What myths have you been told about insurance?
MYTHS: They are everywhere, from Bigfoot to hauntings and even insurance. Today we will show you and de-bunk those insurance myths. There are also some cost savers/discounts available, that you should ask your agent about!
1. Red Cars Cost More to Insure:
If you believe the owners of red cars drive more aggressively and get more speeding tickets, this would make sense. But there’s no data to back this up.
Honestly, it doesn’t matter whether the car is red or green or purple, insurance companies are not concerned about color and neither is law enforcement. Insurers look at behaviors, not appearance, we don’t profile people, and we don’t profile cars.
Insurance companies do care about the type of vehicle you drive, including the make, model, sticker price, engine size, and year. Is it popular with thieves? Is it more costly to repair? Does it have a good safety record?
There does appear to be a correlation between the vehicle model and the likelihood of a traffic ticket. A recent study by Quality Planning (a San Francisco-based analytic’s company that works with auto insurers) found that drivers of flashy cars are often more aggressive and therefore a greater risk.
Based on this study, drivers of the Mercedes-Benz SL-Class convertible are four times more likely to be cited for a moving violation than the average driver. Quality Planning’s list of Top Ten “Spirited Vehicles” includes Toyota’s Camry Solara Coupe, Scion’s TC Coupe, and the Hummer H2/H3 SUV.
Other factors that go into determining your premium: how many miles you drive each year, when you drive, where you drive, and if you’ve had any previous accidents. These days your credit history is also considered. Insurance companies say their data show people with a good credit history are less likely to file a claim.
2. Your Policy Covers YOU if You Drive the Car for Business
Personal auto insurance does not protect you if you are self-employed and using your vehicle for business purposes.
A lot of young people who take pizza delivery jobs don’t know this, for example, so if you’re not an employee of the pizza restaurant, you’re not covered by the company’s insurance policy. If you have an accident while making a delivery and you’re on your own. Your personal insurance will most likely deny any claims.
3. Your Rate is Locked in for the Duration of Your Policy.
Insurance companies won’t necessarily drop your rates unless you ask and stay involved. However, they will most likely go up if when you claim an accident that was your fault, generally at renewal time.
4. Car Insurance Companies Can Charge Whatever They Want
Every state regulates car insurance. Insurance companies are given a maximum limit on what can be charged.
5. My Car Insurance Rates Will be Similar to My Neighbor’s Rates.
Car insurance rates are individually determined by car to make, model, and year, your age, your driving record, state, and any additional policies you have with that insurance carrier.
Factors That Affect Your Auto Insurance Rate:
- Car Body type
- Cost to repair
- Engine size
- Likelihood of theft
- Overall safety record
- Sticker price
- Vehicle age
- Your age, driving record, and credit history
- Moving violations (speeding or reckless driving)
6. Your Insurance Policy Covers any Damage to Your Car
It doesn’t work that way.
Liability insurance (required in some states) covers you if you hurt someone or damage their property. Comprehensive and collision coverage protects your vehicle. That is why this is always optional coverage.
Note: It may be required by the lender if you have a lease or car loan.
If you want to fully protect your vehicle from all types of damage, you need to purchase both collision and comprehensive coverage.
But many people with older cars sometimes drop these coverage’s to save money.
If the vehicle is worth less than a thousand dollars or less than 10 times the insurance premium, purchasing this optional coverage may not be cost-effective.
Comprehensive pays for damage to your vehicle (including broken glass) caused by something other than a collision with another vehicle or object. This would include losses caused by fire, theft, vandalism, severe weather, flooding and falling objects (such as a tree limb), or hitting an animal.
Collision coverage pays for damage to your vehicle caused by a collision with another vehicle or object. It also covers damage caused by potholes or if your vehicle flips over. Your insurance company will reimburse you for the cost of repairs (minus the deductible) even if you are at fault for the accident. The National Association of Insurance Commissioners points out that this is relatively expensive coverage, more costly than comprehensive.
Insurance Cost Savers
Auto insurance companies usually offer a range of discounts. Here are some of the most popular ones to ask about:
- Anti-theft devices
- Auto/home package
- Driver education courses
- Good driver/renewal
- Good student
- Low mileage driver
- Military service
- Multiple vehicles
- Safety devices