Top 8 Auto Insurance Myths

When it comes to auto insurance, deciphering coverage provisions, exclusions, and premium calculations is already hard enough. However, to complicate matters there are a number of myths floating around that can make it near impossible to understand your policy.

In fact, in a recent survey by insure.com, 52 percent of respondents had a misunderstanding of their auto insurance coverage. There were some questions where over 65% of the participants answered incorrectly!

Below we are going to point out the most common myths associated with auto insurance and provide the correct information in regards to each one.

Please remember that if you ever have a specific question in regards to your auto insurance policy, please feel free to reach out to our office.

One speeding ticket will make my car insurance rates go up.
Sometimes this is true, but in many cases, you have to get two tickets before your rate goes up. Your driving history, the length of time you’ve been insured with a company and how fast you were going when you were cited can affect whether your rate increases or not. Keep in mind that a speeding ticket may not be the sole reason your rate increases, as several factors are considered when reviewing them.

If someone driving my car causes an accident, I won’t be held responsible.
It’s possible you’ll be financially responsible for an accident — even if someone else is driving your car. In most states, the car insurance policy covering the vehicle is considered the primary insurance, which means that the insurance company for the vehicle must pay for damages caused by an accident. Even so, it’s still possible that the driver’s insurance company could be responsible for some of the damages. Why? If the vehicle’s insurance limits are too low and don’t cover all the damages, the driver’s insurance may be next in line to pay for the remainder of the damages.

Car insurance rates go down dramatically when drivers turn 25.
Younger and older drivers typically have the most car crashes, and customers of different car insurance companies have different claims experiences. When determining auto insurance rates, insurers generally consider a variety of information about you, including age, vehicle information, claims history and the claims experience of other customers like you.

While it’s generally true that rates will go down when you turn 25 if all information about you and your vehicle remains the same, changes in one or more of the other pieces of information used to calculate a rate could lead to you getting a higher, lower or the same rate when you turn 25.

Auto insurance rates aren’t regulated, so auto insurance companies can charge what they want.
Each state requires auto insurance companies to file how they calculate customer rates, and insurers cannot deviate from these filed rates. Each state also has regulators who review that information and the rates companies charge.

I only need the bare minimum amount of car insurance.
Many states have minimum car insurance requirements, but the minimum amount of required insurance may not cover all of your costs. If you cause an accident that results in a lawsuit and your insurance limits don’t cover all of the damages, your assets could be pursued.

Comprehensive coverage protects drivers in all situations.
Comprehensive coverage is one type of protection available on an auto insurance policy (others being Collision, Uninsured Motorist, etc.). Comprehensive coverage pays only for damage caused by an event other than a collision, including:

  • Fire
  • Theft
  • Vandalism
  • Weather (hail, floods, etc.)
  • Vehicle collisions with animals

I can use Rental Reimbursement coverage to rent a car for my vacation.
Unless your insured car is in the shop as the result of an accident, you won’t be able to use Rental Reimbursement to rent a car for vacation. Depending on the limits you selected when you bought your policy, Rental Reimbursement coverage pays for some or all of the cost of a rental car — but only when your insured car is in the repair shop because of a car accident.

Cheaper cars cost less to insure.
If your cheaper car has a large engine, weighs a lot or is an unusual model, it might cost more to insure than a more expensive small car. However, if you have a cheaper car, you will pay less for comprehensive coverage, which covers damage caused by vandalism, hail, fire or animal accidents.

Life Insurance Purchasing Guide

Did you know almost 60% Americans don’t own any type of life insurance policy? This is according to the latest study done by the Life and Health Insurance Foundation for Education (www.lifehappens.org).

Life insurance allows your spouse and/or family to receive money to help offset funeral expenses, lost income, and future financial needs.

Purchasing the right policy can be a daunting process, though, which is why we wanted to include what we feel are our top tips to buying a life insurance policy.

If, as you read this information, you have any questions or would like life insurance quotes to evaluate your options, please contact our office.

Why Should I Buy Life Insurance?
If someone depends on your income for their livelihood, like a spouse or child, then you should strongly consider buying life insurance. Life insurance provides the financial support families need if a loved one were to pass away unexpectedly.

How Much Life Insurance Should I Buy?
Figuring out the right limit to use depends upon a variety of factors. Lost income, funeral expenses, college expenses, mortgag

e loans, consumer debt balances, and additional expenses are just some of the elements you should consider as you evaluate how much to purchase. There are a number of life insurance calculators available to assist you with this process for free.

Which Type of Policy is Right for Me?
There are four basic types of life insurance to choose from; depending upon your financial situation, investment aspirations, and desired limit, some options will work better than others.

The four types of policies are term life, whole life, universal life, and variable life.

Term Life Insurance. Term life insurance, just as its name implies, is a policy that has a specified “term” to the policy. Typical terms are 10, 20, or 30 year, and it is the most common form of life insurance.

Term policies are typically the LEAST expensive because they only provide insurance protection and they do not accumulate cash value. Many term policies include the flexibility to convert them into whole life policies as the individual’s income and needs change.

Whole Life Insurance. Whole life insurance, also known as permanent insurance, provides protection through your entire lifetime. As long as you pay your premiums the policy will never expire, regardless of your health condition.

Another major difference between whole life and term is it accumulates a cash value that can be borrowed against or withdrawn. However, because of these two major differences the premiums for a whole life policy are higher than those of a term policy.

Universal Life Insurance. Universal life insurance is similar to whole life insurance in that it provides protection throughout your lifetime and accumulates a cash value. Where it differs, though, is in its flexibility with limits and premiums.

Universal life insurance actually gives you the freedom to increase or decrease your coverage and control the amount and frequency of your premium payments as your insurance and financial needs change.

Variable Universal Life. Variable Universal Life is very similar to universal life with one major addition: variable universal life policies allow policy owners to apply their premium dollars to a variety of investment options. This option offers the possibility for an increased rate of return over a normal universal or permanent policy, but that means it is also subject to market risks associated with investing.

How do I know if the policy I buy is from a reputable insurance company? The policy you buy is only as good as the company insuring it. You need to know the company will be around if you need it to pay a death claim. There are actually a few different rating agencies that rate insurance companies on their overall financial strength and their ability to pay claims. A.M Best, Standard and Poor’s, Moody’s, and Fitch are all companies that independently evaluate the financial soundness of insurance agencies and assigned them ratings based upon their findings.

Each company rates insurance companies a little differently so you may want to look at multiple ratings as you select a company. You will want to look for an “A” (or AAA depending upon the rating agency) rating and a positive financial outlook to help ensure you select a financially secure insurance company.

How should I purchase my policy?
While you can certainly purchase life insurance online, we recommend working with a life insurance expert or financial planner. Working with a specialist can help you determine the right life insurance product and select adequate policy limits.

Also, by working with a licensed agent it will be much easier to make changes to your policy and receive guidance and answers to your questions as your needs change.

What kind of questions should I ask?
A lot of people simply don’t know what questions they should ask in regards to their life insurance. You should make sure you clearly understand the product you are purchasing, which is why we’ve included a few examples of questions you should be ready to ask.

  • Is the policy renewable?
  • Can the policy be canceled?
  • Can I make changes to the policy?
  • How long is the premium guaranteed for?
  • Are there any special policy provisions?
  • What are the exclusions on the policy?

What can I do to help reduce premiums?
There are actually a number of things you can do to help save on your premiums aside from reducing limits or changing insurance products. Since your current health condition is one of the primary factors used to determine your premium, any changes you can make to move yourself into a “preferred” or “super-preferred” risk class will greatly reduce your premium.

To do so, though, may involve losing weight, exercising, quitting smoking, or lowering cholesterol and blood pressure. And, while it may take some work, moving into the more “preferred” risk classes can save you tens of thousands of dollars over the life of a policy.

Should I always keep the same policy?
Financial situations and family additions are just a couple of reasons why you should evaluate your life insurance needs every few years. Income growth and additional children can significantly affect the limit and type of policy that will fit your situation. We recommend working closely with an agent or financial advisor who understands how to properly address your changing needs.

*The above information is to be used as guidance only, and should not be considered as definite in any particular case. Every policy is different and you need to read through your policy and consult with your agent to best determine how your coverage will respond. Within this article we simply cannot analyze every possible loss exposure and exception to the general guidelines above.