Auto insurance is a requirement for all US drivers, and as such it is an unavoidable expense in millions of homes throughout the nation. It is only natural then, that people spend a lot of time thinking about this topic, and wondering what they can do to lower their auto insurance premiums. That’s great and often results in some truly smart, safety-conscious decisions. However, just as often people may make faulty assumptions about what is affecting their auto insurance cost and behave in ways that at best don’t make much sense, and at worst are detrimental to them. In the following article we will set you straight about some of the most common auto insurance myths.
The Myth: The color of your car impacts your rates
The Facts: The color of your car can impact a whole range of other driving-related circumstance, but has no effect on your auto insurance rates. A flashy colored car will make you stand out more, and may attract positive and negative attention on the road. If your car is perceived as an “aggressive” color, then there is a chance that you will be the victim of an increased number of speeding tickets, and in turn you may subconsciously adjust your own driving in such a way that you truly are driving faster and being more aggressive. By contrast a “cooler” color may cause other drivers to perceive you as less threatening and you may find yourself mellowing out in response. However, your auto insurance rates are based purely on the numbers and facts, so unless your car’s color has had an impact on your driving and safety record, it won’t by itself impact your rates.
The Myth: The state minimum requirement is all you need.
The Facts: While it is legally correct that the state minimum in auto insurance is all that is required, it is often a mistake for drivers to believe that the minimum is all they need in practical terms. The minimum will protect you from legal action, but it may not be sufficient to protect against the financial loss that could be incurred as a result of the destruction of your car, or even against significant damage to it. Instead it is important to look at the bigger picture and determine based on your unique situation whether or not you need additional coverage.
The Myth: New cars always cost more to insure
The Facts: A new car that is the same make and model as an older car, both being driven by drivers with nearly identical driving records and in the same geographic area, probably will cost more than the older version. However, rarely does the age of the car alone tell the whole story. Certain makes and models are quite a bit more expensive to insure than others and older versions of these models stand a good chance of being more expensive to insure than a newer model of a more economical car. The driver’s own personal driving record and geographic location will also play a big role in determining rates. Naturally a final important consideration is the type of coverage being purchased.
The Myth: Rates rise with age and older drivers always pay more
The Facts: While statistically senior citizens are involved in more car accidents than the middle aged, and thus their rates are often higher, this again does not tell the whole story. Personal driving records are still very important, as is the type of car being insured and the coverage type. Most seniors will also not see a sharp rise in insurance cost until they over age 70, and statistically even until age 85 seniors are less likely to be involved in car accidents than teenage drivers. Thus, experience matters and in many cases the oldest drivers are still paying less than the youngest drivers. Another factor that can impact rates is the amount of driving being done. Many insurance companies offer lower rates for drivers who drive only a limited amount of miles, as is the case for many elderly people. There are additional savings to be reaped from safety courses and other senior specific discounts.
The Myth: You need to buy separate coverage for a rental car
The Facts: It is more important to take your individual insurance coverage into consideration when deciding on whether or not to buy separate coverage for a rental car than it is to use a black and white rule of thumb. Check with your regular auto insurance provider and inquire about how the policy extends to rental cars. In most cases drivers are paying for the rental car with a credit card and many credit card companies also offer perks such as additional coverage on rentals, so make sure that you check with your credit card company as well. Remember that your regular health insurance will typically protect you against personal injury, and your homeowners policy may protect your personal belongings in the car. Thus, before you buy separate insurance on the rental car, make sure you factor in your own individual overall insurance coverage.
The Myth: Rates always rise after any claim
The Facts: It is certainly true that your driving record will heavily influence your rates. Thus, accidents and other claims are typically detrimental to the cost of your coverage. However, as always there are other factors which can come into play. For instance if you have a relatively clean driving record, your insurance company may ‘forgive’ a claim and not penalize you for it. The severity of the claim, and thus the cost to the insurance company, will also play a big role in whether or not you see a rate increase. Finally, it will depend heavily on the circumstances of the incident and whether or not you or at fault.
The Myth: Your regular policy covers you if you drive the car for business
The Facts: Unfortunately this is very often not the case. This myth leads many drivers to mistakenly believe that if they are using their regular car for business purposes that they will be covered under their regular policy. However, many personal auto insurance policies have exclusions on incidents that occur while the vehicle is being use for business or commercial purposes. Thus it is very important to check with your insurance provider and determine what type of coverage is available to protect you in the event of an accident that occurs while you are performing professional duties.
The Myth: If someone else drives your car they are responsible for any accidents
The Facts: State laws vary, but typically it is the insurance of the person who owns the car that is primarily liable in the event of a claim. Typically the driver’s insurance will be liable if the owner of the car does not have insurance, but this is generally secondary. Thus when you lend your car to someone you are also in effect lending them your auto insurance.
The Myth: Your credit score doesn’t matter
The Facts: Many people are surprised to discover that their credit score can affect their auto insurance rates. On the surface it may seem like these two things are unrelated; however, in the eyes of insurance companies a good credit score is typically illustrative of responsible behavior, whereas a low credit score may be a red flag that the person is irresponsible or reckless in general. Thus getting a good rate on your insurance is just one more reason to keep your credit score in good standing.
The Myth: Comprehensive insurance covers everything
The Facts: Unfortunately this is not the case. Comprehensive coverage will go a long way toward protecting you, but there are usually still limitations and exclusions that may apply. For example costs associated with towing are not usually covered. Damage to personal belongs will also likely be excluded. If these additional risks of a concern then it is important to discuss them with your insurance agent so that he or she can make recommendations about ways to get them covered. In any case, you must carefully review your policy information so that you will know exactly what is and is not covered.
The Myth: Having kids doesn’t affect your car insurance needs
The Facts: While it is true that the birth of a new child won’t immediately and automatically affect your car insurance rates, it is still likely to have a secondary impact in terms of the changes it requires. For instance it is very common for parents to need to switch from a smaller, sporty vehicle into a larger, safer vehicle that allows them to protect their child while also transporting more people and things. This switch into a larger and safer vehicle will often have a positive effect on your rates and will lower them. However, new parents also need to consider their overall insurance coverage very carefully, and they may find that they need to add new coverage in certain areas for increased protection. Thus a new child may have a positive, or negative effect on your insurance rates depending on the situation, but either way there is a good chance that they will have an impact on insurance needs.
The above myths are so pervasive that there is a good chance you have not only heard many of them, but may have believed and perpetuated them yourself. We hope that you have found this article informative and educational and that it has given you some valuable new information to bear in mind when it comes to your auto insurance practices. As always the best, most personalized advice will typically come from your insurance agent and you should definitely confer with him or her before making any big changes.