Insurance is an industry that has existed for a long time, shouldering the risks associated with many activities. However, despite its long existence there are still many misconceptions about the insurance industry. In this article, we will address some of these common misconceptions about insurance policies and coverage.
1. Insurance covers any losses
No, insurance does not cover every loss that may be created by the insured party. It is important to read and understand your insurance policy before you sign up for it, as it is often a lengthy document that needs careful attention in order to understand what is covered and what is not. Often the risks excluded from a policy are those that the insurance companies deem too difficult or unrealistic to insure against.
2. Insurance covers only large businesses
One of the common misconceptions about insurance is that it is mainly used by large businesses. This is not true at all as there are several types of insurance policies available for individuals as well, who may need to protect themselves against losses such as earthquakes and floods, fire or even death.
3. Premiums are fixed and do not change over time
Another common misconception about insurance is that premiums are fixed for the whole period of a policy and do not fluctuate over time. This is also completely wrong as insurance premiums can change over time and often do, depending on the circumstances.
4. Staying with one insurer will get you the best rate in the future
Fourthly, there is a misconception that a person would get the best rate from an insurer if he has been with the same one for a long time. This is not entirely correct. In fact, rates are often determined by many factors such as the type of business a person is in and the amount of investment that an insurer has to make in order to pay out on losses against the now insured party. It is advisable to revise your insurance 30 days before it expires and find competitive rates that are affordable and suit you.
5. Your credit score will not impact you
People also tend to think that insurance rates don’t change and therefore a person should not bother with things like discounts and their credit score. This is not true at all because insurance rates are always varying depending on the type of business, as well as the score of the insured party. So having a good credit score definitely counts towards saving more on your premiums.
6. Brokers work for the insurance company
One of the most common misconceptions about insurance is that brokers are working for the insurance company. This is completely not true as brokers work for you and will take your preferences into account before making recommendations. In fact, it is advisable to only use an independent broker who does not work for any one insurance company that may lead to bias when recommending policies from one particular provider.
With an understanding of the common misconception about insurance, it will be easier to make an informed decision about which policy is best for the insured party. It is important for one to ensure they have all the relevant facts before subscribing to a policy.