"Insurance is complicated; time and attention-spans are short. The insurance industry is a juggernaut, with nationwide net premiums of $1.2 trillion in 2017, according to the Insurance Information Institute. There are many types of coverage, including property and casualty, life, health, automobile, property, business and liability each with their own components and all with terminology that never makes for light reading. It’s understandable, then, that there’s some level of confusion among many of your customers. And this has led to certain myths and misunderstandings persisting. As an independent agent, it’s your job to dispel them so that your customers are crystal clear on their options and can make well-informed decisions to find optimal coverage. Here are six of the most common myths and misunderstandings so you’ll know what to address and some specific things to mention when suggesting policies.  

Myth #1: Car Insurance Follows the Person, Not the Car

One of the most pervasive car insurance myths is that insurance “follows the person” rather than the car. So if the legal owner of a car lest a friend or family member drive it and that person has an accident, some may think that the other person’s insurance would cover it. That’s simply not the case. As the Esurance team points out, auto insurance follows the vehicle and not the driver. Therefore, the insurance provider of the legal car owner would be the one to handle the claim. An accident may therefore result in higher premiums even if the person who owns the car isn’t responsible. “Even though you weren’t driving, agreeing to loan the vehicle to someone who then crashes it makes you a higher risk,” insurance expert Adam Johnson writes. “This higher risk often translates into a higher car insurance premium.” The bottom line is that individuals should use caution when allowing others to operate their vehicle.  

Myth #2: A Vehicle’s Color Affects How Expensive It Is to Insure

A bright red sports car. That’s the answer most people give when asked what they think is the most expensive type of vehicle is to insure. Nearly half of all licensed drivers believe that red cars are the most costly to insure explains automotive and insurance writer Mark Vallet. The logic is that red vehicles are the most likely to be pulled over for speeding, thus making them bigger liabilities for insurance companies. But Vallet says insurers aren’t concerned with a vehicle’s color, and it won’t impact your premium. It’s not even a question that comes up on the insurance application, he adds. It is true, however, that red cars do get pulled over more than most other colors, car writer Scott Huntington notes. He references a study that found red came in second place to white. Still, there’s no direct correlation between color and policy cost. The only exception is when there’s a custom paint job because it may be considered as an additional custom part and equipment, Vallet explains. But even that won’t add all that much to a person’s premium. In other words, vehicle color isn’t something people should be concerned with, at least when it comes to buying car insurance.

Myth #3: Homeowners Insurance Covers Flooding

People tend to believe that homeowners insurance is incredibly robust and will pay for damages stemming from flooding. The fact is that standard homeowners insurance doesn’t cover it — even in flood-prone areas. The Federal Emergency Management Agency confirms this, directly stating on its site that only flood insurance reimburses a homeowner for flood damage to their property. It’s just not something that insurance companies provide. And it all boils to simple mathematics. “The reason insurance companies don’t cover flood damage is because the number of people who are willing to pay for the added coverage will not pay enough in premium to cover the amount of money they can expect to pay in claims,” Frank Addessi at The Simple Dollar writes. “That means they will lose money on the proposition, and they are not in business to lose money. The team at ValuePenguin elaborates saying that standard home insurance does cover water damage as long as it’s sudden and internal, meaning that the water never touched the ground outside. Some examples include burst pipes, accident overflow from a toilet or bathtub and faulty plumbing. With flooding as being the most common natural disaster, as Collin O’Mara, CEO of the National Wildlife Federation puts it, this is a misunderstanding that really needs to be cleared up. Independent agents cannot rely on the assumption that the general public is aware of the difference between flood insurance and standard homeowners insurance.  

Myth #4: Tenants Don’t Need Insurance

A landlord is responsible for keeping a property in a habitable condition says the FindLaw team. This includes ensuring that the house is structurally sound, the roof isn’t leaking and the electrical system is working properly. However, they don’t assume all responsibility, and some things are still up to the tenant. For instance, a landlord isn’t required to protect a tenant’s personal possessions from theft and wouldn’t generally be responsible if they lost them during a burglary.   That’s why renters insurance is a smart idea and makes sense for many people. In terms of the specifics, independent insurance agent directory Trusted Choice mentions that renters insurance covers a tenant if their possessions are stolen or destroyed in a fire or in the event that a visitor is injured and sues. Beyond that, it provides a tenant with compensation while they live somewhere else temporarily after their rented property becomes uninhabitable due to damage from a storm or fire. And with Insurance.com reporting the average cost of renters insurance is $17 per month in 2017, it’s certainly feasible for many people.

Myth #5: Childless Single People Don’t Need Life Insurance

Say that a person is unmarried and doesn’t have any children. Some would be inclined to think that life insurance is unnecessary because there will be no one left behind relying on their income. While they wouldn’t technically need life insurance, it’s still a good idea to have it. Why? Someone will still have to pay for funeral costs as well as any leftover medical expenses or personal debts, says AXA Insurance Company. And these can be bigger than you might think. Senior advocate and author Jim T. Miller says that funeral costs alone are typically $11,000 or more. Combine that with medical expenses and personal debts, and it can put quite a financial strain on surviving family members. That’s why having life insurance is usually a good idea. Even a small policy between $10,000 and $25,000 should be enough to cover these expenses in most cases, writes Abby Hayes at financial management blog Dough Roller. It protects extended family members from having to go into debt.  

Myth #6: You Don’t Need Life Insurance When You’re Young

When a person is young and healthy, life insurance may not be a top priority. But the   Waddell & Reed financial advisor team explains that it’s still important to at least consider life insurance. No matter how good a person’s health may be at the moment, accidents and tragedy can unfortunately strike at any time. There are never any guarantees, but having life insurance ensures that their loved ones are taken care of financially. Plus, there’s a huge cost benefit to buying life insurance when a person is young — say in their 20s or 30s. To put it simply, younger equals cheaper, explains Kevin Mercadante, staff writer at Money Under 30. Because a person in this age demographic will generally be expected to live longer, it’s easier to find affordable life insurance. A comparison chart at PolicyGenius shows that a 30-year term average monthly premium for someone under 25 is $36.90 in 2018. That jumps to $320.20 for someone between 55-59.  

Clearing Up Common Misconceptions

Insurance can be complicated, and there’s plenty of room for confusion. That’s something that can be detrimental for independent agents because it can diminish trust, and customers may be reluctant to buy important coverage. In fact, simplicity is one of the features insurance customers look for today, innovation strategist Birgit Fien-Schmalzbauer reports. At the end of the day, they want to do business with agents who are transparent and make shopping for comprehensive insurance coverage as clear and streamlined as possible.   Images by: Cathy Yeulet/©123RF.com, Anna Bizon/©123RF.com, Cathy Yeulet/©123RF.com"