There are plenty of myths around when it comes to money but do you know your money facts from your fiction?
Whether you’re buying a home, going on holiday, insuring your life or home, or just going about your daily financial business, you’re bound to have heard some myths about money. Here we look at some of the most popular tales and whether they are true or false.
1. Your address can be credit blacklisted
False. When you apply for credit, financial institutions look at your own personal credit history not that of your address. It can be affected by anyone you have a financial connection with though, such as a joint account. Lenders do like to see stability, though, so if you've recently moved they will want to know your previous address. Read more in Credit reports - facts and fictions.
2. Duel fuel energy is cheapest
False. Energy companies would like to convince us that taking both electricity and gas from the same supplier is always the best option but that’s not always the case. So when comparing energy tariffs, look at separate gas and electricity companies as well as duel fuel tariffs.
3. You could be charged double the advertised credit card APR
True. The European Consumer Credit Directive (CCD) which came into effect in February 2011 means that only 51% of successful applicants have to be offered the advertised rate. Credit card providers are free to offer the other 49% of applicants any rate they see fit.
4. Self-employed people can’t get mortgages
False. The credit crunch has certainly made it harder for the self-employed to get mortgages but it’s not impossible. These days all mortgage applicants need to prove their income and for the self-employed this means providing accounts going back a few years. Those that are newly self-employed who don’t have accounts may struggle to find a decent mortgage deal.
5. Your car insurance premium depends on your profession
True. Professional sports people, those working in entertainment and nightclubs, and, unfortunately for me, journalists, will see their insurance premiums hiked up. This is because insurance companies see some professions as higher risks than others. Those working in accountancy and admin are seen as a lot less risky.
However, your job is just one factor insurers look at; your age, the car you drive, your driving record and claims history matter a lot more. Read more in The secret to cheaper car insurance premiums.
6. Suicide isn’t covered on life insurance policies
False. Most life insurance policies do have suicide clauses, designed to stop people who already plan on taking their lives from taking out huge amount of cover which will help the families they leave behind. However, these clauses generally only exclude suicide claims for the first 12 months of a policy.
7. Overweight people get charged more for life insurance
True. The higher the risk of someone dying the more likely an insurance company will increase or “load” the client’s premium. To calculate the risk of dying insurers look at an applicant’s health and lifestyle as well as other factors. If someone is obese they may find their policy loaded, especially if they have other problems such as high blood pressure.
8. You don’t need travel insurance if you have an EHIC
False. An European Health Insurance Card or EHIC will entitle you to state medical help in an emergency in the EU, but that’s it. Unlike proper travel insurance, it won’t cover repatriation if you have to be rescued or flown home. Nor will it cover you for a cancelled holiday or loss of belongings or baggage. Read more in Remember this essential holiday item.
9. I’m too young to worry about a pension
False. The younger you start saving or retirement the better. If you start in your twenties you’ll need to put less aside each month than if you wait till your 30s or 40s. You’ll also have a bigger pot with which to buy an annuity when the time comes. Read more in Become a pensions expert in five days.
10. You don’t need life insurance unless you’re married or have children
True. The idea of life insurance is that if you died the insurance payout would stop your family from struggling financially. Therefore you only really need life insurance if you have dependents who rely on your income, such as a spouse or child. The footloose and fancy-free are better off buying income protection or critical illness insurance.
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