If you enjoy playing “Two Truths and A Lie,” you’ll love this new personal insurance primer. It dispels several common myths people really believe about insurance. These misconceptions can be costly, so grab your spouse, your friends and your family members and test your collective insurance knowledge. Can you tell the difference between insurance truths and lies?
Auto Insurance
Costly Lie #1
If a friend borrows my car and has an accident, his insurance will cover it.
Real Truth
Actually, your insurance company would be first in line to cover the damages. If the damages exceed your policy limits, your friend’s insurance would kick in as secondary coverage.
Costly Lie #2
My personal auto insurance will cover me for my small business use.
Real Truth
Running a business exposes you to an entirely different set of risks and liabilities, and personal auto insurance isn’t designed to cover those risks. You’ll need a separate commercial auto policy for business use of a vehicle.
Homeowners Insurance
Costly Lie #1
If my home floods, my homeowner’s policy will cover it.
Real Truth
Flooding isn’t covered under a standard homeowner’s policy. You’ll need to purchase flood insurance. You might even be required to buy it if you live in a high-risk flood zone.
Costly Lie #2
My home business is covered under my homeowner’s policy.
Real Truth
Business liability and business equipment aren’t covered by your homeowner’s policy. If you run a home-based business, you’ll need to purchase a separate policy for the company. You can usually simply attach a business rider to your homeowner’s policy.
Renters Insurance
Costly Lie #1
I rent, so my landlord’s property insurance will cover any loss to my personal property.
Real Truth
If you’re a renter and your personal property is damaged or destroyed due to fire, burglary, or other natural disaster, it’s your responsibility. Your landlord’s property policy covers the building, but not your personal property. You’ll need renter’s insurance for that.
Costly Lie #2
Renters insurance only covers my personal stuff.
Real Truth
Actually, a renter’s policy also provides coverage for liability, medical, property damage, and loss of use. That’ll save you a bundle if you’re responsible for an injury to a guest or have to stay in a hotel after a storm or other disaster damages the building.
Umbrella Insurance
Costly Lie #1
Umbrella insurance is only for the wealthy.
Real Truth
It’s true that if you have a high net worth or a high risk lifestyle, you should definitely have an umbrella policy. But regardless of income or lifestyle, most people have assets they’ve worked hard to earn, and everyone faces big liability exposures that could easily exceed standard insurance policy limits
Costly Lie #2
Umbrella insurance is expensive.
Real Truth
An umbrella policy is more affordable than many realize. Considering everything that’s at stake, it’s one of the most reasonable and inexpensive hedges you can take against losing your personal assets.
Hurricane Insurance
Costly Lie #1
I don’t need hurricane insurance because wind damage is covered by my homeowner’s policy.
Real Truth
Hurricane insurance comes into play if the storm is a hurricane, as designated by the National Weather Service, at the time it makes landfall. The NWS considers a storm a hurricane if it has sustained wind speeds of 74 mph or higher. If you do not have a hurricane policy, you would have no basis for a claim for wind or rain damage caused during a hurricane.
Costly Lie #2
I can wait to purchase hurricane insurance until a tropical storm poses a direct threat to the islands.
Real Truth
Most insurance carriers issue “moratoriums” when a tropical storm is approaching landfall. A moratorium effectively blocks a carrier from writing new business. You don’t want to be caught with no coverage or too little coverage before a hurricane hits because by then it could already be too late to secure the insurance you need.
Don’t let misconceptions about insurance put you at risk for an unexpected and devastating financial loss. Need help understanding your personal insurance coverage? At FICOH, we’ve got many personal insurance solutions to address your everyday exposures. Contact your independent agent to learn more.