Love ‘em or loathe ‘em insurance companies are here to stay. Many of us have strong views about what insurance is about but how many of these views are rooted in fact rather than fiction? Here are our top 10 insurance myths – they might surprise you.
1. My car insurance covers work
If you or any other driver is using your vehicle for anything other than personal use then tell your insurer. Whether you’re commuting to meetings or delivering pizzas you need to make sure you’ve covered for business use otherwise you might invalidate your cover.
2. I don’t need separate liability insurance Whilst motor and home insurance policies have liability sections these may not provide adequate protection. Depending on your personal circumstance you may need an umbrella policy that sits above your existing policies and provides a higher level of cover.
3. You only need flood insurance if you live on a flood plain Even if you don’t live in an area that has previously experienced flooding it doesn’t mean that it never will. Flooding can have a devastating effect on your home and belongings so make sure you’ve the cover in place to deal with it.
4. Healthcare insurance is a waste of money Whether this is true or not depends on where you live and what’s important to you. Whilst in the UK the National Health Service provides care to everyone and private medical insurance gives greater choice and speed when treating acute conditions, in the US universal healthcare does not exist.
5. I don’t need critical illness or disability cover You may think you can rely on the government to help if you are badly injured or disabled, however, even if you can successfully claim benefits this will take a long time and you’re income level will be reduced. Critical illness and cover for disability can help provide some financial protection if this happens.
6. I don’t need to insure for long term care costs Whilst most of us don’t like to think too much about getting old it is important to plan ahead, particularly if you don’t want your family to feel the impact. Investigate the different types of long term care insurance, take action now and you won’t have to worry later.
7. Everyone needs life insurance
Life insurance provides a lump sum for your dependants when you die, leaving them with some financial support. If you don’t have anyone who is financially dependent on you then you may not need life insurance.
8. Only the main breadwinner needs life insurance Think about what your spouse contributes to the household budget and the cost of outsourcing these services if they were to die. Once you’ve factored in the cost of childcare, transportation, cleaning, food preparation etc. you’ll be able to see the financial impact if they weren’t around and whether you could afford it.
9. Whole of life insurance is best
Whilst you are guaranteed that a whole of life insurance will pay out when you die the premiums for this type of cover are more expensive than for a term policy. Some people may be better off, therefore, buying a term assurance policy and setting up a regular savings account to make additional financial provisions.
10. Always make a claim
If you have insurance then you might want to use it at every opportunity. Think before you do though. Insurance is designed to cover unexpected catastrophes. If you keep making claims then your insurance premiums will go up.
Lloyd predominantly writes about business and personal finance matters. He is currently writing on behalf of SO Switch, who can help you find the cheapest home insurance.