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6 Common Insurance Myths Busted

A person typing on a laptop with a paper lying next to them that has the word ‘Insurance’ written on it with an umbrella printed above it.

When it comes to insurance, there are a lot of misconceptions and false information out there. Unfortunately, a lot of people believe these myths and don't take the proper precautions to adequately protect their families and themselves. To help you make informed decisions, we are busting the most common insurance myths here!

Myth #1: Insurance Companies Don't Pay Claims

Insurance companies are in the business of collecting premiums and paying claims. The insurance company will typically pay a claim if the policyholder has a valid claim and the claim complies with the terms of the policy. The prompt investigation and payment of legitimate claims is a fiduciary duty of insurance companies to their policyholders.

Insurance companies have to pay claims within a reasonable amount of time. The amount of time will vary by state, but in most states, the insurance company has to pay the claim within 30 to 60 days of receipt. The insurance company will investigate the claim to determine if it is covered under the policy, and if it is, the claim will be paid.

There are some cases in which an insurance company may not pay a claim. For example, if a policyholder is found to have committed fraud or made a false statement on the application, the insurance company may deny the claim. Additionally, if a policyholder fails to meet the policy's requirements, such as by not submitting all the required documents, the claim may be denied.

However, in general, insurance companies do pay claims. It is important for policyholders to understand their rights and responsibilities.

Myth #2: All Insurance Policies are the Same

This is a myth that is simply not true. All insurance policies are not the same. Insurance policies can differ significantly between insurers and even between different products within the same insurer. Different levels of coverage, exclusions, and cost structures are offered by various insurance policies. Furthermore, some policies might have particular riders or other clauses that are not present in other policies. As such, it is important to read through an insurance policy before purchasing it to ensure that it meets your needs.

For example, a car insurance policy and a health insurance policy offer different coverage. A car insurance policy typically provides coverage for damages to your car, medical bills if you are injured in an accident, and liability protection if you are found at fault for the accident. On the other hand, a health insurance plan frequently covers hospital stays, doctor visits, prescription medications, and other medical services. The scope and cost of each policy also vary, so it’s important to compare different policies before deciding which one is right for you.

Myth #3: It's Cheaper to Go Without Insurance

Going without health insurance can be incredibly expensive. Even if you don't have any pre-existing health conditions, if you don't have health insurance, you are responsible for the full cost of any medical care you receive. This could include hospital stays, emergency room visits, specialist appointments, and medications. Depending on the treatment, the cost could be thousands of dollars!

For example, the average cost of a three-day hospital stay is $30,000. Without insurance, you would be responsible for the entire cost. Even if you have a health savings account, the amount you could save in it would not cover the full cost of a hospital stay. Additionally, you could end up with a large medical debt that can take years to pay off.

Myth #4: You Don't Need Insurance if You're Healthy

Even if you are healthy, it is important to have health insurance in order to protect yourself against unexpected medical expenses. Health insurance can help pay for routine medical care, such as check-ups, vaccinations, and screenings, as well as more serious health issues, such as emergency room visits or hospital stays. It can also help cover the cost of prescription medications.

Having health insurance is especially important as medical costs continue to rise. Without insurance, you may be responsible for paying for all of your medical care out of pocket, which could be financially devastating. Additionally, health insurance can help you access preventive care, which can help you stay healthy and catch any potential health issues before they become more serious.

Home Insurance Policy papers, a notepad, 2 pens and a laptop placed on a table alongside a glass of water and a potted plant.

Myth #5: You Don't Need Insurance if You Have Savings

Insurance provides protection against financial losses that could otherwise devastate your savings.

For example, if you are in an accident and need to repair your vehicle, insurance can provide coverage for the cost of the repairs. If you don't have insurance, then you would need to use your savings to cover the cost. This might reduce the amount of money you have set aside for unforeseen costs or other emergencies.

Likewise, if you get sick and need medical treatments, insurance can cover the cost of your medical bills. Without insurance, you would need to use your savings to pay for the treatments, which could quickly deplete your savings.

A natural disaster is one instance where insurance can provide financial security against specific occurrences that you might not be able to plan for or anticipate. In these cases, you may not have enough savings to cover the cost of repairing your property. Insurance can provide coverage for these events and help protect your savings.

Overall, having savings is important, but it is not a substitute for insurance. Insurance can provide financial protection in situations where your savings may not be enough.

Myth #6: Insurance is Too Expensive

Insurance costs may vary depending on the type of coverage and the amount of coverage you need, but overall, insurance is actually quite affordable. It is important to remember that the cost of insurance is far less than the cost of being uninsured. Without insurance, a person might be responsible for footing the bill for any ensuing medical costs, auto repairs, or damages, which could be a lot more expensive than the cost of insurance.

It is also important to remember that insurance does not just protect you from financial loss, but also from potential legal issues. For example, if you are responsible for causing an accident, insurance can help protect you from liability. Insurance can also protect your family from financial hardship if something happens to you.

The cost of insurance is a personal decision and depends on your individual needs and budget. Shopping around for the best price and coverage is important for finding the most cost-effective policy. Ultimately, insurance can be an affordable way to protect yourself, your family, and your assets.

Insurance is an important part of financial planning and should not be taken lightly. Now that you know the truth behind some of the most common myths, you can make the right decisions. If you have any questions or would like to engage in an insurance plan, please contact Central Financial Group – Corporate today!

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