12 Most Common Car Insurance Myths and Facts
1. Are Red Cars More Expensive to Insure?
The color of your car has nothing to do with your insurance rate. Many factors affect your insurance quote but the idea that red cars are pricier to insure is completely false. The myth about red cars perhaps stems from the fact that many sports cars are red and they are more expensive to insure. However, it’s the car, not the color that determines the risk. A red car doesn’t determine risk but a sports car, driven by a person who most likely enjoys faster speeds, poses a bit of a risk. Go ahead, buy that red sedan you’ve been eyeing. It won’t raise the rate (compare rates here)!
2. Do You Only Need to Buy the State Minimum Insurance?
Most states require liability insurance at minimum. While you are only legally bound to buying the state minimum, it’s hard to say that the minimum is all you need. With the minimum, you cannot get in trouble with the authorities because you’re technically insured. However, state minimums prove to be insufficient in the event of a car accident. If the limits are too low and you cause property damage or, worse yet, bodily injury, the accident may end up being very costly. The higher the limits you elect, the less you’ll be exposed to the risk of paying for an accident out-of-pocket.
Keep in mind that when you buy the state minimum, that usually means liability only. Liability insurance will not cover your car if you are in an accident. It only pays for damages and injuries to the other party. If you want to avoid paying for repairs to your car after an accident, you should buy collision insurance. The same goes for stolen vehicles. Liability insurance will not take care of your losses if your car is stolen. You’ll need comprehensive coverage, which will cover the value of the car.
3. Do Women Pay More for Insurance?
Interestingly, men on average pay more for car insurance, so it’s a wonder where the stereotype of women as bad drivers stems from. Apparently insurance companies think men are more at risk for accidents. While on average men have been paying more for car insurance, it’s more accurate to say that in some states they overwhelmingly pay more and in some states women pay more. In January 2019, California banned insurance companies from using gender as a factor in determining car insurance rates. Other states seem to be moving in the same direction. For now, the pendulum is swinging unfavorably against males.
4. Will Safety Features Save Me Money on Car Insurance?
We all love a good discount. Paying less is great but sometimes you need to look at the big picture to see how much you’re actually paying. Some car insurers do offer discounts on safety features but because these safety features are costly to fix if you are involved in an accident, you’ll probably be paying more in collision coverage. In turn, the discount comes out in the wash! It makes sense too. Some of the new
5. Am I Covered with a Rental Car if I Have an Accident?
The myth is that insurance companies help you out if you’re in an accident, especially if it wasn’t your fault. That’s not always the case. First off, you’re usually always responsible for renting a car if the accident is your fault. If you’re not at fault, your claims adjuster will tell you about your coverage terms and limits based on the other driver’s policy coverage. If the other driver is at fault and doesn’t have insurance, it gets trickier. Basically, it’s best to have rental coverage on your policy in case it is your fault or if you have an accident with an uninsured motorist (another great coverage to consider to ensure coverage.).
6. Do Your Credit and Income Have Any Bearing on Car Insurance?
Unfortunately, there’s the myth that credit and income don’t affect car insurance rates. Even though “redlining” certain neighborhoods based on income and race is illegal, there are certain circumstances that are inextricable from income, like lower education levels and renting versus owning a home. You’re paying less for car insurance if you are a homeowner, and you can’t be a homeowner without any money. So, yes, your income does impact your car insurance rates. As for credit scores, many states use them. California is one state that has not used credit as a factor in determining rates. People with good credit usually have an economic advantage over those with lower credit scores.
7. If Your Car Is Stolen or Vandalized, Are You Covered by State Minimum Car Insurance?
If your car is stolen, you’re the victim of a crime. However, that doesn’t mean that you will be protected if you have the state minimum car insurance. In most cases liability insurance only takes care of the other driver if you are at fault. In no-fault states, the costs are often shared, but if your car is stolen, only your comprehensive insurance will cover the loss.
8. If Someone Else Drives Your Car and Has Accident, Does Their Insurance Cover It?
This is a misconception that cannot be corrected enough. Usually, car insurance follows the car, not the driver. Your insurance rates are often based on the value of your car so it makes sense that coverage follows the vehicle, no? If someone else is driving your car and has an accident, your car insurance will likely cover the accident if it was that person’s fault. And your rate -- not your friend’s -- will go up. If the other driver was at fault, it won’t matter who was driving because you should be covered by the other driver’s liability coverage.
9. Can I Use My Car for Business Purposes?
You can use your car for any purpose you wish but the trouble starts if you have an accident. If that happens, you may quickly learn that you only have personal car insurance, which does not cover you while using the car for business purposes. A question you’ll likely be asked is where you were going when you got into the accident. If your answer is a client’s office, you may end up paying out of pocket for your losses. To lie and say otherwise is insurance fraud!
10. In No-Fault Insurance States, Is No One Penalized in a Car Accident?
To people living outside of the no-fault insurance states it may seem like no one is being penalized in no-fault states but that’s not quite how it works. It’s more accurate to call them shared-fault states.
All drivers living in no-fault states have to carry liability coverage and personal injury protection. So, they have to carry coverage for accidents that weren’t their fault and accidents that were their fault. In these states, there are fewer lawsuits because you’re covered for accidents that damage your car or injure you and passengers. This includes medical coverage. The following are no-fault states:
11. If I Get a Ticket Will My Rate Is Go Up?
Not always. With parking tickets your rate will likely not change at all. However, if you get a seat belt infraction, a speeding ticket or a ticket for distracted driving, your rate will be affected. For moving violations like these, you may be able to take a driver safety class and have the offense struck from your record. If you do it soon enough, your insurance company will never even know about it. Usually rates go up at renewal, so hopefully you’ll have enough time to take the course and pass the test. There are options for online and in-classroom driver safety courses. DUI/DWI offenses not only involve hefty fines and expensive, required courses but they will raise your rate dramatically. On average, people with a first-offense DUI/DWI are paying over $1,000 more a year in car insurance. Someone with a speeding 30+ over limit is paying over $400 more a year. For distracted driving, your rate will go up over $300 and for failure to stop at a stop sign or red light will cost you over $270 a year.
12. Will Car Insurance Cover the Belongings Stolen Out of My Car?
Even if you have comprehensive insurance your belongings won’t be covered if they are stolen. Your car will be covered, but your stuff won’t, unless you have homeowners insurance, condo insurance or renters insurance.
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