Premiums, deductibles, assets, claims…the list goes on. Whether you have a new policy or you’re taking a look at your existing ones, you probably have some questions about your coverage. Insurance is critical - it helps you protect what matters most. Therefore, it is important to understand what you are actually covered for and that you have the appropriate coverage. Don’t let these 6 common personal insurance misconceptions prevent you from having a strong personal risk management strategy:
1. I don’t need a personal umbrella policy.
A personal umbrella policy makes sure you are protected from major liability claims and lawsuits by providing additional liability coverage above the limits of your homeowners, auto, or boat policies. When the liability on these policies is exhausted, umbrella coverage kicks in. Even if you think you don’t have much to lose now, future earnings and assets could be at stake. Talk to your advisor to identify exactly what umbrella limit you should consider and if you could benefit from excess un/underinsured motorists coverage.
2. I’m not held responsible if my friend wrecks my car.
It depends on the circumstances, but since the car in the accident is yours, your auto insurance policy will likely respond and your rates could be affected. If the claim is over your policy’s maximum coverage, your friend’s insurance may be tapped to cover the rest of the damages. Every policy is different so you will want to check with your advisor before letting friends get behind the wheel.
3. I’m covered from all disasters under my homeowners insurance.
You are not necessarily covered from all home damage under your homeowners insurance policy. If you have flood damage, but do not have a flood policy, you will have to pay for the damages yourself. If you operate a home-based business, damage to your business equipment in a disaster may not be covered under your homeowners policy. These are just a few common exclusions. Talk with your advisor to understand your specific coverage and identify potential exposures that are not being properly covered.
4. The replacement cost of a home is the same as its market value.
The replacement value of your home is the amount it would cost to rebuild your home just as it is now. It does not take into account the market, land value, or property taxes. It also does not cover the possessions inside of your home. Contact your advisor to learn about appraisals, home inventories, and other ways to help ensure you have proper coverage.
5. I can save money by buying my car insurance online.
Even if you find the lowest price online, is it the best coverage for you? Having inadequate coverage will cost you in the long run. Most online insurance companies offer state minimum coverage, which may not be enough to truly protect you and your family. All plans are not created equally, and coverage details and exclusion language can be hard to decipher on your own. Working with an advisor gives you access to an insurance expert who not only understands the policy lingo, but can help identify potential gaps in coverage. Additionally, some advisors have access to multiple insurance carriers. This means they can shop around to find the most appropriate coverage and price for your needs.
6. I can put off my financial plan for later.
Do you have a will? What about adequate life insurance? Have you considered disability income insurance or other policies that may help protect you and your family? It may seem like you have plenty of time to make these kinds of plans, but you never know what’s around the corner. Consult your insurance advisor about options and what might be best for your needs. Consider working with a financial planner to make sure your financial goals, challenges, and concerns are being met. And don’t forget to keep these trusted advisors in the loop whenever your financial goals and priorities change!
Don’t wait until you experience an accident, illness, property damage, or any other type of claim. Be proactive. Take time now to understand your insurance policies and dispel these misconceptions so you can continue protecting what matters most.
