Car insurance regulations and coverage are not the easiest to understand. It’s also true that, in some cases, insurance agents don’t always inform customers of the correct facts. Rather, they paint their insurance package more attractive than it sometimes actually is. Consequently, there is a lot of misinformation floating around, which can lead to issues for car owners who aren’t too familiar with what their policies actually cover.

Confusion about auto insurance can lead to financial stress for many people. It’s crucial to distinguish between myth and fact when it comes to your coverage. Those facts are covered in your insurance policy. This includes the terms and conditions of your car insurance – what is covered, what is not, what you pay for, and how your rate has been calculated.

Note: This article covers primarily personal car insurance. Click on this link for information about commercial and business car insurance.

Table of Contents

• Top Car Insurance Myths Debunked
  
• How to Avoid Falling for Car Insurance Myths
  
• Conclusion
  

Top Car Insurance Myths Debunked

• Myth 1: “Red Cars Cost More to Insure”

  A recent study found that 44 percent of Americans think owning a red car increases insurance premiums. This is simply not true. Whatever the color of your car, insurance companies do not consider this when determining your premium.

  Instead, they focus on things such as car make, model, body type, engine size, and the age of the vehicle, as well as the car’s sticker price, the cost to repair it, its overall safety record, and the likelihood of theft. Insurers also take into account the age, driving record, and sometimes most times the credit history of the driver. Essentially, all they care about is the risk of you being involved in an accident or filing a claim, which does not include the color of your car.

  This myth may stem from another myth about red cars, which is that it’s more likely that police will pull over a red car than any other color. There are no studies that have verified this myth. In fact, a 2016 study found that the models with the highest rates of traffic tickets were a mix of luxury and economy vehicles – not their color.

  Myth 2: “Older Drivers Pay More for Car Insurance”

  Actually, the opposite is true: older drivers typically can get better discounts. Retirees who are driving less also may be eligible for a car insurance discount. Some providers even have special offers for drivers over the age of 55. Young drivers are often considered a risk due to inexperience on the road and lack of a driving record, which usually accounts for a higher premium.

  Age is only one of the many factors that determine the amount you pay for your car insurance. Factors such as your driving record, how much you use the car, and the location of the car (high or low-risk area) are equally important. Add to that your gender (women typically tend to have fewer accidents), the make, model, and year of your car, your mileage, and the type of coverage you want, and your insurer will come up with a premium based on certain risk factors.

  Myth 3: “Your Credit Score Doesn’t Affect Your Car Insurance Rate”

  Car insurance, like any insurance, is calculated around risk. The risk factors involved (an old car, lots of earlier claims, a high accident record, or a ‘bad’ neighborhood) all determine the amount of risk the insurance company is willing to take on. The higher the risk, the higher the premiums.

  That said, one of the ways insurance companies can quantify risk level is by seeing how you have acted in the past, such as by checking your credit. A credit score may indicate how reliable and responsible a person is. A higher score could mean a lower rate, while a lower score could result in a higher premium. People with good credit often end up paying less for insurance.

  Generally, five different factors are used to determine your credit-based insurance score:

  • Payment history
  • Outstanding debt
  • Credit history length
  • Pursuit of new credit
  • Credit mix.

  Not all states allow the use of credit-based insurance scores in determining premiums. Some states only allow it as one factor for property insurance like auto and homeowners insurance. Other states allow it to be used with any type of insurance.

  When thinking of purchasing car insurance, it’s good practice to check your credit and see where it can be improved. This includes paying bills on time, resolving collections, and catching up with your credit cards.

  Myth 4: “Your Personal Belongings in the Car Are Covered”

  Common car insurance typically does not cover personal items stolen from or damaged in the car. Insurance against theft or damage to your personal belongings in your car is only possible with comprehensive coverage which covers damage caused by theft, vandalism, fire, falling objects, and natural disasters. Collision insurance covers physical damage to your car from an accident with another vehicle or fixed object, regardless of fault.

  Another solution to protect yourself from stolen or damaged property in your car is renters or homeowners insurance which generally covers your car as well. That means if someone smashes your car window and takes off with your belongings, it’s your homeowner’s insurance — not your auto insurance — that would pay to replace everything. The comprehensive coverage portion of your auto insurance would pay for the broken window and any other vehicular damage, but personal property theft is generally covered under your home or renters insurance policy.

  Therefore, to get full protection for your personal belongings in your car, it’s sensible to get homeowners insurance or, when you are renting, renters insurance.

  Myth 5: “Minimum Coverage Is Enough to Protect You”

  Minimum insurance coverage is to ensure you meet the state legal requirement to operate a motor vehicle on public roads and pay for damage or injuries to others when you are at fault in a crash. Most, if not all states, require a minimum amount of auto liability coverage.

  However, the question is: is this enough? Minimum liability means exactly that—minimum coverage. Meaning, you are likely to pay more out-of-pocket for losses incurred after an accident—and those costs may run pretty high.

  The insurance industry generally recommends a minimum of $100,000 of bodily injury protection per person and $300,000 per accident. This may seem enough, but any harm against you or your own car is not covered. Moreover, any legal costs resulting from the accident or injury are not covered either.

  It also depends on whether or not your car is financed or owned outright. Lenders and lease companies require minimum coverage, sometimes with higher liability coverage limits than your state’s minimum.

  We advise that purchasing comprehensive coverage for your car may be the safest decision. This is especially if you are frequently using your car for business, school, or other activities and your mileage is above the minimum, 

  Myth 6: “Comprehensive Insurance Covers Everything”

  Two types of insurance tend to be confused with one another: comprehensive and collision insurance. Both can be very important to help repair any damages that your vehicle sustains after being involved in an accident.

  Here’s the important difference between these two types of insurance: Collision insurance helps cover repairs after you collide with another vehicle or object such as a building . Comprehensive covers your vehicle after damage from a collision with an animal, including weather-related damage like wind and hail, theft, fires, and vandalism.

  Knowing this difference can help you decide whether it’s worth to have one or the other.

  In most cases when an insurance company, agent, or lender refers to full coverage auto insurance, they typically mean comprehensive and collision plus any other coverages required by your state. 

  Comprehensive insurance, then, does not cover anything and everything that can happen to you and your car. Meaning, it’s not blanket protection. It only covers the cost of damage to your vehicle when you’re involved in an accident that’s not caused by a collision.

  Depending on your car, your lease, or whether it is wholly owned, you may want to determine which is better for you: comprehensive, collision insurance or both. For example, if your car is 10 years old with some scratches and minor dents, you might reconsider the necessity of comprehensive insurance. If you don’t live in an area prone to hurricanes or earthquakes, collision insurance may be more important.

  Myth 7: “Insurance Follows the Driver, Not the Car”

  In most states, the auto insurance policy covering the car itself is considered the primary insurance. This means that the car owner’s insurance company must pay for damages caused by an accident, regardless of who is driving. Note that insurance and driving laws differ by state. So, make sure you understand the rules before allowing another person to drive your car.

  When renting a car, rental car insurance may include liability, which covers you for damages or injuries you cause while driving the rental. It will also include a loss/collision waiver, which releases you from responsibility for damage that occurs to the rental car. This includes theft and vandalism, as well as personal accident insurance, protecting against injuries to you and your passengers while driving a rental car. 

  If your own insurance already includes liability, comprehensive, and collision, you may not need rental car insurance though we recommend it as this protects your insurance policy as claims in most cases will not affect your insurability. Also, if you have homeowners or renters insurance, any personal belongings you keep in a rental car should be covered too, less your deductible.

How to Avoid Falling for Car Insurance Myths

1. Understand Your Coverage

Knowing the truth about how auto insurance works can provide you with a better understanding of your coverage plan. It allows you to comprehend the intricacies of what’s covered and what’s not, giving you peace of mind when you need it the most.

Understanding your own circumstances goes hand in hand with understanding your coverage: Is your coverage adequate for your needs? Do you need additional comprehensive and/or collision coverage? Review these questions to make sure you are well covered.A professionally licensed insurance agent can assist you with understanding the coverage on your insurance policy. 

2. Rate Fluctuations

Myths often lead people to believe that their rates will skyrocket for reasons that are untrue. When things are taken to be true that aren’t, it may scare drivers away from getting insured. So, understanding the real factors affecting your rates can help you make informed decisions about your coverage.

3. Importance of Insurance

The more people know about auto insurance and how it works, the better. At the end of the day, your insurance provider is there to protect you and your passengers if you’re ever involved in an accident.

Having the right information helps you appreciate the role of insurance in safeguarding your financial and physical well-being. Your insurance agent can help answer any questions you may have. Checking state regulations may be useful in questions of what is allowed and what isn’t.

Your car insurance company typically will give you all the information you need, and many online sources adequately answer questions without spreading myths.

Conclusion

Understanding the truth about car insurance can save you money, prevent misunderstandings, and ensure adequate coverage. Getting informed about the various types of car insurance, their requirements and benefits puts you in the know with regards to what you need to be adequately protected. Consult your insurance agent or car insurer to get your questions answered and ensure you have the right coverage.

QUESTIONS ABOUT YOUR CAR INSURANCE? CONSULT YOUR INSURANCE AGENT OR CAR INSURANCE COMPANY OR GET A QUOTE TO MAKE SURE YOU ARE WELL PROTECTED.