All states require licensed drivers to carry auto insurance to legally drive. This is why it’s important to understand the factors that affect your policy costs and coverage. Unfortunately, there are a lot of myths out there that have been perpetuated as common knowledge for years. To help clear up some of the misconceptions, Kaufman Law has compiled a list of the most common auto insurance myths and the actual truth’s behind them:
Myth #1: Using “No Fault” Insurance Means I’m Not at Fault
No-Fault insurance is for medical bills not for property damage. While “No-Fault” insurance can vary from state to state it usually requires your insurance agency to pay medical expenses and lost wages for injuries due to a car accident, regardless of who is at fault. After the medical payout, the insurance companies will decide who is at fault for the accident and require the person at fault and their insurer to pay for property repairs and other damages. If you are the responsible party, then you will need to use your collision insurance to get your vehicle fixed and if the other party is at fault you will need to make a claim under their property damage liability coverage.
Myth #2: The Color of My Car Will Affect My Insurance Rate
There are some factors about your choice of car that can affect your insurance premium like the make, model, engine size, age, safety features, and how much it costs to repair or replace the vehicle, but the color does not affect the rate. It’s not a myth, however, that certain color cars get pulled over and ticketed more often. While red is the most commonly cited according to a recent study, it’s actually white cars that are the most commonly ticketed, followed by red, grey, and silver.
Myth #3: My Friend is Protected Under Their Own Insurance When Driving my Car
In most states, the auto insurance policy covering the car is considered the primary insurance for that vehicle. Auto insurance follows the car, not the driver. This means that the car’s owner is responsible for damages caused by an accident regardless of who is driving. Even if your friend has their own insurance policy, you will have to file a claim on your own policy, pay your deductible, and face an increase in your premium cost.
Myth #4: If I Get a Ticket my Car Insurance Rate Will Increase
While a ticket can cause an increase in your rates, it’s not guaranteed. If the ticket was for a minor infraction or your driving record is relatively clean, then you may not see an increase in your premium at all. Even if you are cited as being responsible for a minor accident, you may have auto insurance with accident forgiveness that can keep the premium cost from increasing. If the ticket does increase your premium, then it will not keep it higher forever. Tickets stay on your record an average of three years and accidents for five, but it depends on your insurance company.
Myth #5: My Personal Auto Insurance Covers Both Personal and Business Use of my Car
If you use your car primarily for business related purposes, especially if you are a rideshare driver, you will likely need to purchase supplemental coverage or a commercial auto policy to be covered properly. If you are just going to and from client meetings you may be covered under your traditional auto policy, but if this is a regular use of your vehicle then you may want to check with your insurance company to see if you need additional liability protection.
Myth #6: Insurance Rates Cost More as You Age
This is usually the opposite as drivers over the age of 55 are usually eligible for special discounts. If you are over 55 you can get reduced rates through AAA and AARP by completing a course on safe driving or accident prevention. There are also discounted rates available to people who are retired or not employed full time and are spending less time on the road. Driver discounts vary from state to state and insurer to insurer, so it’s always best to check with an insurance professional to see what rates you may qualify for. It’s also a common myth that men pay more than women and while this is partially true, after the age of 25 the rates are treated equally.
Myth #7: The More Expensive the Car, the More Expensive the Insurance Rate
When determining how much to charge someone for collision and comprehensive coverage, insurance companies will look at the “loss history” for that vehicle. Loss history is a combination of how many claims they have paid out on that vehicle make with how much it will cost to repair or replace it. An extensive loss history is why some mid-priced vehicles will have a higher insurance premium than more expensive vehicles.
Myth #8: Personal Belongings in Your Car Are Covered by Auto Insurance
What you are covered for depends on the type of coverage offered by your insurance policy. If your policy has comprehensive coverage it will cover fire, flooding, vandalism, and even theft of certain items like your stereo, winter tires, or seat covers, but personal property items like a laptop or cell phone would not be covered. While comprehensive car insurance does provide extremely valuable protections, towing, rental, and personal property coverages aren’t among them. These items will typically be covered under personal property insurance from your home or renters policy.
Myth #9 Your credit score has no effect on your insurance rate
Insurance companies look at what’s called a credit-based insurance score that is derived from your credit history. A good credit score helps to demonstrate how well a person manages their money and statistically is a good predictor of whether someone is more likely to file an auto insurance claim. This is why most insurance companies take this into consideration and why people with a low credit score may end up paying less for insurance.
Myth #10: My Insurance Company Can Change or Cancel my Policy at Any Time
Most states have regulations that prevent insurance companies from dropping drivers in the middle of your policy term. Unless the insurer has adequate grounds to drop you such as non-payment or fraud, then there is little to worry about. Also, if they want to make a change in your policy, they are required to inform you in advance through a call, text, email, or mail. This is why you should always make sure that they have your correct contact information including phone number, email, and mailing address.
Myth #11: Insurance Companies Will Pay the Remainder of a Loan if Your Car is Totaled
The purpose of auto insurance is to cover the “fair market value” of your car. The “fair market value” is determined by the original cost of your car subtracted by the value of depreciation. Unfortunately, in most cases, this amount is less than the remainder of the balance on a car loan and leave the owner responsible for the difference. Many insurance companies offer supplemental or gap coverage that covers the difference, but it’s usually not standard on most policies and it’s important to inquire about if you purchased your car using a loan.