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HOMEOWNER'S INSURANCE

Myth #1: The "replacement cost" provision in my homeowner's policy means that I would immediately be paid the cost of my damaged possessions.

Actual: Generally, replacement-cost coverage initially pays only the depreciated value -- reflecting the reduced value because of age or wear and tear - of your damaged possessions when you file your claim. In this case, you would have to come up with your own extra cash to buy new replacement items and do repairs. You then would have to file a supplemental claim, accompanied by a copy of the purchase receipt, to be reimbursed for your cash outlay.

Myth #2: The mold exclusion in my homeowner's policy means that I am financially responsible for taking care of any mold problems that develop.

Actual: If the mold stems from a covered event, your insurer is responsible for mold-remediation costs despite this mold-exclusion clause. If your insurance company tries this, pay a mold-remediation service a few hundred dollars to determine the age and source of your mold. If you can establish that the mold dates to the covered event, the insurance company should back down.

Myth #3: Replacement of only the damaged sections of my home is covered by my insurer.

Actual: If replacing the damaged section of the home creates a visible difference between the replaced section and the old section, the insurer must replace undamaged areas as well. This rule applies when there is a spot from which the undamaged section and the replaced section can be seen at the same time. If your insurer tries to dodge its responsibility to replace undamaged sections, write the adjuster a letter referencing the line-of-site rule. If they still have any doubts about replacing the undamaged areas, ask them to refer to the Fire, Casualty and Surety (FC&S) Bulletins. Adjusters will usually back down when policyholders cite this trade publication known by few outside the insurance industry.

 

AUTO INSURANCE

Myth #4: I have to live with the work that the repair shop does if my auto insurance requires me to take my vehicle to a specific shop.

Actual: Work done by a repair shop mandated by your auto insurance company's "Direct Repair Program" is automatically covered by your insurer. If you can show that the repairs were subpar or incomplete, you have the legal right to insist that they be redone.

Myth #5: When I lend my car to a friend, my coverage still applies.

Actual: It depends on the policy. Some insurers now provide coverage only to drivers specifically named on the policy, a practice called "named insured only." Make sure you read the terms of your insurance contract carefully before handing over your keys. Consider the driving skills of the person you're lending the car to, even if your coverage does extend to this driver - your insurance rates could be increased, even though you were not directly involved in the accident.

 

HOME AND AUTO INSURANCE

Myth #6: There's no harm in calling my insurer about a minor incident to find out if it's worth filing a claim.

Actual: Your insurance company will open a claim file as soon as you call the claims department, even if you don't pursue payment. More claim files typically mean higher premiums when it comes time to renew auto insurance, and homeowner's insurance providers sometimes cancel coverage when policyholders have multiple claim files. This can occur even if no payment is ever made on any claim. Do not contact your insurer unless it is likely that the cost of repairs will significantly exceed your deductible. Obtain a repair estimate first if you are not certain.

Myth #7: An "independent" insurance adjuster sent by my insurance company will be fair and non-partial.

Actual: An adjuster's job is to look out for the insurance company's bottom line. He/she will pretend to be your ally but will steer you toward options that save the insurer money, such as repairing damaged furniture rather than replacing it... or taking your damaged vehicle to a body shop that works cheap. This is true even if the adjuster is employed by an independent company — these independent agents know that they will lose the insurance company's business if they fail to keep claim costs down. If you believe an insurance adjuster is not being reasonable, consider hiring a public adjuster, an insurance claims specialist who represents policyholders in their negotiations with insurance companies.

Myth #8: I can cancel my insurance simply by not paying my renewal bill.

Actual: Insurance companies typically provide a grace period of about 30 days before terminating coverage when a bill is not paid. Policyholders are legally responsible for premiums charged during this grace period, even if they have no intention of continuing their coverage and already have obtained coverage through a different insurer. Not paying the resulting bill is likely to put a black mark on your credit report and trigger calls from bill collectors. It’s better to call and cancel an insurance policy that you no longer need, even if the policy has reached the end of a coverage period.

Posted 11:20 AM  View Comments

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