Will you be penalized for not having health insurance this year? Does your homeowner’s policy cover items that are stolen from your vehicle?
According to a new survey commissioned by insuranceQuotes, most Americans either do not know the answers to basic questions like these or are misinformed about them.
Designed to test consumer knowledge on health, home and auto insurance, the nationwide study exposed a lack of awareness surrounding everything from the basics of the Affordable Care Act, commonly known as Obamacare, to the nuances of what’s covered and not covered by a standard auto or home policy.
Just when you think any confusion over Obamacare is finally over, think again.
Survey findings revealed that a majority (60 percent) of Americans do not know that the Obamacare individual mandate and its penalties for dropping coverage are still in effect for 2018.
The respondents are not entirely misinformed. In late 2017, President Trump did sign a sweeping tax bill that repealed Obamacare’s tax penalty. What is incorrect is the belief that this change went into effect immediately. In actuality, it is effective starting 2019.
And for those who opted out thinking they wouldn’t get penalized, it was an expensive lesson. For 2017, the penalty was the greater of $695 per adult with a $2,085 family ceiling or 2.5 percent of household income and will be slightly more for 2018. In 2016, roughly 6 million opted out and paid the penalty according to the IRS which estimates similar figures for 2017.
Tobacco was another area of confusion. More than one-third (39 percent) of consumers do not know that health insurers are allowed to factor in tobacco use when determining their premium.
This may seem unfair, until you run the numbers. According to the Center for Disease Control and Prevention (CDC), cigarette smoking is the leading cause of preventable death in the United States and other studies show approximately 8 percent of all healthcare spending is due to tobacco-related illness.
Given the complexities of healthcare today, experts in the health care industry are not surprised so many Americans are unclear on the details of their health care coverage but believe this will change in the future.
“One of the responses we've seen from pharma/biotech manufacturers is an effort to help patients understand their coverage through patient programs that include support around access,” says Violet Beaumont, a health care consultant at a leading global life sciences advisory firm. “They know that their drugs can only help patients so long as they have access.”
The good news? Attempts at reducing consumer confusion are under way. As companies become more patient-centric they recognize the need for improved education in this area according to Beaumont.
Things aren’t always as they seem. This might explain why the survey revealed that a majority (62 percent) of Americans do not know that theft of items from a vehicle is covered by a standard homeowner's or renter's policy.
Scott Doctor, co-owner of Doctor & Doctor Insurance in Northridge, California, says it sounds logical that an auto policy covers everything that can possibly happen to your car, on your car, or in your car, but that’s simply not the case.
“The auto policy covers the vehicle, as it rolled off the assembly line, with no special equipment or add-on’s unless it’s added for an additional charge,” Doctor says. “And while your stereo built into the dash would be covered from theft under the auto policy, anything removable including your purse, laptop, cell phone, clothing, etc., would all fall under a home policy as ‘personal contents.’”
Doctor admits it can be confusing for consumers, particularly since everything in the car is removable — to an extent. That’s why he recommends consumers think of it as what is built into the car versus what you take in and out of the vehicle.
And if you don’t own a home to get your contents coverage? Doctor says not to worry.
“A renter’s policy offers the same personal property protection as a homeowner’s policy. Whether you have a home, condo or renter’s policy, that contents protection follows your 'stuff' wherever it goes in the world and not just while it’s in your home — such as in your car, on vacation or at the gym.”
Another common misconception with home insurance has to do with pests. Nearly half of consumers (46 percent) do not know that a standard homeowner's policy lacks coverage for damage caused by pests such as termites and rodents.
Doctor says while nearly every home insurance policy includes liability protection for things like dog bites, pests are an entirely different matter. A good general rule of thumb with home insurance is pets are covered, pests are not covered.
“Claims are always determined by a claims adjuster from your insurance company, so when in doubt, it never hurts to file a claim to see what can be covered should something occur. Keep in mind, your home deductible always applies so claims under that deductible amount would not be paid out from your carrier anyway.”
According to the findings, a majority (60 percent) of Americans do not know that women, on average, pay lower auto insurance premiums than men.
“The rates for car insurance may seem unfair but they are actually based on numerous variables and risk factors including gender, type of car, crash tests and cost of parts, home ZIP code etc.,” Doctor says. “The methodologies that insurers use to determine rates for gender is not dissimilar to how they’ve determined that teens cost more than their parents and seniors cost more than their kids.”
Doctor points out that those in any group which has more claims filed statistically across the country would see higher prices in their auto insurance, even if they have a clean record of no tickets or accidents themselves.
Another source of confusion has to do with liability. More than one-third (34 percent) of respondents do not know that their own auto insurance policy is responsible for paying if a friend gets into an accident with their vehicle — and of these individuals.
“Insurance always follows the car, not the driver,” Doctor adds. “The owner of the vehicle is responsible to maintain the minimum insurance protections required by law.”
Doctor says if a claim occurs, and the car owner’s insurance doesn’t pay enough to cover the loss, then the driver’s own insurance policy would step in to supplement things financially, up to the driver’s liability limits.
“All policies have restrictions on who can drive your car if someone is not a regular listed driver on your policy, and some companies can also pay out less for unlisted drivers who have a claim,” says Doctor, who adds that the most important thing to remember is it’s always best to alert your insurance company if unlisted policy drivers will be using a policy vehicle for one or more days.
And this also goes with the opposite scenario of you borrowing someone else’s car, or you grabbing a rental car or rental truck for the weekend.
“The worse time to find out about policy limitations is after a claim,” Doctor warns. “Before you go lending your car to your friend, you may want to ask about their driving record.”
Big picture when it comes to insurance
Ultimately, if a policyholder lacks a full understanding of their coverage, their pocketbook will more than likely pay the price.
When faced with an accident or property damage, it’s crucial for consumers to be both mentally and financially prepared for the costs involved — and remaining educated on the specifics of one’s policy, whether it be home, auto, health or life insurance, is key to avoiding any unfortunate surprises.
At the end of the day, it’s advised that consumers regularly shop around and evaluate their options to determine they’re getting the best possible deal. Reading the fine print and combing through the details when conducting research can make a world of difference, offering peace of mind and ensuring they have sufficient coverage before an unexpected circumstance arises.
This study was conducted for insuranceQuotes via telephone by SSRS. Interviews were conducted among a sample of 1,009 respondents from May 30 through June 3, 2018. The margin of error for total respondents is +/-3.69% at the 95 percent confidence level. All data are weighted to represent the adult U.S. population.
Jason Hargraves is the managing editor of insuranceQuotes.com — which publishes in-depth studies, data and analysis related to auto, home, health, life and business insurance—where he studies the insurance industry in order to direct and oversee the management of editorial content that provides trusted tips, advice and insights for consumers.
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