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As time passes, it feels like everything is going up in price. It makes sense to watch the family budget by doing extra research, such as finding the insurance cost for a new driver.
Yet it goes further: there are so many myths out there about car, life, and home insurance that it can be difficult to find out exactly what you need to get and when to get it.
The pressure to be on top of all of this information in the information age is only increasing, but thankfully this guide will crush some of the biggest myths around car, life, and home insurance for beginners. No jargon here, just quick explanations to get you started on the right track.
Challenging our beliefs is important for growth, and facing wrong information head-on is just part of the journey.
Myth #1: Your Car Insurance Premiums Go Up No Matter What
Fact: Incorrect. Car insurance premiums go up for specific reasons.
Many people new to the auto insurance world feel they have to be extra careful. After all, anything can send your car insurance monthly premiums zooming up, right?
This assumption isn’t correct. The truth is that car insurance premiums go up for specific reasons: at-fault accidents, bad credit (change in risk), accidents caused by other people on the policy (spouses, children, roommates), and serious traffic violations.
Speeding tickets are considered a major traffic violation. Too many speeding tickets change your risk and will cause a change in your premiums. This is also the case even if it’s just someone listed on your insurance policy.
Myth #2: Home Insurance Is Required by Law, So There’s Never Any Room to Rate Shop
Fact: Rate shopping home insurance is always a good idea.
Home insurance isn’t required by law. However, since most people get mortgages to buy the house of their dreams, they are subject to the guidelines the lender wants to set.
The mortgage lender will require home insurance on a property to protect their interests, not just your stuff.
Shopping around for the best home insurance rates is important. Like auto insurance, every carrier will have its own underwriting guidelines for home insurance. These vary so much that it would be difficult to pinpoint average numbers.
Myth #3: Credit Plays No Role in Car Insurance Premiums
Fact: Credit plays a big role in car insurance premiums.
While there are a few states where insurance companies can’t use credit history to make their decisions, the truth is that credit is a huge part of the auto insurance underwriting process.
Underwriting just means the process of examining potential customers and assigning a rate based on a variety of factors.
Good credit signals to the insurance company that you are a person who takes their responsibilities seriously. Carriers want to know if you’re addressing the debts you owe, or just letting them go.
After all, the reasoning is simple: if you’re not taking responsibility in one aspect of your life, what makes the insurance company certain you’ll take responsibility on the road?
All of your habits play a role in life, and managing car insurance is definitely included in this statement.
Myth #4: Life Insurance Isn’t Necessary Until You’re Old
Fact: Life insurance is critical. Get it early.
Life insurance is one of the classic insurance products that gets overlooked until it’s too late. Unfortunately, no one knows when they’ll have to leave their loved ones unexpectedly.
We only get so much time to ensure that our families are prepared for an uncertain future. Life insurance in its simplest form is simply funds set aside in the event of someone’s passing.
The idea that you should wait until you’re older for life insurance doesn’t make sense. If you’re raising a family or have others who depend on your income, it makes sense to get life insurance fairly young and hold the policy.
The younger you are, the better rates you get to enjoy. It’s also easier to qualify for life insurance without a medical exam, which means you can get the policy activated faster.
Myth #5: An Accident Is Always Covered if You Have Car Insurance
Fact: Coverage for an accident depends on what type of car insurance you have.
Anyone who has processed auto claims for a living will tell you many newcomers to insurance assume that any accident is automatically covered by their insurance policy. Unfortunately, this just isn’t the case at all. The reality here is it depends on what coverage is active at the time of the accident.
For example, if you have comprehensive coverage but not collision, this means an accident where you hit a deer would be covered, and the insurance company would pay for damages to your vehicle.
However, if you struck another vehicle and didn’t have collision coverage, the insurance company would not pay for any damages to your vehicle.
Knowledge Is Power
Once you know the truth instead of the myths, it’s easy to move forward. Comparing quotes online is the best way to go so you aren’t at the mercy of some insurance carrier’s schedule. The more you search around, the more likely it is you’ll find insurance products that fit your budget.
Remember that picking the most expensive policy doesn’t automatically mean that you have the best protection. Failure to pay the monthly premiums will mean the insurance policy is canceled. In the event of an accident, a canceled policy means the insurance company will not pay to repair your vehicle or the other party’s property.
The Road Ahead
There’s truly no time like the present to get quality insurance products to protect you and your family from life’s uncertainties.
If you own a home, home insurance takes care of not just natural disasters, but costly repairs from things like unexpected pipe breaks and water damage to property.
What’s covered in your car, life, and home insurance policies varies by state, so it’s important to read your contract carefully.
If you have questions, the best step forward is to talk to your specific insurance carrier’s representatives. They are always happy to answer any questions you have with company specifics.
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Luke Williams writes and researches for the insurance comparison site, TheTruthAboutInsurance.com. His passions include best practices for insurance and educating others on its often-overlooked details.