Insurance Myths

Do you have clients that believe that reporting a claim to their insurer should be avoided if it is not serious?  As we all know, this is just not the case.  This is one of the insurance myths addressed in a series of two articles in Insurance Journal (see here & here).

An auto accident – a fender bender where one party paid cash on the spot to settle the claim – is used as an example of why not reporting a claim is a bad idea.  The author correctly points out that a subsequent, and late, claim for bodily injury might be declined by the insurer based on a failure to report the claim in a timely manner.  While this is a simple and obvious example, we still see this avoidance of claim reporting from commercial insureds from time to time, including professional liability insurance insureds (see a prior post here).

Other myths addressed in the article:

• I don’t have anything, so I don’t need insurance
• He is a 1099 employee, and therefore an independent contractor
• I only need Flood insurance if I am in a flood zone

Brought to you by MercatorPro.

 

Comments

[Tracy]

"I don’t have anything, so I don’t need insurance" <- That's a good one, who comes up with this stuff anyway??? Thanks for these articles!

[Devon]

Good article, I learn something every day. Thanks.

[Arizona Auto Insurance]

I would say the enough clients have seen their auto insurance rates increase after filing a claim that many are conditioned to try and avoid filing claims, when possible. At least it's a thought that crosses their mind.

[Rick]

Another common myth is that your homeowners insurance policy covers flooding...this is definitely not the case and has probably cost a lot of homeowners over the years.

[Cary White]

On August 26, 2009, the Supreme Court of California adopted Rule of Professional Conduct 3-410 which requires lawyers without professional liability insurance to provide written disclosure of their lack of coverage to all new clients and returning clients with new engagements at the time of the client’s engagement. This new rule goes into effect January 1, 2010. Meanwhile, a debate rages in Texas whether they should adopt a similar rule. During that debate, these myths and others are being propogated by well intenioned individuals fighting the new rules.

[Assurance]

These articles are very interesting. I work in an insurance company in France and these myths are exactly the same !

Thanks for this excellent blog.

[Big Bad Insurance Tsar]

There are tons of other myths out there too, like red cars cost more to insure. They're bogus and totally ridiculous. The flood insurance myth is the biggest, though, and probably the most harmful. Great article.

[Jason Withrow]

Very interesting --- I've seen many cases where clients are completely miss-informed and a need a lot of educating. Thanks for the nice articles!

[Steve Benedict]

That old saw about not turning in a claim has been going around since I was a kid and I'm 61 now. I think I heard it as " Don't turn in a claim or it'll raise your premiums." Some myths never die. It must be a generational thing.

[Insurance Paper]

Sump pump and sewer back-up riders are commonly missed on policies

[Life Insurance Broker]

Many new drivers think that putting their parents name on the policy and adding themselves as a named driver is a good way of keeping costs down. This is known as fronting and is actually illegal and can affect your cover.

Insurance can be really expensive for a new driver, so many think about insuring their car in a parent's name and adding themselves as a named driver - a practice known as 'fronting'.

A surprising number of people believe this is a simple way to bring down the price of insurance for a young motorist, but actually it is against the law. In fact, fronting invalidates an insurance agreement, so if you're in an accident then you could find yourself without cover.

[Chicago Auto Insurance]

If you want a surefire way to increase your premiums, send in a claim when you get in a fender bender. Happened to me first hand.

[Insurance Adjuster License]

It is generally believed that the insurance rates are increased after reporting an incident. But not reporting them can lead to a bigger loss. So even the minor things should be reported to avoid risking your policy.