Shocking Insurance Mistakes You’re Probably Making!

Shocking Insurance Mistakes You’re Probably Making — and How to Fix Them Before It’s Too Late

When it comes to insurance, the biggest mistakes are often the ones you don’t realize you’re making. Every day, homeowners, drivers, and small business owners across California put their financial security at risk — not because they’re reckless, but because they assume their coverage is enough.

In a recent episode of Insurance Hour, host Karl Susman tackled some of the most common — and costly — misconceptions people have about their insurance policies. Through listener questions ranging from home-based business coverage to cyber liability, Susman highlighted one simple truth: understanding your policy is your best defense against financial disaster.

This article breaks down the top insurance mistakes revealed during the show — and what you can do right now to avoid them.

1. Mistake #1: Using Personal Auto Insurance for Business Purposes

One listener from Santa Clarita called in to ask if he could simply add his plumbing business van to his personal auto policy to “keep things simple.”

Susman’s response was clear: “This is a true commercial exposure.”

A personal auto policy is designed to cover everyday driving — errands, commuting, and family use — not vehicles used for income-generating activities. Once your car becomes a work vehicle, it moves into a different risk category altogether.

Why it matters:
If you’re in an accident while driving for business, your personal insurer can legally deny the claim. That means you could be left paying for medical costs, repairs, or liability lawsuits out of pocket.

The fix:

Ask your agent about a commercial auto policy specifically for business vehicles.
If you occasionally use your personal car for work (e.g., site visits, deliveries), make sure your personal policy includes a “business use” endorsement.
Keep records showing which vehicle is used for business and how often — it can save you later in a claims dispute.

2. Mistake #2: Assuming Your Homeowners Policy Covers a Home-Based Business

A listener from Daly City runs a boutique from her home and wanted to know if her homeowner’s policy would protect her inventory and liabilities.

Susman didn’t mince words:

“This is not the coverage you’re looking for.”

Homeowners insurance is meant to protect your personal property, not your business operations. Once you start selling goods or services — especially if clients visit your home — your risks multiply. You could face liability if a customer trips on your front step, or lose thousands if a fire destroys your stock.

The fix:

Ask your insurer if they offer a home-based business endorsement that extends coverage to limited business operations.
If your business is growing or involves customer interaction, consider a home business policy or full commercial general liability policy.
Be transparent with your agent. Misrepresenting your home’s use could void your entire policy.

As Susman put it, “What you don’t want is to build your business, do well, and have it all go down the drain because of one uncovered loss.”

3. Mistake #3: Misunderstanding the California FAIR Plan

Another caller wanted to know whether the California FAIR Plan should be added to their existing homeowner’s coverage as wildfire risk increases.

Susman explained that the FAIR Plan isn’t something you “add” — it’s a last-resort fire policy for homeowners who can’t get coverage from private insurers.

“You’d have the FAIR Plan, and then you’d add other policies to supplement it.”

The FAIR Plan covers fire and smoke damage only — not theft, water, or liability. To get full protection, homeowners must purchase a separate Difference in Conditions (DIC) policy for everything else.

Why it matters:
With private insurers pulling back from California’s wildfire zones, many homeowners are turning to the FAIR Plan without realizing its limitations.

The fix:

Use the FAIR Plan only when no private carrier will write your home.
Pair it with a DIC policy for comprehensive protection.
Re-shop your coverage regularly — private options may return as market reforms take effect.

Susman also noted that other states like Colorado are now creating similar programs as wildfire risks spread beyond California.

4. Mistake #4: Confusing Condo Insurance with Homeowners Insurance

A caller from Oceanside asked how condo insurance differs from a standard homeowners policy — a surprisingly common question.

Susman explained that condominium coverage works “walls in.” The building’s master policy, managed by the HOA, covers the main structure and shared areas, but not the interiors of individual units.

“If you take the roof off your condo and shake it — whatever falls out is your responsibility.”

What condo owners often miss:

Walls-in coverage: This covers fixtures like cabinets, flooring, and appliances.
Personal property: Covers movable items like furniture or clothing.
Sub-limits: Jewelry, art, or collectibles often have low built-in limits unless you schedule them separately.

The fix:
Review your HOA’s master policy and match your condo policy to fill any gaps. Confirm whether the HOA covers interior finishes — if not, increase your “building property” limit accordingly.

5. Mistake #5: Dropping Collision Coverage Too Soon

Another caller from Sacramento wanted to save money by removing collision coverage from her aging pickup truck.

Susman’s answer: it depends on your tolerance for risk.

Collision coverage pays for repairs to your vehicle after an accident. If your car’s market value is very low, keeping this coverage may not make sense — but dropping it too soon could leave you stranded with no replacement funds.

The fix:

Compare your annual collision premium to your car’s value.
If premiums equal your car’s value after 3–4 years, consider dropping it.
Set aside a “self-insurance fund” to cover future repairs or replacement.

As Susman put it:

“There’s no one-size-fits-all answer. Ask yourself — if I lost this car tomorrow, could I afford to replace it?”

6. Mistake #6: Ignoring Cyber and Identity Theft Insurance

In today’s digital world, cyber threats aren’t just for big corporations. A caller from Elk Grove asked about cyber insurance for individuals — and Susman’s advice was straightforward: “You want some type of cyber protection. You really do.”

Cyber insurance isn’t standardized, which means policies vary widely. Some focus on identity theft restoration, others on fraud recovery or data breaches.

The fix:

Look for coverage that includes identity recovery services and fraud monitoring.
Verify limits and triggers — some policies only activate after a proven financial loss.
Always read the fine print — not all “cyber” add-ons are equal.

Susman also reminded listeners to stay vigilant: “It might look like an email from your bank or Aunt Beth — that doesn’t mean it is.”

7. Mistake #7: Believing You’re Fully Covered Without an Umbrella Policy

A listener from Oxnard asked whether it’s worth getting an umbrella insurance policy for additional protection beyond her home and auto coverage.

Susman’s answer: if you own property or have assets, it’s absolutely worth considering.

Umbrella insurance provides extra liability coverage, typically starting at $1 million, that kicks in after your primary policy limits are exhausted. It won’t replace your home or car, but it can protect you from lawsuits that could otherwise drain your savings.

“People like to sue,” Susman said frankly. “Losses that were small 50 years ago are now huge — and umbrella claims are paying out limits more often than ever.”

The fix:

If you own a home, multiple cars, or have savings, add an umbrella policy.
Coordinate limits — most insurers require minimum liability thresholds on underlying policies.
Review your coverage annually as your assets grow.

8. The Biggest Mistake of All: Not Asking Questions

Perhaps the most important takeaway from Susman’s show wasn’t about any specific coverage — it was about communication.

“I do the best I can to give you the right answers,” he told listeners, “but if you hear something that doesn’t sound right — ask. There’s no ego here. My goal is to get you the right information.”

That mindset is what separates the well-protected from the financially vulnerable. Insurance policies are complex, and no two are exactly alike. Asking questions — and getting professional guidance — is the best way to avoid hidden gaps and nasty surprises when you file a claim.

Final Thoughts

Insurance isn’t just about having a policy — it’s about having the right policy for your unique risks. Whether you’re running a home business, protecting your condo, or thinking about dropping coverage on an older car, every decision carries consequences.

Karl Susman’s recurring advice throughout Insurance Hour rings true across all scenarios:

“Be educated. Know what you have, what you don’t have, and what you need before you need it.”

If you’re unsure about your current coverage, now’s the time to act. Review your policies, talk to a trusted broker, and don’t assume you’re protected — verify it.

Because in the world of insurance, what you don’t know really can hurt you.

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