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12 Auto Insurance Myths Debunked

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Linsay ThomasGuest Blogger
October 30, 2016 · 1.2k Views

Auto insurance is mandatory in most states (Virginia and New Hampshire are the only exceptions). It’s an expensive necessity, considering that it can cost $1,000 or more per year to insure one car. Have a sports car or a bad driving record? Expect the cost to rise even more.

We may know in a nutshell that auto insurance protects you in the event of an accident, but how exactly does it work? The process of finding the right coverage can be so confusing. Why are the prices so different? What’s the difference between one type of coverage and the other?

Auto insurance can be a complicated and mysterious subject. Want to know the facts?

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Read on to debunk these 12 auto insurance myths!


1. Red cars cost more to insure.

red car

Source: Full HD Pictures

This myth likely was founded on the fact that many sports cars are red, and therefore have higher premiums. But the truth is that sports cars are more costly to insure, and it’s not based on the color at all. In fact, your insurance agent won’t even ask you the color of your car when you add it to your policy. Your premium is based on several factors, such as:

  • Your car’s make, model, age and engine size.

  • You car’s safety record, sticker price and popularity with thieves.

  • Your age.

  • Your credit history.

  • Your driving record.

The car’s color has no impact on insurance. So go ahead and get the car you want in your favorite color, whether it be red, black, yellow, blue, purple and maybe even plain white.

2. My rate won’t increase since the accident wasn’t my fault.

It doesn’t matter whose fault it was. If you were involved in an accident, you could still see your rates go up. However, if you caused the crash, your premium will go up even more.

3. I can use my car for business purposes.

domino's pizza delivery car

Source: News-Topic

If you drive your car for non-personal use – such as delivering pizzas or meeting with clients for your own business – your current insurance policy may not cover you in the event of an accident. You may need a separate business policy. Check with your agent to determine what is and what is not covered. You certainly don’t want to find out after an accident.  

4. It’s okay to let someone else drive my car, as long as they have insurance.

In most states, the responsibility lies with the owner of the car in the event of a crash. That means that if you let someone drive your car, you could be footing the bill for any damages if they’re not careful. Think about this before handing over the keys.

5. If I buy a new car, it will probably get stolen.

stolen car

Source: News Cronaca

Actually, thieves prefer older cars. They don’t typically have the security and anti-theft features that modern vehicles have, making them easier to steal. Plus, there’s a huge marker for older parts, which means easy money for thieves.

6. Smokers pay more.

There is no evidence that this is even remotely true. Insurance agents typically don’t ask whether or not you smoke, so this should have no effect on your premium.

 

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7. My credit score has nothing to do with my premium.

credit score

Source: GOBankingRates

Actually, many insurance companies will check your credit score when submitting a new application. The lower your score, the higher your premium will be. That’s because studies show that better drivers tend to have higher credit scores. This means if you’re late paying your bills, you should prepare to pay more for your premium.

8. Don’t report an accident and your premium will stay the same.

Your rates won’t go up if you don’t tell the insurance company about your accident, right? Wrong! There are ways for the insurance company to find out about your fender bender. If you hit another driver, he or she can file a claim with your insurance company. Plus, if the accident results in a driving violation, it will show up on your record. The insurance company will find out and bump up your rate.

9. My insurance will cover theft and damage from fire and weather conditions.

car flood damage

Source: The Spokesman-Review

It won’t if all you have is liability coverage – which is typically the minimum insurance requirement. Only comprehensive coverage will protect you if your car is stolen or damaged due to fire, hail and other acts of God.

10. If your car is totaled, your insurance company will automatically pay it off.

Your insurance company goes by the fair market value of the car, not the balance of the auto loan. So if your car is totaled and you owe $20,000, but the car is valued at only $18,000, you’re on the hook for the $2,000 difference. The only way your insurance company will pay this difference is if you have gap insurance, which would pay for any difference between the value and loan. This option is often available for newer cars, since they depreciate quickly.

11. Premiums increase with age.

old man driving

Source: Odyssey

This is not true. In fact, younger drivers tend to pay more than older ones due to a lack of experience. In addition, drivers age 55 or older can save up to 10% on their premium by taking an accident prevention course.

12. The best way to get a low rate is to choose one agent.

It’s a good idea to do some research and get quotes from a variety of companies instead of focusing on one agent from one company. There are comparison sites that can do the work for you or you can make the calls yourself, but don’t settle for the first quote you get.

 

Now that you know what your premium is based on, you can determine how to keep it as low as possible. You’ll also know what to expect in the event of an accident. Most importantly, you now know you won’t be penalized for driving a red car.


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linsaythomas profile picture
Linsay Thomas is a seasoned writer and editor who has written thousands of articles about topics such as saving money, healthcare, law, pets and education. She hails from California, where she lives with her husband, two children and a menagerie of pets. When she's not writing, she enjoys sports, breeding chocolate Labs and visiting the beach.

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