What Are Some Common Insurance Myths Or Misconceptions That People Should Be Aware Of?
What if everything you thought you knew about insurance was wrong? Timothy Walters, licensed insurance agent and owner of The Walters Agency, tackles the most persistent myths that trip up consumers when shopping for coverage. We dive deep into why insurance agents ask so many detailed questions during applications, and it's not because they're being nosy. The real reason might surprise you and could save you from serious headaches down the road.
Credit scores and insurance premiums have a complex relationship that varies dramatically by state, and Timothy breaks down exactly how insurance companies use this information to assess risk. We explore the statistical reasoning behind credit-based insurance scoring and why companies rely on the law of large numbers rather than individual circumstances. The conversation also covers auto liability coverage, which remains one of the most misunderstood aspects of car insurance, and Timothy explains why smart drivers choose higher limits to protect both their neighbors and their own financial futures.
We also bust the old myth about red cars costing more to insure, revealing how modern insurance companies actually determine your auto premiums using sophisticated data analysis. From VIN numbers to safety features, discover what really matters when insurance companies calculate your rates. Whether you're shopping for homeowners, auto, or business insurance, understanding these facts will help you make better decisions about protecting what matters most. Subscribe for more insurance insights that cut through the confusion and help you stay properly protected.
To learn more about The Walters Agency visit:
https://www.brightway.com/agencies/tn/knoxville/0237/team
The Walters Agency
7009 Asheville Hwy
Knoxville, TN 37924
423-417-2070
Episode Transcript
Welcome to the Walters Agency Podcast, where
insurance meets peace of mind.
Hosted by licensed insuranceagent and owner, Timothy Walters
, we're here to help families,homeowners and small business
owners throughout East Tennesseeprotect what matters most Our
mission Creating win-win-winsolutions for insurance.
Speaker 2 (00:24):
Let's dive in what's fact and what's fiction in the
world of insurance.
Welcome back everybody.
Skip money here.
Co-host slash producer.
Back in the studio withlicensed insurance agent and
(00:44):
owner of the Walters agency,Timothy Walters.
Tim, how's it going?
Speaker 3 (00:49):
All right, how are you doing?
Skip.
Speaker 2 (00:50):
Doing just fine.
Doing fine In the market, as wewere discussing in the green
room for some homeownersinsurance, and so one of the
things that I wanted to asktoday was what are some common
insurance myths andmisconceptions that people
should be aware of?
What should I be aware of?
Speaker 3 (01:09):
I think in my experience as an agent on our
side of things, one of thebiggest misconceptions that a
lot of people have is thatdetails don't matter somehow.
I have a lot of people, I talkto a lot of people, I do a lot
of quotes for lots of differenttypes of insurance homeowners
(01:30):
insurance, auto insurance,business insurance, life
insurance.
We're pretty broad in what wedo here and what I've noticed is
a lot of people don't seem torealize that the details do
matter.
They matter a lot, and so whenan insurance agent is asking you
questions, it's not becausewe're nosy some of us are, but
(01:52):
that's not why and it's not toget to be oh gotcha, it's not a
gotcha thing.
It's literally, you know, forus to do our jobs correctly to
best represent the risk that youknow your homeowner's insurance
, your life insurance,represents to the companies that
we're going to be quoting youwith.
We have to ask questions and weneed honest answers Because I
(02:13):
promise you, there's a longprocess from when someone
contacts us as an agency to getquotes to the final issuance of
a policy, and part of thatprocess is the company does
underwriting investigationsafter we submit a policy to BIND
, and BIND means basically we'vetaken payment and sent the
(02:35):
policy to the carrier for finalconsideration.
So we ask a lot of questions onthe front end in order to make
sure that there's not an issueafter we submit a policy, where
the company does their owninvestigation and something
comes up that either wasn'tdisclosed to us or maybe even
the client didn't know about.
That happens sometimes.
So, yeah, details do matter.
(02:56):
If you're watching this andyou're talking to an insurance
agent, you're kind of debatingbecause we're giving you the
Spanish Inquisition treatment.
I know it seems like thatsometimes.
It's not because we just loveasking all these questions.
It's literally part of our joband to do our job effectively we
have to ask these questions andfor you, the clients, to get
the best insurance and have theleast aggravation after you
(03:19):
submit a policy, you know you doneed to answer those questions
honestly as best you can, and ifthere's things you don't know,
that's fine to say, hey, listen,I don't know, I'm not sure, and
we can try to find out usingother methods.
But I would say, yeah, thedetails absolutely do matter and
yes, that's number one, I'd sayPretty much across all lines of
business.
Speaker 2 (03:38):
Yeah, what about credit scores?
Does that really impactpremiums?
Speaker 3 (03:44):
It can, but depending on the state.
Some states have regulationsthat's forbidding insurance
companies from taking creditscores into account in the
underwriting process.
Most states do allow it to somedegree or another.
I would say credit score may ormay not directly affect your
insurance rate.
May or may not directly affectyour insurance rate.
(04:04):
I think what insurancecompanies really look at your
credit score is statisticallyspeaking and insurance companies
are all about the law of largenumbers, right?
Statistically speaking, somebodywith a lower credit score
probably has that credit scorebecause they've had something
happen in their life.
Maybe they went through a toughperiod of time, maybe, who
knows, maybe they have badhabits.
It might mean that they don'tpay their bills.
(04:25):
Let's just be honest Ininsurance companies, one of the
biggest causes of them losingmoney is writing policies and
that there is an expense towrite policies.
They have to staff.
They have their staffs that dothe underwriting, that do all
this stuff.
They have their overhead, theyhave their technology.
This is a business, so there isa cost to writing new policies.
(04:49):
Most companies, most insurancecompanies, don't see a profit on
a policy for at least the tillthe end of the second term
usually, and so if they'relooking at somebody who has good
credit score, that's reasonableto say, oh, this person
probably pays their bill,they're responsible.
Then you have somebody whomaybe has a lower credit score.
(05:09):
The law of large numbers saysthere's something has happened
in their past that maybe theyweren't great about paying their
bill.
And again, that doesn't meanthat they're that way now.
Maybe they're recovering.
I haven't always had the bestcredit score myself.
It doesn't make you a badperson.
It just means they're lookingat the statistics.
Like I said, they don't knowyou from Adam's house, kim.
(05:29):
They're looking at what theycan tell from the statistics,
the data that's available tothem, and they're gauging the
risk, the potentialprofitability, because, again,
this is a business Profit's nota bad word in America, or it
didn't used to be and companiesto stay in business, they have
to make more money than they payout in overhead in the case of
insurance companies and claimsand all that kind of stuff.
(05:50):
So yeah, absolutely, yourcredit score could potentially
affect your rates.
Different companies weighteddifferently, but yeah, no.
So yes and no, and a little bitin between, right, which is an
odd answer to give, but thereyou go.
Speaker 2 (06:04):
It's the case.
Are there common misconceptionsaround what auto liability
actually covers?
Speaker 3 (06:11):
Yeah, there's a lot of misconceptions about auto
liability.
A lot of people don't even knowwhat liability is and, like I
said, I didn't really understandit Until I got into this
business.
I was 30 years old.
I got into this business.
I just, you know I have to haveinsurance.
You know if I get pulled overso the cops don't harass me, but
you know liability at the endof the day is you taking
(06:33):
responsibility for damage youcause to other people.
So if me, tim Walters a prettygood driver most of the time,
but if I make a mistake drivingand accidentally run a red light
or a stop sign or turn intotraffic, thinking it was clear
and then I missed a vehicle atdusk right.
Accidents happen and God forbidI hurt somebody or kill somebody
(06:57):
or cause damage to their assets, their vehicles.
I this is me personally I wantto be in a position to where I
can try to make good on thoselosses.
So I carry basically the maxedout liability available with the
company that I use for my autoinsurance because I want to try
to be a good neighbor, I want totry to be a good citizen and
(07:18):
thank God I'm in a positionfinancially where I can afford
the premium because it's notsuper expensive for me.
I have a pretty good drivingrecord right now.
I could get it less expensiveif I cut some coverage back.
But again, I'm not immune tomaking mistakes and if I do make
a mistake that causes seriousdamage to somebody where they're
on the hook for hundreds ofthousands of dollars in medical
(07:39):
bills, I want to be able to takecare of that first and foremost
in my insurance and also Idon't want to have to be paying
that out of my own pocket,liquidating my assets to pay for
medical bills or funeral costsor lost wages, bereavement,
expensive vehicles, repair, allthat kind of stuff.
I mean that's to protect me aswell.
Liability, the way I look at it, is, first and foremost is to
(08:07):
protect my neighbors you knowthe people I'm out on the road
with and secondly is to protectme in my financial future.
Some people might flip that.
Some people will be like, hey,I want to protect me first and
foremost, which is perfectlyfine, perfectly reasonable, and
then they might.
You know, and also you knowthese yahoos that I cut off and
caused a massive accident,helped them out too.
I don't know, everybody looksat things differently, but
(08:28):
that's what liability is.
It is there to provide funds tomake whole people who you
damage or I damage, or the world, all these people out here
driving.
We're all capable of causingaccidents, accidents, and that's
what it's there for is toprotect the well-being, the
(08:48):
financial well-being, of thepeople who are damaged and to
protect you from having to paythat out of your own pocket.
So that's what it is in anutshell.
Speaker 2 (08:55):
In a nutshell.
Now, this is kind of crazybecause I've always heard this
is a myth or misconception thatI've heard about a lot of stuff.
I've always heard that if youdrive a red car, you're more
than likely to get pulled overfaster, but I've also heard that
red cars cost more to insure.
Is that true?
Speaker 3 (09:09):
Okay, so I think maybe a long time ago that could
have been true, I'm not sure.
Like I said, I came into thisbusiness when I was 30 years old
, back in 2012.
And I can tell you, none of thecompanies that I work with
currently, to my knowledge, careeven a little bit about what
color your car is.
They're going to ask for theVIN number, the mileage, that
(09:33):
kind of thing, because all thethings that they care about as
far as the vehicle is concernedcan usually be pulled from the
VIN.
They're concerned about safetyfeatures, they're concerned
about survivability, they'reconcerned about statistics on
how badly people are injured incar accidents with that
particular make and model, yourmake and model.
Okay, that's what they'reconcerned about.
(09:54):
Now, you know, I've heard thattoo.
I've heard oh yeah, if youdrive a red car, your insurance
can be more expensive.
That has never been myexperience Quoting auto
insurance for a long time now.
It could have been true in thepast because I know, back in the
old days, they had tables thatthey worked off of because,
frankly, you know, computers,you know, and internet and the
(10:14):
interconnectivity of data didn'texist.
So, yeah, they had to havebasically have tables they
worked off of to establish riskratings, but that's I don't
think that's true now.
Or if it is like somebody onthe internet, right?
Oh yeah, tim's wrong, becausethis one Insta and this weird
state, you know, in the middleof nowhere, they do that with
(10:34):
this in-state company.
Maybe they do that.
Okay, I'm not saying it'simpossible.
I'm just saying in all theyears I've been in insurance,
I've never seen that specificissues.
And in all the years I've beenin insurance, I've never seen
that specific issue.
Speaker 2 (10:46):
That's good.
I don't have a red car and Idon't want another.
I used to have a red car.
Speaker 3 (10:51):
I can't speak for the cops.
It could be true that the copsare going to see a red car
before they see my little beatertan Toyota creeping down the
road.
Speaker 2 (11:00):
Right.
Well, I wonder if it's aderivative of or a result of.
Back in the day, maybe a lot ofcars weren't red unless they
were a hot rod or had a bigengine in them.
Maybe I don't know.
Speaker 3 (11:13):
It's possible.
Like I said, it's entirelypossible.
That was a thing back in theday, I know the old way of
establishing rates was verydifferent from what it is now.
It's very specific these dayswith automobiles because, like I
said, companies are not goingto issue a policy unless they've
confirmed the VIN number.
They're just not because thatVIN number is the golden key to
(11:34):
all the or most of theinformation they want to
establish the rating on thatparticular vehicle.
Speaker 2 (11:40):
Gotcha, so don't worry about red, I'm not worried
, Wouldn't fuss about it.
Speaker 3 (11:44):
You know, if you like red, buy your red car you know,
I mean, first vehicle everbought is a Ford Ranger deep red
, that kind of burgundy red.
Speaker 2 (11:54):
Yep.
Speaker 3 (11:54):
Yep.
Speaker 2 (11:55):
That's a great car.
Yeah, I love Rangers too.
Tim, thanks so much for bustingsome myths open, wide open for
us and, as always, enlightening,and we'll see you next time on
the podcast.
Speaker 3 (12:07):
Sounds good.
Thank you, Skip.
Speaker 1 (12:13):
That's a wrap on this episode of the Walters agency
podcast.
Ready to find the rightcoverage for your home, business
or family, call or text.
4, 2, 3, 4, 1, 7, 2, 0, 7, 0for a free 20-minute
consultation.
Until next time, stay covered,stay protected and keep winning
(12:33):
with the Walters Agency.
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