5 Common Insurance Myths and Misconceptions
Reading time • 5 minutes
By Matic
Understanding your insurance policy, your coverage, and your rate can be daunting, but it’s crucial in making sure you’re properly covered when you need it most. Every day, our insurance advisors speak to customers and help them understand the ins and outs of home and auto insurance. Today, they’re addressing some of the most common myths, misconceptions, and assumptions they hear from our customers, to help you make the right decisions on insurance in the future.
1. MYTH: Your insurance policy is guaranteed to cover everything
The biggest thing I hear is a lack of understanding about what the term “replacement cost” really means. The majority of people think that their insurance policy will fully cover the cost of rebuilding their home if they ever needed to. In reality, they’re underinsured. Their current coverage is often not enough, and in the event of damage, they’d be on the hook for paying a lot of the costs out of pocket or even downgrading their home’s features. For instance, a customer might not have enough coverage to replace their hardwood floors and is forced to downgrade to laminate flooring.
The truth is that insurance is something we all hope to not have to use, but having the right coverage to be able to rebuild your home is necessary so you’re protected from the unexpected. At Matic, we have a detailed process to ensure our customers are properly covered with their home insurance policies, in the event that they need to rebuild.
–Mike Siegel, Insurance Advisor
2. MYTH: Filing a claim is always the answer
A lot of people think that when they have damage to their home or vehicle, they should always file a claim, just to see if the damage is covered. In reality, you shouldn’t always file a claim. Even a $0 payout can negatively affect your insurance score. This is important because your insurance score is based on your credit rating and claims history, and is used by insurance carriers to determine your level of risk. If your insurance score goes down, you’re likely to pay more in premiums in the future. My advice is to review your insurance policy before you submit a claim to determine if the cause of damage is covered. If it’s not, you shouldn’t file a claim.
Even if the cause of damage is covered, you should get an estimate of the cost of repairs and compare it to your deductible to ensure the claim is worth filing, rather than paying out of pocket.
–Amelia Bivona, Senior Insurance Operations Analyst
3. MYTH: Mortgage companies will cancel your old insurance policy when you move
One misconception I hear often is that when you sell your home, your mortgage company will cancel your home insurance policy for you. The truth is that in all cases, whether you’re selling your home or simply switching to a new carrier, homeowners are responsible for canceling their policy. In fact, when you decide to make a switch, insurance carriers can’t cancel a policy without your approval — either through verbal consent or with your signature on a special form. Make sure you contact your carrier to cancel your policy.
-Gillian Gross, Customer Service Rep
4. MYTH: Staying with one carrier for many years will get you the best rate
I commonly hear the assumption that loyalty to an insurance company always helps you get the best price. The truth is that sticking with one insurance company isn’t guaranteed to get you the best rate. In fact, the best way to get a great rate on your insurance is to shop your insurance every year, approximately 30 days before your current policy is set to renew (so you have plenty of time to shop and get a new policy set up). There are so many reputable insurance companies out there — some you may not have known about initially — that offer competitive rates and could be a great fit for you. This is especially true if you bundle your home and auto insurance policies.
-Joey Keating, Insurance Advisor
5. MYTH: You’ll save money by purchasing your state’s minimum coverage for auto insurance
Many people think that the best way to save money on auto insurance is to get as little coverage as possible (your state’s minimum required coverage). The truth is that carrying higher liability limits will have a positive impact on your future insurance rates, so you’ll save money in the long term. Additionally, while you might be paying a slightly higher rate right now, having more liability protection in the event of an accident is far more important than any small increase in cost.
–Amelia Bivona, Senior Insurance Operations Analyst
Insurance can be confusing, but Matic is here to help answer your questions and make sure you have the right coverage at the best rate. Get a personalized quote from our network of 40 A-rated carriers.
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