How financially literate are your customers

Auto Repair Insurance Extended Warranties Myths And Facts text background word cloud conceptWhile almost everyone has some insurance, and most have more than one type, many Americans believe a lot of myths about the plans they pay for. This is an opportunity for insurance providers and sellers to educate their clients and help find the coverage that’s best for them (and thereby, boost their own profits at the same time).

Here are some common misconceptions many Americans hold about insurance.

Home insurance

Myth: The law requires you to buy home insurance

No government mandates home insurance. A bank or other mortgage holder typically makes homeowners’ insurance or property insurance a condition of the mortgage loan. They also usually require renter’s or tenant’s insurance for rented properties.

Myth: Homeowner’s insurance should be based on the real estate value

In reality, homeowner’s insurance, including fire, flood, storm and other damage should be based on replacement and reconstruction value. After all, even after the worst disasters, in most cases the land will still be there.

Myth: Standard home insurance protects against sewer backup

Most home insurance plans offer sewer backup protection as an option, but not usually as a standard or default provision. This is something that insurance providers and sellers need to make clear to customers.

Myth: Standard home insurance protects against floods

In reality, this is not standard at all. There are important differences among home insurance plans. Most home insurance policies protect against accidental release of, or entry of water into the home — such as from burst pipes. Most policies do not protect against overland flooding, when water flows over normally dry land and comes into the home through doors and windows — such as when a river overflows, or when your neighbors improperly drain their pool.

Health insurance

Myth: The Affordable Care Act requires you to accept the health insurance plan offered by your employer

Actually, while the Affordable Care Act, also called “Obamacare,” requires almost all Americans to have health insurance, it does not tell them how to acquire it, whether via an employer or on the market. All Americans have the choice to buy the policy that makes the most sense to them.

Myth: The Affordable Care Act allows health insurance companies to charge higher premiums for those with high blood pressure, heart disease and other health conditions

Despite the fact that it was a key selling feature of the plan, many Americans believe that. In fact, the opposite is true: The ACA specifically prohibits health insurers from basing premiums on pre-existing conditions.

Auto insurance

Myth: Comprehensive auto insurance covers the car bumper to bumper

Belief in this myth is understandable — it’s in the name. But in fact, comprehensive insurance only covers a narrow range of circumstances, such as theft, storm damage, vandalism and animal collisions.

Myth: If you lend your car to another insured driver, their insurance will cover any accidents or damage

The reality is that the owner’s policy covers damage, no matter who’s behind the wheel. So if your buddy totals your car, you’re on the hook for any increases in premiums as a result.

Time to reach out

Take the opportunity to disabuse your clients of their insurance myths. You’ll help them make better choices, and at the same time, you could find more opportunities to provide choices that will work out better for both of you. You can find a lot of resources about insurance at our website, Cost Financial Group.