There are many insurance myths and legends that we come across when talking to customers. Some of them are downright funny while others are nonsensical. The myths that scare us the most, however, are those that mislead consumers about insurance coverage. Here are some of the insurance myths and legends we have heard over the years and the truth about each one.
Auto insurance follows the driver first, the car second
This is a question we hear several times a month: if I loan my car to someone and they have an accident, their insurance pays, right? The short answer is no. Auto insurance follows the vehicle first and the driver second. In an auto accident, the insurance on the vehicle (the coverage purchased by the vehicle owner) would pay first. If the total damages exceed the coverage provided by the vehicle owner, the driver’s insurance may pay for the difference. In a nutshell, if you hand your keys to someone else you are on the hook for what they do with your car.
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Small economy cars are the cheapest to insure.
This legend is hard to explain but the truth is that the cost new of a vehicle is only one factor that determines auto insurance pricing. In reality, the cost of repairing a vehicle is more important than the value of the car. Total loss accidents are infrequent compared to minor “fender benders”. So, the cost of parts and labor to fix your car is factored into the price of comprehensive and collision coverage. There are other considerations as well such as the demographic that purchases certain vehicles. For example, a loaded up minivan that has a sticker price of $40,000 will likely be less to insure than a small turbo-charged hatchback worth $25,000. The reason? Consider the demographics of who purchases minivans versus who purchases a turbo-charged hatchback.
Flood insurance is a waste of money unless I live in a flood zone.
Anyone that has lived in Las Vegas during the monsoon season knows this one is a myth. The National Flood Insurance Program estimates that over 25% of all flood claims come from homes that are NOT in a “high risk” flood zone. Flood waters go wherever they want despite our best efforts to contain them. Flood insurance is very affordable, especially for property outside a “high risk” flood zone, and should be a consideration for every property owner whether residential or commercial.
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Listing youthful drivers is not required by an auto insurance company.
This is another myth that could have severe ramifications for those that choose to hide young drivers in the home. Be aware that some auto insurance companies limit coverage for undisclosed drivers living in the home. You might have paid for high limits of liability coverage but find you are only provided with statutory minimum limits if that undisclosed driver has an accident. Auto insurance companies have a legal right to underwrite and rate for all drivers in your household. Hiding those drivers is insurance fraud could be the basis for denial of a claim or, potentially, recission of your insurance policy.
I don’t need to buy rental car insurance.
This one is less of a myth and more of a misunderstanding. Generally speaking, comprehensive and collision coverage on your auto insurance policy does transfer to a rented car. There are conditions on when coverage applies and geographic limitations (i.e. renting a car outside the US). Keep in mind that there are charges your auto insurance policy may not pay for if you damage the rental car. For example, loss of use and diminished value are typically not covered by auto insurance. Do not simply reject rental car coverage without at least discussing with the rental agent what your legal obligations are if the rental car is damaged.
I rent a home so my landlord covers all my stuff.
This myth purely wishful thinking on the part of a tenant. Your landlord does not and, in fact, cannot provide insurance to cover your stuff. One of most basic insurance concepts is “insurable interest“. Your landlord has no insurable interest in your belongings. If you rent a home, condo or apartment you need renters insurance to cover your personal property and provide liability for your actions. Renters insurance is affordable and simple to quote. Don’t fall victim to this myth and neglect to purchase renters insurance.
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Insurance Myths and Legends
In summary, do not believe every insurance myth and legend you hear. When in doubt turn to a reputable source like the agents and employees of Safeguard Insurance. We are happy to discuss any insurance myth and legend with you. We want our customers, and all insurance consumers, to be informed and educated about their insurance policies.