5 Common Insurance Policy Myths

Insurance can be incredibly confusing. Most people have a basic understanding of premiums and how they believe insurance works. The fact is most myths and misconceptions come from miscommunications or misunderstandings about the terminology in their policy. This is why it is so vital that you always ask questions when your policy is being written.

Myth 1: I will receive full value when I file a claim.

When you purchase insurance, you are buying protection against financial loss. An insurance policy does not provide you with financial gain. If an item is lost, damaged, or stolen, you will receive its fair market value when you file a claim. It would be best to think of your insurance policy as a warranty, not an investment.

Myth 2: Premiums are saved until I file a claim.

Premiums are not saved by account. Instead, all premiums are put into a large pool. When claims are filed, the payouts are drawn from this more extensive account. Everyone’s premiums are placed into the larger pool to make it easier to pay claims that are filed. This minimizes administrative fees and reduces costs for the insurance company.

Myth 3: Your rates won’t go up if you file a claim and have a solid payment history.

While a consistent payment history is essential, it does not affect your premiums and whether or not they go up after you have an accident. Your premiums are based on several factors, including the number of accidents in your area. If your area becomes high risk, it may alter your rates even if you don’t have an accident.

Myth 4: I can lie on my application and no one will ever know.

Insurance companies rely on the honesty of their customers when filling out applications. However, insurance companies have access to much more information than what you provide on your application. If you get caught in a lie, your policy may be suspended, or it may be changed to reflect the real situation. This could result in a dramatic increase in your premiums.

Myth 5: Replacement cost isn’t worth the extra money.

Replacement cost and actual cash value are two different things. For example, new appliances are much more costly than ones sold just a few years ago. If an event occurs, your insurance will pay you what they are worth at the time of the incident. This could be much less than what it will cost to replace them. Insuring your items for replacement cost is a much more lucrative solution than having to pay the difference out of pocket.

If you have questions about what your insurance policy says, you need to talk to your insurance agent. Get the answers you need so you are fully aware of everything that is in your policy. Contact the agents of ISU-Wissink today. They can help you sort out the myths from the facts. Read through your policy, mark any sections you have questions about and then make the call.