Car Insurance Myths
Car insurance is complicated enough without rumors circulating about what colors raise premiums or if rentals are covered by your policy. But knowing what exactly can affect your rate and is covered by your policy is necessary to make an informed decision and fully protect yourself. With that, to follow are some common car insurance myths – debunked. And, when in doubt, you should always ask your agent or broker. They’ve heard it all before.
Myth: The color of your car affects your rates.
You’ve probably heard this one before you even knew how to drive. This widely common car insurance myth, which usually follows that red cars are more expensive to insure because their drivers are more likely to speed or be aggressive, is especially persistent – 1 in 4 drivers surveyed by Progressive believed the logic. But sorry to disappoint those drivers who diligently have been avoiding red cars – it’s simply not true. Insurers most likely won’t even ask you what color your car is when determining your rate. What they do want to know about your car is its make, model, body type, engine size, and age. They’ll also most likely factor in its sticker price, cost to repair, and vehicle rating as determined by the Insurance Services Office, which rates each vehicle based on its loss history – or how much is usually paid out in claims.
Myth: Your driving history is the only factor that determines your car insurance rate.
If you think the only factor that insurers care about is your driving record, think again. In addition to considering the make, model, age, and other characteristics of your car, your age, credit history, number of miles you drive annually, where you live, and, yes, your driving record all play a part in determining your rate. National and regional trends, such as increasing costs to repair vehicles, lawsuits, and rising hospital bills could also affect your premium.
Myth: Car insurance rates go down when you turn 25 and go up for older drivers.
According to the Progressive survey, 60% of respondents thought that rates go down drastically when a driver turns 25 – most likely because younger drivers typically have the most crashes. While age is a part of the equation, there are many other factors that go into determining your rate that have a greater influence than when you turn 25, such as your vehicle and claims history. Similarly, while older drivers are also more prone to accidents, other factors like vehicle type and driving record likely will have greater sway on the rate. Many older drivers may even quality for discounts. Drivers over 55 may qualify for a reduction up to 10% in auto insurance rates if they complete an accident prevention course, and retired drivers may be eligible for a 5% discount off their car insurance. Eligibility for both reductions depends on the state and insurance carrier.
Myth: Insurance covers any type of car damage.
Just because you have auto insurance doesn’t necessarily mean you’re protected from anything and everything that can happen to your car. Most standard car insurance policies only cover liability in the event you case damage to another car. But if your car is damaged from a collision with another vehicle, your insurance policy would only help you if you have collision coverage, which is optional. Likewise, if your car is damaged by anything other than a collision, such as hail, wind, fire, or flood, or is stolen or vandalized, that is only covered by comprehensive coverage, which also is optional. And don’t let the name fool you – comprehensive coverage doesn’t protect drivers in all situations. If you have mechanical problems unrelated to a crash, for example, it won’t cover the bill.
Myth: You’re automatically covered for rental cars and towing.
Another thing standard insurance policies, or even collision and comprehensive coverage, for that matter, don’t automatically cover are rental cars and towing. You often can buy additional riders to your policy if you want these covered.
Myth: You only need the minimum amount of auto liability insurance required by law.
It may be tempting to go with just your state’s minimum liability for bodily and property damage – it is cheaper – but it may not be enough to cover all your losses if you’re in an accident, especially if you have a lot of assets. The Insurance Information Institute recommends that you carry at least $100,000 of bodily injury protection per person and $300,000 per accident, which could be at least double or triple what your state minimum is.
Myth: Your car insurance protects you even if you use your car for business.
If you’re driving your truck around for your landscaping business and get into an accident, your personal auto insurance isn’t going to cover your damages. Rather, vehicles you use for business purposes need to be covered under a separate policy geared for business. These policies can be more costly, but it’s better than getting denied a claim.
Myth: If other people drive your car, their auto insurance covers them in the event of an accident.
The general rule of thumb is, the car insurance follows the car, not the driver. So if your friend gets into an accident while driving your car, you are responsible for paying any damages. The exact terms of this scenario differs by policy, though, so make sure you know what yours is before you loan out your vehicle.
Myth: Thieves are more likely to steal new cars.
This logic seems reasonable enough, but according to the National Insurance Crime Bureau, the most-stolen vehicles reported in 2009 were made in 1994, 1995, 1991, and 2004. They’re simply easier to steal and with people keeping their cars longer, it creates a market for used parts. So if your older vehicle is worth replacing if stolen, you’ll want to get comprehensive coverage.
Myth: Personal property inside your car is covered.
If your laptop is stolen along with your car or damaged in an accident, your auto insurance isn’t going to cover that loss. Your car insurance policy will only cover your car – not anything extra in it. There is hope, though – most homeowner’s and renter’s insurance policies do cover property damaged in or stolen from a vehicle.
Myth: No-fault insurance covers you no matter what.
No-fault insurance is widely misunderstood, with good reason – policies are only available in 12 states, and exact terms vary from state to state. Essentially, if you live in a no-fault state, it means that if you are in an accident, your insurer will pay for your damages up to your policy limits, regardless of who caused the accident, and the other driver’s insurer would do the same for him. Generally, this covers most injury-related expenses, such as medical bills and lost wages. Where it gets complicated is no state uses a pure no-fault system. Rather, no-fault states have both a no-fault and standard liability system in effect. That means that in some cases, you could be held financially responsible for the damage you cause.