Since our first 5 Insurance Myths and Mistakes post was very popular and there are certainly more than 5 that we observe on daily basis, we decided to create a series and this is the second episode.
- If I don’t tell my agent I’ve had an accident within last 5 years, he or she won’t find out and I will have a lower insurance rate. Trust me, your agent will find out. They will run MVR (Motor Vehicle Registry) and CLUE (Comprehensive Loss Underwriting Exchange) Reports, which are mandatory, before they will be able to sell you car insurance. It will also help if you provide accurate information about your accidents and tickets, so that your agent can make sure that there are no other claims on your record by mistake. These can be disputed and removed from your record, which can potentially lower your rate.
- When I first receive a quote from an agent for my car insurance, this is how much I will pay. Let me ask you. How many questions did your agent ask before he went and quoted your car? The less questions asked, the lower probability that the quote will be accurate. And why is that? There are a lot of variables when creating a proper quote. Besides your name, address, date of birth and VIN of your car, the agent also needs to know how you use your car (commute, pleasure, business) and how far you drive (there is a low mileage discount), if there is anyone else driving it, what is the job and education of all the drivers (there is an education discount) and whether you had any claims within past 5 years. Now, your agent can (and will) find out about the claims, however, he or she may not run the report at first (because it costs money) before they are sure that you will buy the policy. However, if you’ve had claims, the quote will be highly inaccurate…Unfortunately, this is how some agents lure you in. They give you a low quote without running reports and when they have you interested, they run the report and voila…your rate is doubled and it’s hard to back out. You can be sure that at our agency we always run reports BEFORE we return a quote to you, in order to be sure that we are giving you the most accurate price!
- I’ve been with my insurance company for many years so I am sure they are rewarding my loyalty with the lowest rates possible. I wouldn’t be so sure. Let’s face it, the insurance companies are for-profit organizations. And although they sometimes reward loyalty with lower rates, it is not unheard of that you can get a better rate somewhere else for the same coverage and same or better service. That’s where an independent agent comes into play, who can provide you several comparative quotes for the same coverage and you can see whether switching makes sense. Don’t pay more than you have to in order to be properly covered!
- I should get coverage for the Actual Cash Value of my house or roof. The actual cash value (or ACV) is the cost of the minus the depreciation. But if you are rebuilding your house after it burned down for instance, or you have to replace your roof after a storm, regardless how old the house or roof were, you will have to purchase everything new and the price of materials and services constantly grows. Therefore, it is important to insure for the Replacement Value. Insurance agents can use Replacement Value calculators that help determine the replacement cost of your house based on materials used, as well as the replacement cost of your personal property inside (like furniture, fixtures, appliances, etc.). Your agent should always quote you replacement value.
- I don’t need earthquake insurance in Texas. This one is not as clear cut but I still wanted to address it. Some of you may remember the tremors in Irving in 2015 and heard many stories about how fracking is going to increase the incidents of earthquakes in our home state. Before you jump on the earthquake coverage, consider these aspects. Earthquake insurance can be added to your homeowners policy relatively easily, however, it will have a separate, usually quite a bit higher deductible. So, if your house sustains only a relatively low damage (cracked walls or broken dishes), your insurance won’t cover it. On the other hand, if your house fully collapses, after the deductible, you will be covered. Consider that wooden frame structures (most often used for residential buildings here in Texas) are not as prone to collapse as brick structures. For collapse to happen you usually need earthquake of a pretty strong magnitude (6.0-7.0 Richter scale), which is not unusual in California but Texas earthquakes have historically been only around 2-3 magnitude and nothing over 5.0 for the past 22 years (and that was by Mexican border south of Odessa). Discuss your policy with your agent in detail and evaluate whether you need to pay extra on your policy for this coverage when the probability of actually using is quite small. Consider flood insurance instead. Check out this handy Earthquake Tracker!
If you have believed any of these myths or made any of these insurance mistakes, don’t beat yourself up, you are not alone. But now you can do something about it. Call us at 972-584-1286 or email us so we can go over your risks and help cover you and your family better for the future!