Top 10 Common Misconceptions About Insurance

Often there are many misconceptions that clients face when it comes to the practice of insurance. The insurance industry is very complicated, and it can be challenging for consumers to determine what exactly is fact or fiction. However, over our 15+ years of business experience within the industry, we've heard it all here at The Sarrica Group, Inc. (www.thesarricagroup.com).  Therefore, to shed some light on some common misconceptions, we've put together a list of common mistakes plaguing the insurance industry today:

1. Your Home/Commercial Property Should Be Insured for the Same Amount it was Purchased

   When buying a building, you will be purchasing that property based off Market Value. This value will include various factors such as surrounding land, neighborhood features, and area trends. However, the premium price of property insurance or home insurance is determined by the value needed to rebuild your property, not reimburse the purchase price.
   

2. Letting Your Insurance Policy Cancel is "No Big Deal”
   All insurance companies reserve their most competitive rates for policyholders who had at least six months of insurance and no lapse in coverage. A lapse in coverage will either prevent you from obtaining insurance or cause you to pay premium at a higher rate.
   

3. There is No Need for Renters Insurance
   Renters Insurance not only protects personal belongings within an apartment but also provides liability protection as well.  For example, if a renter causes a fire in an apartment complex, there is a possibility that they can be sued for the damages caused not only to their unit but any surrounding units as well. Renters Insurance would cover them against those lawsuits and liability exposures. 
   

4. Insurance Rates are Negotiable

   Insurance carriers determine rates on insurance through calculations composed of numerous amounts of data that are entered into a sophisticated algorithm. Once the premium is calculated, there is no way to change the rates without altering the information or the coverage. As a result, these premiums rates can't be negotiated. However, there is a possibility that discounts can be offered on specific policies that will lower the premium price for the policyholder.
   

5. All Companies Offer the Same Exact Policies
   Not all insurance policies are created equal. Some insurance carriers implement broader language and terminology within their policies to offer enhanced coverage options to ensure an excellent claim experiences for their policyholders. However, other insurance carriers provide a more restrictive policy language when providing coverage. This makes it easier for some carriers to only pay claims when it is absolutely required. Even though the name of each coverage on your policy may look similar, the experience you will receive can vary significantly from company to company.
   

6. If My Friend Crashes My Car, Their Insurance will Pay
   This is a highly common misconception for auto insurance. Unfortunately, auto insurance follows the named insured's vehicle, not the driver behind the wheel. Therefore, your insurance carrier would ultimately bear the primary responsibility for any damages that your friend caused while driving your car. If the loss exceeds your policy limits, then your friend's policy would kick in as secondary coverage for the peril. Be very cautious of who you let behind the wheel of your car
   

7. I'll Only Need Collision/Liability Coverage for My Car
   This is another popular misconception about Auto Insurance. Liability coverage only protects the named insured if you are at fault during an accident. This will cover damages to property, vehicles or people up to your policy limits. Collision coverage would cover costs to repair your vehicle only if it was involved in a collision such as hitting a pole, vehicle or any other object. However, if your car is ever vandalized, stolen, caught on fire, damaged by falling objects, or struck an animal, then you'll need Comprehensive Coverage to recoup your losses.
   

8. Small Cars Have the Cheapest Premium
   The reason why smaller vehicles do not have the cheapest rates is that younger and inexperienced drivers often choose them. These drivers are usually the type who submit the most auto claims. Also, injury claims are much higher from small vehicles, which lack the weight and protection offered by larger cars.
   

9. I Don't Need Insurance
   Please read our article - "5 Reasons Why Insurance is Important to Our Society" (www.thesarricagroup.com).
   

10. Most People Buy Insurance Online

    Many policyholders still want and seek out the professional expertise of an insurance professional when it comes to guidance on their insurance policies. A reliable insurance agent who can help sort out all of the available options is in high demand. Contact The Sarrica Group, Inc. for assistance with your insurance policies today!