement is subject to backups by adding a sump pump in your basement. Even if the pump fails for mechanical reasons, you’re still covered up to a certain limit.

Now true floods are different. Think “Act of God” type floods where rising river banks or excessive rain causes water to rise and invade both your home and your neighbor’s homes. Homeowners insurance doesn’t not cover this type of flood. Anyone who carries a standard policy expecting it to cover a flood is going to be sorely disappointed. If your home is at risk, you’ll need to add separate flood insurance, which isn’t part of a homeowners policy. If you’re curious if you need this type of insurance, ask Square State Insurance. There are ways to evaluate if your home may be at risk in the future.

Homeowners Coverage And Earthquakes

One other note while we’re discussing common insurance misconceptions. Earthquakes, although not common in some parts of the world, can strike when we least expect it. Even Colorado has a history of earthquakes. You probably don’t think about it, but if an earthquake strikes your home, a standard homeowners policy will not cover it. This Act of God, just like flooding, is only covered if you get a separate earthquake policy.


Homeowners Covers All Your Possessions

Often when customers purchase homeowners insurance, they think all the personal items they store in their house will be covered. The reality is this is only true up to a certain point. Yes your electronics, furniture and other goods are covered, but more expensive items like jewelry, firearms and even money you store in your house has a limit. If you have a significant amount of jewelry or firearms in your home, it’s best to talk to your agent at Square State Insurance and make sure you’re coverage matches your needs. You can get riders and additional coverage for these expensive items so you aren’t disappointed in a claim should you need to file one.

Your Credit Doesn’t Matter In Insurance

Another one of the common insurance misconceptions we hear a lot is about credit. While bad credit can affect your home and auto loans, you may not be aware of the fact it affects your insurance rates too. Poor management of your personal finances will drive your premiums up. This is one of many reasons to be careful with what you borrow and what your credit score is. Remember, many businesses check credit scores these days, and the insurance industry is another one that you may not immediately think about.


Final Thoughts On Common Insurance Misconceptions

Remember, it is up to you to check on potential coverage gaps and additional insurance options you may need. If you continue to live by these common insurance misconceptions, you could be in for a costly experience in the future. Take the time to educate yourself on your insurance policies before it is too late. And if you have questions, we’re here to help at Square State Insurance. Contact us today to learn more or to get the right coverage for you.

Image one, two, three and thumb courtesy of Wikimedia Commons.

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