Insurance Misconceptions That Plague Policyholders

Insurance policies can be complex, multi-page documents that many policyholders pay for but don't always read thoroughly. It's helpful to understand how your coverage works, beginning with these five common misconceptions.

Belief: My home insurance policy covers jewelry.
Truth: Most home insurance policies provide limited coverage for jewelry, but often only in the case of an accident or theft, and for a maximum amount. To protect the full value of the jewelry in your home, consider additional coverage, scheduling the jewelry individually as an endorsement, or taking out a Personal Articles Floater policy.

Belief: If a friend borrows my car and gets into an accident, it goes on their insurance, not mine.
Truth: When you lend your car to a friend, you lend them your insurance as well. Any accidents that occur are covered based on your policy, so choose wisely when it comes to lending out your vehicle. If your friend does have an accident while driving your car, you can dispute the accident from your claim history so that you are not rated for it regarding quoting purposes.

Belief: Where you live affects your home insurance rate only, not your auto insurance.
Truth: Each zip code has a risk profile that includes statistics for theft, accidents, burglary, and natural disasters. These numbers, along with other factors, can make home and auto insurance vary from zip code to zip code.

Belief: Sports coupes are more expensive to insure than family sedans.
Truth: A car's sportiness (or lack thereof) doesn't determine how expensive a car is to insure. Key factors that do matter include whether it's a model targeted by car thieves, how much is costs to repair and how well it protects passengers from injury in a collision.

Belief: Insurance covers the current market value of my home should it be damaged.
Truth: Homes are insured for the cost to rebuild them, including debris removal, not their current market value. For this reason, it's important to adjust your policy if building costs have increased in your area, as it may cost more than your current coverage to rebuild should disaster occur.