But you can lose more than just your peace of mind if you believe these misconceptions. When life throws you a curveball, they can leave you completely unprepared, overpaying, or underinsured.
Let us make things plain. These are the most obstinate insurance myths that will not go away, along with the reality you must know.
1.“Insurance is a waste of money—I’m young and healthy.”
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Myth: Until you are older or have children, you do not need health, disability, or life insurance.
The fact is that while you are young and healthy, insurance is actually less expensive and easier to qualify for. A vehicle accident, a medical diagnosis, or losing one’s work can all transform one’s life in an instant. By obtaining coverage early, you can lock in lower rates and shield yourself from financial ruin in the future.
Instead, consider insurance to be a component of your foundation rather than an afterthought. While you can, safeguard your loved ones, your health, and your money.
2.”Insurance rates for red autos are higher.”
Myth: You will pay more for insurance if your car is red.
The fact is that insurance companies do not give a damn about your car’s color. In reality, what influences your premium?
What to think instead: To keep rates low, drive carefully, keep your credit in good standing, and pick a car with high safety ratings, regardless of color.
3.”All natural calamities are covered by my house insurance.”
The fallacy: Your policy will protect you in the event of Mother Nature’s wrath.
The fact is that flood and earthquake damage are typically not covered by standard homeowners insurance. Too many homes discover this the hard way—after the damage has been done—and that those call for different policies.
What to think instead: Ask your agent about any holes in your coverage after thoroughly reviewing it. Get the appropriate coverage before a crisis strikes if you reside in an area that is prone to earthquakes or flooding.
4.”My credit card covers everything, so I do not need rental car insurance.”
Myth: If something goes wrong with a rental automobile, your credit card will take care of everything immediately.
The fact is that some credit cards provide secondary coverage, but it may not cover personal injury or liability, and some only take effect after your own motor insurance. Limitations, fine print, and exceptions abound.
What to think instead: Prior to your trip, give your credit card company and motor insurance a call. Avoid making assumptions. To avoid being faced with a large payment or having your claim denied in a different zip code, be aware of what is covered.
5.”Work-related life insurance is sufficient.”
The myth: In the event of an emergency, your family will be covered by the policy your work provides.
The reality is that most work-based life insurance policies pay out between one and two times your salary, which is far less than most families can afford. Furthermore, if you quit your employment, it does not follow you.
What to think instead: carry use of your employer’s policy as a wonderful bonus, but add your own, controllable life insurance policy to it.
In this manner, your policy will accompany you wherever your career takes you.
6.”If I submit a claim, my rates will climb.”
The myth: Automatic rate increases follow any claim, no matter how minor.
The fact is that not every claim has an impact on your premium. The size of the claim, your history, and the type of insurance all play a role. Your premium may not change at all in some situations, such as a comprehensive auto claim for theft or a non-at-fault collision.
What to think instead: Do not be scared to use your insurance when necessary. However, avoid overcharging your insurer for minor claims that you might handle on your own. Keep it for the important things.
7.”I seldom visit the doctor—health insurance is not worth it.”
Myth: Purchasing health insurance is a waste of money if you are healthy.
The fact is that a single trip to the ER can cost thousands of dollars. An arm fracture? More than that. The purpose of health insurance is to shield you from financial devastation in the event of an emergency, not to treat common colds.
What to think instead: If you are normally healthy, pick a plan with a larger deductible, but make sure you are always covered for the major events. Years of savings might be wiped out in a single emergency.
Conclusion: Avoid Believing Myths Insurance is more than simply a line item in your budget; it is a safety net, a policy that gives you peace of mind, and occasionally your final line of defense. But only if it is founded on reality rather than antiquated presumptions.
Spend half an hour going over your existing policies. Pose inquiries. Obtain a second opinion. And do not be scared to question the “conventional wisdom” that you have been exposed to for a long time.
Because your preconceived notions about insurance may end up costing you more than you anticipated.
