Archive for January, 2011

Debunking Insurance Myths!

Posted on January 6, 2011. Filed under: Good for You | Tags: , , , , , , , , , |

Who wants to think about insurance at the beginning of a new year?  But just like those resolutions, now is the perfect time. Whether you are revamping your diet, your budget, or your goals for the coming year, we all know change is sometimes necessary. One thing you may need to change is the way you view insurance. There are a lot of misconceptions about the different kinds of insurance, who needs it, who provides it, and the best ways to shop for it. So, to get you started, we are “debunking” some of the top myths about insurance.

Myth #1: All agents are the same. Just because two agents sell the same kind of insurance, does not mean they offer the same levels of coverage. No two insurance companies sell the exact same policy. The only way to be confident you are purchasing adequate coverage, is by taking the time to help an agent fully understand your needs so they can work to find a policy that best meets them. There is also a big difference between a captive agent and an independent agent. Captive agents only have access to policies and coverages provided by the company for which they work (ex. State Farm, Allstate, etc.). Whereas, independent agents are appointed with multiple insurance companies and are able to comparison shop for their clients.

Myth #2: I will pay more for my insurance if I use an Independent Agent. Independent agents are paid commission by the insurance companies with which they are appointed. However, consumers will find the premiums to be the same whether they purchase insurance through an independent agent, or from the insurance company directly, if possible. Additionally, the services provided by independent agents are typically free to the individual and small business consumer, for coverages such as individual health insurance, life insurance, small group health insurance, homeowners insurance and auto insurance. In those instances when fees are charged, they must be disclosed to consumers.

Myth #3: I’m young and healthy, so I don’t need health insurance. Health insurance is easily obtainable and much less expensive if first purchased when you are young and healthy. If you become ill, without access to group insurance, you may not be eligible for individual health insurance OR may find your illness excluded from coverage when you apply. Purchasing health insurance after you become ill is like trying to buy auto insurance after you have an accident.  Even though the Healthcare Reform Act is designed to lessen these difficulties, many of the changes won’t take effect until 2014. If you are covered by group insurance, and lose those benefits, it is also important to identify creditable individual insurance in order to maintain your coverage. It is also true that individuals covered by health insurance are more likely to pursue preventative health care services, which can minimize the possibility of health problems later in life.

Myth #4: I’m a safe driver, so I only need minimum limits on my auto insurance. Accidents happen, even to the safest and most cautious people. And, the one thing that is true about all accidents is we can’t pick when, where, or how they happen. Liability insurance pays for damages you cause to another’s property or bodily injury. If they drive a “beater” that isn’t worth more than $1,000 and no one is injured, you might do just fine with minimum limits. But, if the person you hit drives a brand new Mercedes and it’s totalled or multiple cars are involved, it’s a pretty safe bet that minimum limits are not going to provide adequate insurance. In this case, they may seek your personal possessions for compensation. It is also important to consider the type of vehicle you drive. A super cab pickup truck has the potential to cause A LOT more damage than a Smart Car.

Myth #5: My wife is a stay-at-home mom, we don’t need life insurance on her. Maybe you can afford to pay for the services required to replace all that your wife does around the house. But, before you simply decide not to investigate the cost of life insurance, we recommend you think about the services you might need should something happen to your spouse. If you have young children, they could include a cook, housekeeper, nanny, after school care, daycare and more. A life insurance policy won’t replace the one lost, but it can simplify and ease both the decisions and change associated with unexpected loss. One more thing to think about is the cost of life insurance. Like health insurance, you will get the most bang for your buck when you are young and healthy. Health conditions and family history can significantly impact both your premiums and eligibility for life insurance.

Myth #6: My kids are too young for life insurance, they can buy it later. There are multiple benefits to buying life insurance for your children, even while they are still infants. Whole life insurance is extremely inexpensive when purchased for an infant or young child. And, it provides a savings benefit which can be used to offset the cost of college or other expenses. Most whole life polices can also be converted to term life insurance later in life. This is especially beneficial if your child develops a health condition later in life that would make them otherwise ineligible for coverage. And, while no one wants to think about the worst happening, some children are victims of accidents and illness. The death benefit of a life insurance policy can ease potential financial burdens caused by unexpected burial expenses.

Myth #7: I have both homeowners and auto insurance. I don’t need an umbrella policy. In today’s highly litigious society, it is very likely that a lawsuit for damages will accompany an insurance claim when serious bodily injury is involved. Let’s say you caused a car accident that leaves someone paralyzed, your auto insurance will only cover damages up to your maximum liability and defense limits. An umbrella policy can provide additional coverage for the excess amounts, including legal fees and court awarded damages. For the type of protection provided, umbrella insurance is inexpensive to maintain.

Myth #8: I don’t need flood insurance. Your property insurance policies do not cover losses due to flood. If it rains where you live, flooding IS possible. Even without a nearby river, creek or lake, rain falling fast enough and long enough, can cause the ground to become saturated and lead to local flooding. We saw rains like this in Austin and surrounding areas during 2010. Homeowners, in areas that had never flooded, were surprised by water levels up to the eaves of their homes. There are also other factors that can affect the risk of flooding, including nearby construction, community development, and even clogged drainage systems. Like umbrella insurance, flood insurance is inexpensive; the damages caused by flooding are not.

Myth #9: I only have a small at-home business, so business insurance doesn’t really apply to my situation. This simply is not true, as home insurance does not cover your business pursuits. The vast majority of homeowner’s policies exclude, or severly limit, liabilities due to business conducted in the home. In addition, business property (computers, inventory, etc.) will also be excluded or limited by your homeowners insurance. The coverage required to adequately insure your at-home business may vary widely, depending upon the type of service and/or product you offer. Your agent will help you determine the best type of insurance for your needs.

Myth #10: I have life insurance, so I don’t need disability insurance. Life insurance benefits will be available to your beneficiaries in the event of your death, but what if you are injured and unable to work. Even if you have a Whole Life policy, which you can borrow against, you have to pay it back or risk losing some or all of your death benefit. Disability insurance, on the other hand, provides replacement income in just such an instance. And, if you think it can’t happen to you, think again. Three out of every ten Americans (under the age of 65) will suffer a disability lasting 3 months or longer. Nearly 1 in 5 Americans will be disabled for one year or more during their working years. Top that off with the staggering statistic that 70% of working Americans wouldn’t make it 1 month before suffering financial difficulties. And, more than 1 in 4 Americans wouldn’t make it a week. (Statistics provided by The Life and Health Insurance Foundation for Education, 2008)

If you found yourself or your life situation anywhere in the myths above, we recommend you contact your agent, or us, to review your current insurance policies and identify potential gaps in coverage. If you live in Austin, or anywhere in Texas, and need an agent, please give us a call.

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