3 Insurance Myths Shattered Into Pieces

Good Morning Dinks.  Today we are discussing an important aspect of the financial planning process and clearing up some of the biggest misconceptions in the financial industry.  There are several different aspects that financial professionals consider when providing financial planning advice such as tax planning, retirement planning, estate planning, as well as the topic that we are discussing today…insurance planning.

Many people purchase home, auto, health, and life insurance because they know they need it to have it in order to protect themselves in case of a financial emergency.  But as a financial professional I can tell you that there is a lot of confusion regarding insurance policies and insurance premiums.

People purchase an auto insurance policy because we can’t drive without it, and people purchase a home owners insurance policy because they can’t buy a home without it; but not a lot of people know how their insurance premiums are calculated.  If you chose not to have insurance you should have a very big emergency savings fund that will cover all of your costs in case of an unforeseen event or loss.

TD Bank recently posted an article which discusses the most common myths about auto insurance policies. You may remember that my car insurance was one of the many expensive reasons why I chose to sell my car.  I more recently had an insurance nightmare while shopping for home owners insurance.  So it is safe to say that insurance is not always a delightful topic.  Have you ever wondered how your auto insurance premiums are calculated? We can’t tell you all of the trade secrets of the insurance industry, but we can tell you which factors are considered when insurance companies are calculating the cost of your insurance premiums.

3 Auto Insurance Myths Broken Into Pieces

1. The colour of your car affects the cost of your insurance.  It is not true that red cars have more expensive insurance premiums; it is also not true that two door cars have higher insurance premiums than four door cars.  Car insurance premiums are calculated based on the cost to replace or repair the car after an accident or loss.  They are also calculated based on the driver’s track record and the possibility of theft.

2. Parking Tickets Cost Your Insurance.  Parking tickets are not a factor when insurance companies are determining the cost of your insurance premiums.  However, traffic violations such as speeding tickets do affect the cost of your insurance premiums. Your driving record among other things, such as the value of your car, help determine the overall cost of your auto insurance premiums.

3. If You Don’t File a Claim Your Premiums Won’t Increase. If you are in an accident and you don’t file an insurance claim, your premiums could still increase.  If the other involved party files a claim with their insurance company your insurance company will be notified; therefore your auto insurance premiums could still increase.  It is best to always be honest with your auto insurance provider…just in case.

Photo by kodomut