The Myths of Insurance

Insurance is an area that everyone seems to have an opinion, and often that opinion is completely wrong.
It’s a reality that most insurance policies are filled with so much jargon, it’s really hard to make sense of what they are really saying. It’s not much wonder that people make up what they think it says and then try to deal with it later, and pass along those misconceptions to others.

The bottom line is that there are a number of myths that people need to know about to set the record straight about insurance. For instance that famous myth about a person’s job disability will cover them. It’s amazing how many people think lost wages will be covered through their employer’s long-term disability insurance plan. Don’t look now, but that is definitely a myth.

Generally speaking a typical group policy pays about 60% of a person’s wages up to a specified “limit,” such as $4,000 a month. The policy won’t replace bonuses or commissions either. Know what the policy says before assuming something that turns out not to be true and affects the ability to pay bills. Make it a point to speak to an expert insurance broker who will explain what to do if there is not enough insurance, e.g. buy an individual plan that pays up to 70% to 80% of an individual’s salary, etc.

Another prevalent myth is the one that says the homeowner’s policy will cover a lot of things. The problem here is that a lot of homeowners think they are covered for everything including the kitchen sink, and they might “not” be. Read the fine print. A standard homeowner’s policy has limits, and riders are usually needed for things like damage due to power outages, wind storms, earthquakes and sewage backup.

Interestingly enough, many Americans don’t feel they need long-term care insurance; it’s only for seniors. The thing is everyone ages and not always gracefully as one would like. In addition, people think the government helps with long-term care, but in reality Medicare only offers short term care after hospitalization. Look for coverage earlier in life and be prepared.

Drivers often think low deductibles are better for home and vehicle policies. This is definitely a myth because the lower the deductible, the higher the premiums. In addition if a person tends to make a lot of small claims, this works against them because they are costing the insurance company money.

There are more insurance myths that make the rounds with amazing regularity and many of them can be explained by an expert insurance agent who has seen just about everything and cares about his customers. Ask around and find out the “real” truth about insurance and what it does. The answers may be rather surprising.

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Sunday, November 8th, 2009 Press