Most people feel confident about their insurance coverage – until they actually need to use it. The problem isn’t a lack of coverage, but a lack of clarity.
Insurance myths spread easily. A friend says something. A headline reinforces it. A quick Google search confirms it. Before long, assumptions replace facts, and those assumptions can quietly cost you money, or even leave you exposed.
But how does that translate into the actual coverage itself?
Most people believe they fully understand their insurance. In fact, a study by JustCare found that 86% of insureds said they knew everything about their policy. In reality, only 56% understood the specifics, and just 35% knew how to navigate their coverage when it mattered most.
That gap is where insurance myths live and continue to multiply!
Insurance shouldn’t be based on assumptions. It should be built on clarity. Let’s break down some of the most common insurance myths and uncover what’s actually true!
| Myth #1: “My Homeowners Coverage Automatically Covers Everything”
On average, nearly two-thirds of homeowners believe their homeowners insurance automatically covers everything within their property. As a result, about half of insured experience denied claims due to misunderstandings about what their policy actually covers.
Standard homeowners insurance does not cover:
- Flood damage (storm surge, overflowing rivers, surface water)
- Sewer backup (without endorsement)
- Sewer backup is not a flood, either! They are two separate coverages.
- Earth movement (earthquakes, landslides, sinkholes)
- Normal wear and tear (aging roofs, rusted pipes, worn HVAC systems, fading paint)
- Certain high-value jewelry or collectibles
Flood insurance policies, water backup endorsements (also known as sewer backup coverage), earthquake coverage (purchased as a separate policy or added endorsement), and increased limits through scheduled personal property endorsements are all supplemental coverages that may be necessary depending on the insured’s location, property characteristics, and individual risk profile.
| Myth #2: “I Don’t Need Umbrella Coverage”
Umbrella insurance is often misunderstood as an expensive add-on to coverage that many people assume is already handled within their existing policy. As mentioned in Myth #1, the term “excess coverage” can lead policyholders to believe it’s simply extra and unnecessary.
In reality, umbrella coverage protects against risks that extend beyond the limits of standard policies. Many insureds don’t realize the additional layer of protection it provides until they face a situation where their primary coverage falls short.
Here are the conditions under which umbrella coverage typically kicks in:
- A serious auto accident quickly exceeds $300,000.
- A guest slipping on your property, resulting in a lawsuit.
- Increased liability exposure on rental properties.
Umbrella coverage is often one of the most affordable ways to protect assets, especially for retirees and homeowners with savings or property equity.
| Myth #3: “Red Cars Cost More to Insure”
Agencies like HAWK consider many factors about your vehicle when determining your premium, but the color of your car isn’t one of them. While it’s a common myth that red cars cost more to insure, insurers actually focus on details that affect risk and repair costs.
Things like the vehicle’s make and model, safety features, likelihood of theft, repair expenses, and how often the car is driven all play a role in calculating your rate. These factors give insurers a clearer picture of the potential cost of a claim.
While the color of your car won’t affect your rate, choosing a vehicle with higher repair or replacement costs certainly can!
| Myth #4: “My Business Insurance Covers Cyber”
Many business owners assume their general liability policy includes cyber protection for their online assets. Safe to say that’s not always the case.
Cyber incidents include but don’t limit to:
- Ransomware attacks
- Data breaches
- Stolen client information
- Wire fraud
- Email compromise
If your business stores any vital information of your clients and employees, then your security should go beyond that of your physical premises!
| Myth #5: “I’ll Just Lower My Deductible Later”
Your deductible isn’t just a number. It’s part of your financial strategy.
Many people assume they can adjust it anytime without consequences. But whether you change it now or wait until renewal, there are tradeoffs.
If You Adjust It Now…
Pros:
- May impact your monthly premium.
- Forces you to rethink your claim strategy
Cons:
- You’ll pay that deductible amount upfront if you file a claim.
- It could affect how your policy is rated at renewal.
If you wait Until Renewal
Pros:
- Cleaner time to review coverage with updated property values.
- Opportunity to align deductible with your current savings and risk tolerance.
Cons:
- Higher deductibles mean higher out-of-pocket costs during a claim.
- Lowering it could increase your premium moving forward.
The right choice depends on your emergency savings, claim history, and comfort with risk!
We’re here to help you understand the facts, not the myths. Reach out to our team today to learn more about your coverage options and make sure you’re protected with the right insurance for your needs!
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