Common Misconceptions about the Insurance Industry

While the insurance industry is complex much of the information one may find online is not always valuable information. Insurance has become a necessity to ensure the safety of your family and finances. It is essential to avoid unreliable and false information. At EFP, our team only works with the most reputable and financially stable carriers for the safety and advocacy of our clients. Thank you to our Senior Vice President, Louis Faiola for taking the time to bust a few myths about the insurance industry he has encountered over the years.

1. Insurance companies offer the same policies.

• Insurance is a product and quality will vary depending on the company you purchase said product from. Some insurance companies enhance coverage options in order to provide a better claims experience for their clients, while others prefer paying claims only when necessary. The experience a policy holder receives will vary by company.

2. It is ok to have a lapse in coverage.

• A lapse in coverage is NOT OK and can even be illegal in some states. Numerous insurance companies will not insure an individual who has had a lapse in coverage, limiting your overall options and potentially increasing your premiums for coverage in the future.

3. You can negotiate your insurance rates.

• Unfortunately, insurance rates are predetermined by many factors and are non-negotiable.

4. A little white lie will not affect your insurability.

• When filling out insurance applications, it’s incredibly important that you answer questions honestly and disclose all the information that the insurance provider requests. People will often attempt to conceal information from their insurance providers to save money on their premiums. A small lie or omission on your application could constitute an act of insurance fraud resulting in higher rates or loss of coverage. Dishonesty is seen as high-risk behavior. If you are issued a policy under false pretense and file a claim, your insurer has the right to deny your claim, cancel your policy, and even pursue legal action if a lie is uncovered.

5. Life Insurance Premiums rise as I get older.

• Life insurance premiums do cost more as you age, but that’s before you sign up to get a policy. If you purchase life insurance at age 30 it will not be as high if you purchase it at age 50. When you purchase the insurance does affect the premium.

6. No kids = No need for life insurance

• It’s common to hear discussions around life insurance focus on how it protects your family in the case of your unfortunate passing. So, if you are single, young, and without kids, do you need life insurance? In most situations if you are single, young, and without kids there is not a need for life insurance. However, two major reasons why you should consider purchasing life insurance is student loan debt and funeral costs. If parents co-sign your loan they are left with the financial burden. In 2020, the average cost of a funeral with basic service was between $7,000 – $12,000. That’s a debt you don’t want to impose on your loved ones.

7. I should buy life insurance for my children.

• For the most part, life insurance is a way to protect your family financially if you were to pass unexpectedly. If you wish to purchase life insurance for your children, it’s best to add them to your current policy rather than getting them one of their own. This is typically less expensive, and they will still have coverage.