photo credit: Blair Fraser

photo credit: Blair Fraser

Insurance policies can be complex, multi-page documents that many policyholders pay for but don’t always read thoroughly. It’s helpful to understand how your coverage works, beginning with these five common misconceptions.

Belief: My home insurance policy covers jewelry.
Truth: Most home insurance policies provide limited coverage for jewelry, but often only in the case of an accident or theft, and for a maximum amount. To protect the full value of the jewelry in your home, consider additional coverage.

Belief: If a friend borrows my car and gets into an accident, it goes on their insurance, not mine.
Truth: When you lend your car to a friend, you lend them your insurance as well. Any accidents that occur are covered based on your policy, so choose wisely when it comes to lending out your vehicle.

Belief: Where you live affects your home insurance rate only, not your auto insurance.
Truth: Each zip code has a risk profile that includes statistics for theft, accidents, burglary and natural disasters. These numbers, along with other factors, can make home and auto insurance vary from street to street.

Belief: Sports coupes are more expensive to insure than family sedans.
Truth: A car’s sportiness (or lack thereof) doesn’t determine how expensive a car is to insure. Key factors that do matter include whether it’s a model targeted by car thieves, how much it costs to repair and how well it protects passengers from injury in a collision.

Belief: Insurance covers the current market value of my home should it be damaged.
Truth: Homes are typically insured for the cost to rebuild them, not for their current market value. For this reason, it’s important to adjust your policy if building costs have increased in your area, as it may cost more than your current coverage to rebuild should a disaster occur.