Common Insurance Myths Explained: Auto, Life, and Legal Truths

Published Date: 07/09/2024

As Insurance Hour wrapped up its final segment, host and insurance expert Karl Susman fielded some of the most unusual — yet surprisingly common — listener questions. From whether it’s legal to drive without car insurance, to what really happens when someone dies shortly after buying a life insurance policy, the discussion revealed how many misconceptions still surround everyday insurance.



In this final Q&A episode, Susman blended technical clarity with real-world experience and a strong sense of purpose, reminding listeners that behind every policy and premium is real protection for real people. Here are the most important lessons from the episode and what they mean for consumers.

Is It Legal to Not Have Auto Insurance?

One of the first listener questions challenged a common assumption:

“Is it legal to not have car insurance?”

The answer surprised many.

“Believe it or not,” Susman explained, “it is legal to not have auto insurance — depending on how you meet your state’s financial responsibility laws.”

Every U.S. state requires drivers to prove they can pay for damages they cause while driving. Most people meet that requirement by buying auto liability insurance, but technically, insurance itself is not always the only legal option.

How Financial Responsibility Laws Really Work

In several states, drivers can legally meet financial responsibility requirements by posting a bond or cash deposit with the state instead of purchasing an insurance policy.

Examples include:

• California: A $35,000 cash deposit with the DMV can replace an auto insurance policy.
• Florida: Drivers may qualify for a certificate of self-insurance with proof of sufficient assets.
• Texas: Drivers can post a surety bond backed by at least two property owners.

“You can post a bond, which is significantly less expensive than buying an insurance policy,” Susman said. “And you can satisfy the financial requirement of your state by having that bond.”

While legal, this option is rarely used.

“Is this done frequently? No. Is it sort of nerdy insurance trivia? Yes. But it can be done.”

Why Most Drivers Still Buy Auto Insurance

Even though posting a bond is legal in some states, it carries enormous personal financial risk.

If you cause an accident that exceeds the amount of your bond, you are personally responsible for the remaining damages. The bond protects the public, not you.

This is why most drivers still rely on traditional auto insurance, which typically includes:

• Liability coverage for injuries and property damage
• Uninsured and underinsured motorist protection
• Comprehensive and collision coverage for your own vehicle

“The law doesn’t mandate an insurance policy,” Susman said. “But it does require financial responsibility — and most people meet that requirement through an insurance company.”

Technically legal does not mean financially safe.

What Happens If You Die Soon After Buying Life Insurance?

Another listener posed a sensitive but important question:

“Can I purchase life insurance and die?”

Behind the awkward wording is a common concern: what happens if someone buys a life insurance policy and dies shortly afterward?

Susman explained that this is governed by the incontestability period, which is built into nearly every life insurance policy.

Understanding the Incontestability Clause

Most life insurance policies include a two-year incontestability period. During this time, the insurer can investigate the application if the insured dies to determine whether there was:

• Misrepresentation of health or medical history
• Undisclosed risky behaviors
• Fraud or material omissions
• Death related to illegal activity or suicide exclusions

Once the two-year period has passed, the insurer is legally required to pay valid claims as long as premiums were current — even if errors are later discovered in the application.

“Once that period of time passes,” Susman said, “it doesn’t matter if you lied about your age, your health, your sex — after two years, if you’re paying that premium, the company has to pay the death claim.”

This rule exists to balance fraud prevention with consumer protection.

A Real-Life Case Inside the Contestability Period

Susman shared a deeply personal story to illustrate how the incontestability clause works in practice.

He once wrote a life insurance policy for a woman who was tragically murdered by her partner just months after the policy was issued — well within the two-year contestability window.

“Her boyfriend came into her house with a shotgun, shot her, killed himself, and set the house on fire,” he said. “It was traumatic.”

Because the death occurred during the contestability period, the insurer initially reviewed the claim. Once official documentation confirmed the cause of death and ruled out fraud or self-harm by the insured, the claim was quickly paid.

“I had to show them a newspaper clipping that explained what happened,” Susman said. “Once they saw that, they released the funds, and I was able to give the check to the client’s daughter within a couple of days.”

That experience permanently shaped his belief in the real-world importance of life insurance.

“When you walk into a room where everyone is devastated — and you’re the one person who shows up with a check — it feels good to be able to help.”

The True Purpose of Life Insurance

Susman emphasized that life insurance is not about predicting tragedy. It is about creating financial stability when tragedy strikes.

Life insurance benefits can:

• Replace lost household income
• Pay off mortgages and debts
• Cover final medical and funeral expenses
• Provide long-term security for surviving family members

Many consumers focus only on premium costs, but Susman urges people to focus on whether their coverage is sufficient to fulfill those obligations.

“I do believe in life insurance,” he said. “Because I’ve been through that process of delivering a check. I know what it means to those families.”

Why Insurance Knowledge Matters More Than Ever

As the conversation turned reflective, Susman acknowledged that insurance isn’t flashy — but it has never been more important to understand.

“I know insurance is not necessarily the most sexy concept,” he said. “But it’s important that you understand what it is you’re getting, what to look for, and what the red flags are.”

With rising premiums, wildfire exposure, and regulatory changes across California, insurance decisions today are far more complex than they were even a decade ago.

“Things are more complicated than they used to be,” he added. “You just need to know more than you used to.”

That’s the foundation of Insurance Hour: education that empowers consumers to make better financial decisions.

Key Takeaways From the Final Q&A

• You don’t have to buy auto insurance in every state — but you must prove financial responsibility. Bonds and cash deposits are legal alternatives in some states but carry major personal risk.
• Life insurance policies include a two-year incontestability period. During this time, claims may be investigated for misrepresentation. After that, valid claims must be paid.
• Honesty on applications is essential. Misstatements during the contestability period can jeopardize your beneficiaries.
• Life insurance is about peace of mind, not speculation. It exists to protect families when income and stability are suddenly lost.
• Insurance literacy is financial power. The more you understand your policies, the better protected you are.

Final Thoughts: The Legacy of Insurance Hour

As the episode closed, Susman thanked listeners for their questions and encouraged them to stay engaged and informed.

He reminded his audience that even in an industry filled with confusing rules and rising costs, the fundamental mission of insurance remains unchanged — to help people recover after loss.

“If you have any questions, reach out,” he said. “We’ll get to your question — even if I have to start doing the show more often.”

In the end, Insurance Hour has always been about clarity over confusion, truth over assumption, and people over policies.

Because insurance may not be glamorous — but understanding it is one of the smartest financial decisions you can make.