I read an article the other day from the Insurance Journal about 10 common Insurance myths. I wanted to share a few of these on our page and give a little more detail on the reality.
- Myth: Home Insurance should be for the real estate market value of a home
- Reality: Your home should be insured on the cost to rebuild the home on your land. Depending on the market and area you are in, this could be quite a bit more or less than the current market value. A good estimate for the rebuild cost of an average single family home in NC is $100 per square foot. If your homeowners coverage is for much less than that, you are probably very underinsured.
- Myth: Red cars cost more to insure because they get pulled over for speeding more.
- Reality: Car color doesn’t impact your insurance rates. In fact, I have never heard of a carrier even asking what the color of the car is. There are so many other things wrong with this mythical statement. Insurance rates are based on the likelihood you will have a claim in the future, not the likelihood of whether or not you will be pulled over.
- Myth: If I cause an accident with extensive damage to other, my insurance company will cancel me immediately.
- Reality: An insurance carrier can’t just cancel you because you have had a claim. There are laws and a process that must be followed in order for a carrier to cancel you. If an insurance carrier reviews your file and no longer wants to insure you based on your claims frequency or severity, then they would have to give you advance notice that they would not be offering a renewal. However, if you neglect to pay your premium, they can cancel you midterm and decline to reinstate or re-write. Here in NC, an auto insurer must provide a minimum coverage for liability regardless of your claims history.
- Myth: Small cars are cheapest to insure.
- Reality: Hmmm, not sure where this school of thought comes from. Most sports cars (high performance) are small cars. Also, full-sized or luxury cars are more often driven by more experienced drivers. Smaller cars are typically targeted for theft more frequently, and they are often less visible to other drivers on the road. What is true is that each vehicle model has an assigned symbol by the Insurance Standards Office (ISO) and higher the symbol, the more an insurance company will likely charge for insurance. The symbols are based off a number of things including safety tests, performance capability, probability of theft, etc. If you are in the market for a car and have a few different models in mind, your insurance agent should be able to tell you which vehicle will cost less to insure.
REALITY: Talk to an agent about your insurance questions. They are the professionals and will be able to clear up any misconceptions and help you make informed decisions about your insurance needs and choice.
Have you heard other insurance stories or discussions you would like clarification on? Comment here and we will answer them! And as always, Stay Covered North Carolina!