Auto Insurance

Myths About Car Insurance

 | 
January 21, 2021

There are plenty of myths about car insurance floating around that cause a lot of confusion. Don't go through life misunderstanding what your insurance does for you! Know the facts. We've compiled a list of ten of the most common myths about car insurance. Give them a read through, and the next time someone tells you that driving a red car will raise your rate, tell them the truth!

1. "No-fault insurance means it's never my fault!"

This varies state by state, but most often your car insurance company will pay for medical expenses and lost wages due to injury if you have no-fault insurance, regardless of who is at fault. However, just because you have no-fault insurance doesn't mean you're off the hook. Once the insurance company determines who is to blame, you will be responsible for repairs due to any damage since no-fault car insurance is only for medical bills, not for property damage. No-fault insurance exists because while it can take some time for the insurance companies to determine who is to blame (therefore figuring out who is responsible for paying for damages), you or another involved party might be in need of immediate medical care.

For example, if you end up determined "at fault" in a collision, then you would need collision insurance in order to have the damage to your vehicle covered. If another driver collided with you, then you would need to obtain their insurance information so you could file a claim to have your property fixed at their expense.

2. "The color of my car affects my insurance rate."

This is one of the most common myths about car insurance. Insurance companies determine rates based on how safe a vehicle is, and how much it costs to repair or replace that vehicle. The color of the car has nothing to do with that rate.

So there you go. If you drive a rare sports car with few safety features and you have a history of speeding tickets, then your insurance premium will probably be higher. But it's not because that sports car is red!

3. "My friend borrowed my car, so he's responsible for damages."

If your friend is driving your car and crashes it, your insurance will be on the hook to cover damages, not your friend's insurance. In general insurance follows the car, not the driver. Even if you're comfortable with that idea, keep in mind that unless you have accident forgiveness, one claim (such as the aforementioned car accident) will most likely make your insurance premium go up.

4. "My auto insurance company can cancel my policy at any time."

There are state regulations to prevent insurance companies from cancelling your policy in the middle of your term, unless they have adequate grounds to do so. If you haven't been paying your bill or have committed fraud, then you do risk your policy being cancelled. As long as your driver's license is valid and you've been paying your premiums on time, you shouldn't worry.

That said, the insurance company can choose not to renew your policy at the end of your term. One reason they may do that is if you have filed too many claims, meaning they've probably determined you too high of a risk to insure.

5. "A more expensive car costs more to insure."

There's a term in the insurance industry called "loss history." Let's say you buy a 2019 Ford Mustang. The car insurance determines your premium based on a few factors, including the history of how many claims they've paid on that specific model in the past. Its sales price doesn't determine the premium amount. It's more about how much it usually costs to repair or replace the car based on that history.

Because of that, some cars that are mid-priced might actually have higher insurance premiums than luxury cars if they have costlier claims, such as if the parts are difficult to get or cost more than average. If more people tend to crash Mustangs rather than Porsche Spyders, then the Mustang insurance might actually cost more.

6. "I got a ticket, so my car insurance rates will skyrocket."

This is not necessarily true. If it was a minor infraction (like an expired tag) and you have a generally clean record, your car insurance premium might not increase at all. You can also opt to have accident forgiveness insurance, meaning that your driving record is protected from your first at-fault accident, therefore preventing your premium from going up.

It's really dependent on what type of ticket you received. Check out this traffic ticket calculator (https://www.insurance.com/auto-insurance/traffic-ticket-calculator.aspx) to find out how much your premium will be affected by each particular traffic violation.

7. "I don't need comprehensive insurance for theft because my car is old and nobody wants to steal it."

Thieves don't only steal cars for a joyride. Many older popular cars like Hondas and Toyotas are stolen at a high rate because there's demand for their parts. The thief may steal it to take it apart and sell those parts.

8. "The laptop in my car would be covered by my auto policy if it's stolen."

Your auto insurance policy really only covers the car itself. Any of your personal belongings inside of the car actually fall under your personal property insurance, most likely from either your home or renter's insurance policy. If your laptop was stolen and you made a claim, the claim would still be subject to a deductible, depending on what kind of personal property policy you have. It's a good idea to keep any valuables with you instead of leaving them in your car.

9. "I just bought a new car, but I recently paid my insurance premium so I don't need a new policy."

If you purchased a new (or old) car, you still need a new policy for that car. You can simply add it onto your pre-existing policy if you're keeping the car you had before. But you still need to get in touch with your agent to let them know.

Depending on your policy, you may want to add the new car before you purchase it. It's a good idea to call or email your agent to double check before you make the purchase.

10. "My personal auto insurance covers my car if I use it for business."

If I use my personal car for business purposes, like making deliveries, any damages will not be covered by your personal auto insurance. There can be some gray area here, so it's best to describe your particular circumstances to your agent so they can give you more detailed information. However, in general, if you're using your personal car for business, you'll want to have it insured for business usage.

Let us help you compare quotes and find the best car insurance policy for your needs. We're always here for you to bust myths, and make sure you're insured so you can ride with your mind at ease.

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