12 Car Insurance Myths Debunked
We debunk 12 common car insurance myths about auto policies, coverage, discounts, and the many factors used to determine your insurance rates.
Car insurance is complicated. There are many different coverage types, different states can have very different requirements, and there is little transparency regarding the factors that affect insurance rates.
As is the case with any complicated topic, there is a lot of misinformation. This article will help drivers separate car insurance reality from fantasy.
1. Purchasing the minimum amount of coverage required by your state is enough.
Most states require liability insurance coverage of around 25/50/10. This translates to $25,000 for the bodily injuries of one person in the accident. $50,000 would be for the bodily injuries of everyone involved in the accident. $10,000 would be for damage you caused to the other driver's property (i.e. car).
While you might think that you are a good driver and opt for the minimum required amount of coverage, it is better to be safe than sorry. It is not difficult to cause an accident where the medical bills of an injured party far exceed your liability coverage limits. Since many states have not updated their minimum insurance requirements in decades, they have not kept pace with the rapid increase of health care in recent years.
Depending on your state, you may also have to purchase either no-fault or PIP (Personal Injury Protection) coverage. This will cover your medical bills after a car accident, no matter who was at fault. It is important to get more than the minimum required amount of this coverage as well, because car accident injuries can be costly, and you wouldn’t want to pay a hefty medical bill entirely out-of-pocket.
Bottom line: It might cost more to be adequately insured, but it’s worth it.
Being well protected is more affordable than you might think.
2. Full coverage will fully protect me if I get into an accident.
You purchased liability coverage, comprehensive and collision coverage, uninsured and underinsured motorist coverage, medical payments coverage, personal injury protection, and rental reimbursement, so you have full coverage, right?
Well, just because you purchase the main types of car insurance coverage, doesn’t automatically mean you that are fully covered. You need to make sure you know how to manage your premiums and deductibles. You also need to make sure that your coverage limits are high enough that your insurance will cover most of the damage resulting from an accident.
Having full coverage is half the puzzle. The other half is making sure you don’t just purchase the minimum coverage amount for each type of coverage. While this increases your rates, it decreases the out-of-pocket costs you will pay.
3. Anyone driving my car will be covered under my insurance policy.
It is a common misconception that your car will be covered for damages caused by whoever may be driving it. Some types of auto insurance policies cover the car, and others cover the driver. If you want to lend out your car worry free, then you must read further.
There are a few different steps you can take to ensure your car will be protected if you lend it out. For example, you can purchase comprehensive and collision coverage. This will protect your car no matter who is driving it at the time of the accident.
Say you lend your car to a friend, and they crash it. You would have to file a claim and pay the deductible, but your insurance will cover the car. Your friend’s insurance would only serve as extra coverage.
Of course, every insurer is different, so it is best to consult with them on how to go about insuring your car, regardless of who is driving it (as long as they have your permission).
4. I can use my car for business and my insurance will cover me.
If you work for a ride share program like Lyft or Uber, you probably drive your own personal car for business. Unfortunately, you may not be able to use personal car insurance—and might have to use your businesses coverage.
Lyft and Uber both provide their own auto insurance coverage to their drivers. However, the catch is that you must use personal insurance when you are driving on your own. When you are driving a customer, business insurance will take effect.
Research your company’s insurance policies to see if they provide business coverage. The company should be able to help you determine which type of coverage you need.
5. The age of your car affects your rates.
Many people are under the impression that newer cars are more expensive to insure, because their parts are costlier. However, at the same time they come with many safety features to prevent collisions, protect occupants, and prevent damage to the car.
There is also the misconception that older cars are more expensive to insure, because they are more prone to something going wrong.
The truth is, there isn’t one definitive answer as to how the age of your car affects your rates. Each insurance company uses a different pricing model to calculate a driver’s rates.
Click here compare quotes and get low rates regardless of the age of your vehicle.
6. The color of your car can raise your insurance rates.
One of the most enduring car insurance myths is that red cars are costlier to insure because they have an elevated risk of traffic citations.
Vehicle color is not used in setting car insurance premiums. And if it was, any difference in premiums based on color would be totally overwhelmed by factors like a vehicle’s safety features, its theft rate, and its dollar value.
7. Your credit history doesn’t affect the price of your premiums.
Your credit history (but not your credit score) can be a factor in your car insurance rates. Insurance carriers maintain that good credit is predictive of a lower risk of insurance claims and vice versa.
Some carriers use drivers’ credit history as part of their underwriting process; some carriers don’t. Additionally, if you live in California, Hawaii, or Massachusetts, using credit scores to determine rates has been banned.
8. All companies use the same criteria for determining your rates.
While many companies take into consideration much of the same information when determining your premiums—others don’t. The most significant and most common data that insurance carriers use to determine rates are: age, gender, vehicle, driving record, and geographic location. However, different companies will provide different rate quotes because they use different formulas to determine your premiums.
9. My insurance will cover me if someone breaks into my car or it gets damaged.
If someone breaks into your car and you don’t have comprehensive coverage, your car probably won’t be covered.
If you have purchased comprehensive coverage, it will protect you against car theft and people vandalizing your car. It will also protect against trees falling on your parked car, as well as flood, hail, or fire damage. Cracked windows might also be covered.
Just a heads up—many insurance companies will sell comprehensive coverage alongside collision coverage, in which case you may have to purchase both.
10. I am covered if a thief steals things from my car.
Personal items inside your car are covered by your homeowners or renters insurance policy, not your car insurance. Not even comprehensive insurance can help with this.
11. A speeding ticket or traffic violation will cause my rates to go up.
The truth is, your insurance company might never find out about your traffic ticket. This is especially the case if you received it after you purchased your insurance. Insurance companies usually ask for a record of your driving history when you purchase your policy. After that, unless you make changes to your policy, file a claim, or switch providers, your insurer won’t typically look at your driving record.
12. If I am with my insurance company for a long time, my rates will go down.
Being a loyal customer to your insurance company does mean getting loyalty discounts. However, that doesn’t mean you can’t compare rates from competitors.
It's a good idea to compare rates from different companies at least once per year. It’s the only way to know if you’re still getting the best deal.
FREQUENTLY ASKED QUESTIONS
Q: Is it really true that as you age, your car insurance will get more expensive?
A: This is partially false. After you turn 25, your car insurance premiums will go down, until you reach around 65 years of age. After that, your insurance rates can rise, but there are things you can do to mitigate this hike in your rates.
For example, if you are over 65, you should look into safe driving courses, which can help reduce your rates.
Q: Does rental car coverage protect me if I get into an accident in my rental car?
A: Actually, this coverage covers the cost of a rental car if you get into an accident in your own car, and need to rent a car while it’s in the shop. However, you must purchase comprehensive and collision coverage in order to use this coverage.
If you want to make sure your rental car is insured, you should consult with your insurance provider. In most cases, your liability, comprehensive, and collision coverage will extend to your rental car if it becomes damaged.
Check with your policy provider for more information.
Q: Do military personnel actually pay more for car insurance?
A: It might seem like people with high risk jobs would pay more for insurance. However, members of the military usually pay less. This is because they qualify for many car insurance discounts, across many different insurance companies.
If you previously served in the military or have family in the military, you might also qualify for discounts.
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