4 In­sur­ance myths and mis­con­cep­tions dis­pelled

The Mercury News - - Real Estate Plus -

There are sev­eral myths and mis­con­cep­tions that ex­ist when it comes to in­sur­ance. For ex­am­ple, true or false? It costs more to in­sure red cars.

The an­swer is false. Car color has no im­pact on in­sur­ance pre­mi­ums; how­ever, fac­tors like your driv­ing his­tory, an­nual mileage driven, the cost of your ve­hi­cle and other things will af­fect how much you’ll pay for in­sur­ance.

In­sur­ance is one of the most use­ful in­vest­ments you can make to help safe­guard your be­long­ings and fi­nan­cial as­sets, but it’s im­por­tant to know what you’re pur­chas­ing. Here are four things you should know about auto, home­own­ers or renters in­sur­ance poli­cies to en­sure ad­e­quate pro­tec­tion in the event of an un­fore­seen or un­ex­pected loss.

1. Myth: Auto in­sur­ance cov­ers all ve­hi­cle-re­lated is­sues

Most states re­quire driv­ers to carry auto li­a­bil­ity in­sur­ance. This cover­age pro­vides fi­nan­cial pro­tec­tion if you’re found to be legally re­spon­si­ble for caus­ing in­jury to an­other per­son or their prop­erty. It doesn’t cover dam­age to your ve­hi­cle, how­ever, or items stolen from your ve­hi­cle, or dam­age from a storm or van­dal­ism.

Col­li­sion in­sur­ance cov­ers you while your ve­hi­cle is in mo­tion and you crash into an­other ve­hi­cle or with a fixed ob­ject, like a pot­hole, guardrail or light post. This cover­age is typ­i­cally re­quired by a lender when you fi­nance a ve­hi­cle.

Com­pre­hen­sive in­sur­ance is cover­age that pro­tects your ve­hi­cle when it is dam­aged while not in mo­tion. Ex­am­ples of this could in­clude van­dal­ism, theft or an act of Mother Na­ture like a hail­storm or fire.

“When fi­nanc­ing a ve­hi­cle, the lender may re­quire you to carry this cover­age un­til it is paid off. If your ve­hi­cle is older, how­ever, and it has been com­pletely paid off then com­pre­hen­sive in­sur­ance may not be the right cover­age be­cause a ve­hi­cle’s value de­creases with age. Con­sider whether the sav­ings of not hav­ing com­pre­hen­sive in­sur­ance are enough to off­set the risk of po­ten­tially hav­ing a large re­pair or re­place­ment bill,” says Kevin Quinn, vice pres­i­dent of auto claims at Mer­cury In­sur­ance.

2. Mis­con­cep­tion: Home­own­ers in­sur­ance pro­tects against dam­age from all nat­u­ral dis­as­ters

Home­own­ers in­sur­ance cov­ers losses or dam­ages to your house and per­sonal be­long­ings in the event of a fire, sud­den flood­ing caused by a bro­ken pipe, theft and even ob­jects fall­ing from the sky like air­plane de­bris. It also pro­vides li­a­bil­ity cover­age if vis­i­tors suf­fer in­juries on your prop­erty, and it can ex­tend to events off the premises as well like if per­sonal prop­erty is stolen from your ve­hi­cle.

“Gen­er­ally speak­ing, home­own­ers in­sur­ance is de­signed to help you re­build your home and re­place per­sonal prop­erty if it is dam­aged or stolen,” says Christo­pher O’Rourke, vice pres­i­dent of prop­erty claims at Mer­cury In­sur­ance. “How­ever, you may need to pur­chase a sep­a­rate flood in­sur­ance pol­icy to pro­tect your home from floods, be­cause these events are usu­ally not cov­ered by a home­own­ers pol­icy.”

Home­own­ers should con­tact the Na­tional Flood In­sur­ance Pro­gram to in­quire about cover­age for floods, ris­ing tides or storm surges.

3. Myth: Renters in­sur­ance is un­nec­es­sary

Renters in­sur­ance is very af­ford­able; how­ever, only 41 per­cent of renters pur­chase it. And with­out renters in­sur­ance, you’ll have to pay out of pocket if your per­sonal be­long­ings are dam­aged in a fire or are stolen.

“Un­for­tu­nately, your land­lord’s in­sur­ance pol­icy will not cover any of your per­sonal be­long­ings and it won’t pro­vide li­a­bil­ity pro­tec­tion if a law­suit is brought against you be­cause a vis­i­tor slips, falls and in­jures them­selves in­side your rental unit,” says O’Rourke. “Renters may not be re­spon­si­ble for re­pair­ing the home they live in, but there’s al­ways a chance their pos­ses­sions and valu­ables will need to be re­placed if they are dam­aged or stolen, so pur­chas­ing a renters in­sur­ance pol­icy is a smart way to pro­vide fi­nan­cial se­cu­rity.”

4. Mis­con­cep­tion: Your auto in­sur­ance pol­icy pro­vides cover­age when­ever you are driv­ing your ve­hi­cle

A per­sonal auto in­sur­ance pol­icy pro­tects driv­ers in case they’re in­volved in a col­li­sion. How­ever, there are cer­tain sit­u­a­tions where more cover­age is needed.

“With the ad­vent of the gige-con­omy, many peo­ple are turn­ing to ride-hail­ing jobs, where they can be their own boss and set their own hours,” says Quinn. “With­out the proper in­sur­ance, how­ever, they’re putting them­selves and oth­ers at risk if they get into a col­li­sion, be­cause your per­sonal auto pol­icy doesn’t cover you when you use your ve­hi­cle for com­mer­cial pur­poses. This in­cludes driv­ing for Uber or Lyft, or even pizza de­liv­ery.

“Mer­cury pro­vides ride­hail­ing in­sur­ance, but if it isn’t cur­rently avail­able in your area or you’re us­ing your ve­hi­cle to make money in an­other ca­pac­ity like de­liv­er­ing piz­zas, you’ll want to pur­chase a com­mer­cial auto pol­icy.”

In­sur­ance is a sound in­vest­ment, but can be com­pli­cated, so it’s al­ways a good idea to speak to an in­sur­ance agent. These highly trained pro­fes­sion­als can pro­vide ex­pert ad­vice and guid­ance to help en­sure you are ad­e­quately pro­tected.

In­sur­ance is one of the most use­ful in­vest­ments you can make to help safe­guard your be­long­ings and fi­nan­cial as­sets, but it’s im­por­tant to know what you’re pur­chas­ing.

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