Dispelling Common Home and Life Insurance Myths
While wide variety of insurance policies available for purchase offers great flexibility in safeguarding our possessions and loved ones, it can also create some confusion and myths around policies. Let’s take a look at some myths about life insurance and home insurance and shed some light on some of the most commonly asked questions:
Myth #1: Use Insurance Policies To Cover Everything
While there is such a term as “under-insured,” we can also be over-insured. When choosing what items to put under coverage, a certain risk and benefits analysis should be performed by the policy owner, and preferably with an experienced agent. The possibility of a particular accident occurring should be weighed against the associated premium. There is a cut off line between protecting against reasonable disasters and paying premiums on a policy that will almost never pay off.
Myth #2: Claim Every Incident
Before making an insurance claim, take a moment to do some math. Nearly all plans require deductibles, so getting an idea on the total damages before filing a claim is a good idea. An abundance of claims will also make you appear to be a risky person to insure, meaning your premiums may very well increase. Now, don’t be shy about using the home insurance you purchased, but be careful of situations where it doesn’t pay to file a claim.
Myth #3: Only The Main Income Generator Needs Life Insurance
Some people see a stay at home spouse as a person with zero income, therefore they do not need life insurance. Putting aside the obvious emotional toll and final expenses, do realize that a homemaker does a lot to maintain a household that would otherwise be very expensive. Look at the cost of childcare, and then add in food preparation, housekeeping, school transportation, and the dozens of other activities that homemakers do on a daily basis. Now you can see why a full time homemaker contributes at least the equivalent of a full time job.
Myth #4: You Don’t Need Flood Home Insurance If You Don’t Live In A Flood Zone
Deciding on a flood rider on a home insurance policy requires a calculation of risks and benefits. Be aware that any area can suffer from flash flooding when a period of heavy rain follows a drought or long dry season. Water damage is usually not covered on standard home insurance policies; make sure to investigate the risks involved without flood coverage.
Myth #5: Whole Life Insurance Is Always The Best Option
The myth that whole life insurance is ‘always the best’ stems from the fact that whole life and universal life policies have a cash value that accumulates and is usable before the insured passes away. Of course, this perk comes with an increased premium. There are very few rules when it comes to insurance plans that are set in stone. Always weight the options between whole life and term life policies. Sometimes it makes better sense to purchase the less expensive term policy and invest the difference in a retirement account.
Ultimately, taking a look at these five myths will help us make better financial decisions when it comes to insurance.