The Top 22 Myths About Car Insurance
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You might think you know about car insurance. But there are plenty of misconceptions.
Are red cars more expensive to insure than others? Does gender really impact car insurance premiums? Today, we’re explaining the most common car insurance myths – including some myths that are true and others that can be debunked.
The Most Common Auto Insurance Myths
1. Red Cars Are More Expensive to Insure
There’s no data to suggest that red cars are more expensive to insure than other colors of cars. In fact, no insurance company asks for the color of your car. The insurer asks for the make, model, and year of your vehicle, and they may consider the mileage – but they do not consider the color of the vehicle. It’s possible red cars are a more attractive target for thieves, or that red cars attract more speeding tickets, which could indirectly lead to higher insurance premiums. All other things being equal, however, red cars are not more expensive to insure.
2. Thieves Are More Likely to Steal a Newer Vehicle
Many drivers assume new cars are more attractive to car thieves. Instead, the most stolen cars in the United States are frequently older vehicles. The top three most stolen cars in the United States in 2019, for example, were the Honda Civic (2000), Honda Accord (1997), and Ford F-Series Pickup (2006).
3. Car Insurance Always Covers My Stolen Car
Most drivers assume that car insurance will cover a stolen vehicle. If someone steals your vehicle, then insurance should pay you, right? Unfortunately, you only receive compensation if you have full coverage car insurance, which includes collision and comprehensive coverage. Comprehensive coverage is optional and adds coverage for theft, vandalism, hail damage, fire damage, and more. Without comprehensive coverage, you will not receive any compensation for vehicle theft.
4. Car Insurance Always Covers Collision Damage to My Own Vehicle
Most drivers also assume insurance will cover the cost of repairing their own vehicle after a collision. However, this isn’t always the case. Repairs to your own vehicle are only covered if you have collision coverage. If you are found at-fault or partially at-fault for an accident, and you don’t have collision coverage, then you may not receive compensation for collision damage after an accident.
5. I’ll Lose My Loyalty Discount by Switching Insurers, So It’s Not Worth It
Insurance companies don’t want you to switch away. That’s why many offer loyalty discounts. You might assume that your loyalty discount is worth more than any potential savings from making the switch, but that’s not always the case. Many insurance companies are willing to match your loyalty discount after a switch, for example. Or, some budget insurers are much cheaper even with your current loyalty discount. It’s never a bad idea to compare rates and see what’s out there.
6. I Can’t Cancel My Auto Insurance Policy Mid-Year
If you shop around for insurance today and find a cheaper rate, then you can cancel your current policy and switch to the new insurer very quickly. Most insurance policies have cancelation policies built-in. You might have to pay a small cancelation fee – or you might not. Most insurers give a refund on any premiums you have prepaid. It’s easier to make the switch than you think.
7. No-Fault Insurance Means I’m Never At Fault
13 states in America use no-fault insurance systems. Even in a no-fault insurance system, fault is still assigned in an accident. It can be assigned to one driver or shared between drivers. No-fault insurance simply means your own insurance company pays for your damages. If you were responsible for the accident in any way, then your rates will still rise. On the other hand, if you were not responsible for the accident, then your rates are unlikely to increase even though your insurer covered the cost.
8. Men Pay More than Women for Car Insurance
This myth is partially true. In most states, young male drivers pay more for car insurance than young female drivers. Young male drivers are riskier to insure, and they have higher accident and claims rates. However, this trend reverses with age. Middle-aged males and older tend to pay lower rates for car insurance than females of the same age. A male driver in his 40s, 50s, and 60s typically pays much lower car insurance rates than a female driver of the same age.
9. Gender Always Impacts Car Insurance Premiums
This myth is also partially true. In most states, insurers consider gender when calculating insurance premiums. However, some states have passed laws banning insurers from using gender to calculate premiums. In California, for example, insurers cannot discriminate based on gender, which means men and women do not pay different premiums, all other things being equal.
10. All Car Insurance Companies Charge Pretty Much the Same Rates
You might assume car insurance companies charge basically the same rates. However, that’s not the case. Some car insurance companies focus on the budget market, charging the lowest possible prices for bare minimum car insurance rates. Other insurers target the middle of the market, charging higher prices for better products and customer service. Some insurers cater to wealthy markets, charging premium prices for better service.
11. If a Friend Causes an Accident While Driving My Car, My Premiums Will Not Increase
When you lend a friend your vehicle, you’re not just lending the car: you’re lending your insurance policy. Your insurance follows the car. As long as someone has your permission to drive the vehicle, your insurance covers that person while driving. That means your premiums will rise if your friend gets into an accident – regardless of whether or not you were in the vehicle at the time of the accident.
12. If My Garage Burns Down, My Homeowners Insurance Covers Vehicle Damage
Homeowners insurance never covers vehicle damage. Homeowners insurance may cover fire damage, storm damage, water damage, and more. However, it does not cover any vehicle losses or damages. If your garage burns down, and your vehicle was parked inside your garage, then you will not receive compensation through your homeowners insurance policy for the vehicle. Instead, you need to make a claim through your car insurance policy’s comprehensive coverage, which is optional in every state.
13. Insurers Mostly Look at Driving History to Calculate Premiums
Driving history plays a big role in car insurance premiums, but it’s not the only thing. Insurers also check credit score, age, gender, driving experience, and more.
14. Insurance Rates Always Drop with Age
Young drivers pay the highest rates for car insurance. They’re inexperienced, and statistics show they have higher crash and claim rates. As you get older, car insurance premiums should drop (assuming you have a safe driving record). After a certain age, however, car insurance premiums may start rising again. Drivers in their 70s and 80s pay higher rates for car insurance, for example. Age is one of many factors used to calculate insurance premiums.
15. I Don’t Need Any More Than the Minimum Legally Required Car Insurance
In some states, the minimum legal car insurance requirements cover just $10,000 to $30,000 of liability. Yes, bare minimum car insurance can save you money on premiums, but it can leave you severely underinsured in an accident. Even a minor accident can lead to hundreds of thousands of dollars of medical bills. Insurance covers you up to the limits of your policy. Beyond that, you will need to pay out of pocket. Most drivers have enough insurance to cover their assets.
16. My ZIP Code Has No Impact on Car Insurance Premiums
Your ZIP code can have a significant impact on car insurance premiums. Generally, drivers in rural ZIP codes pay less for car insurance than drivers in urban ZIP codes. Rural ZIP codes have less traffic and fewer accidents than ZIP codes in big cities. Or, certain ZIP codes are more dangerous: they’re associated with higher rates of vehicle theft or vandalism. Insurers consider all of these factors when calculating premiums.
17. Speeding Tickets Don’t Impact Car Insurance Premiums
Most insurers consider your entire driving history when calculating car insurance premiums. A single, minor speeding ticket may not have a significant effect on car insurance premiums, although multiple speeding tickets can lead to much higher rates. Speeding is a high-risk driving behavior, and insurers consider risk when calculating premiums.
18. 2-Door Cars Are More Expensive to Insure than 4-Door Cars
Certain car models have higher insurance premiums than others. Sometimes, the 2-door version is more expensive. In other cases, the 4-door version has higher insurance premiums.
19. My Insurer Can Cancel My Policy at Any Time
Most states have laws preventing insurers from immediately canceling your policy without good reason. In most states, insurers need to have adequate grounds for canceling your coverage – like non-payment or fraud. Getting multiple accidents or speeding tickets could lead to non-renewal, which means your policy will not be renewed when it expires, although it should not lead to immediate cancelation.
20. Expensive Cars Cost More to Insure
You might assume a $50,000 car costs more to insure than a $15,000 car, but that’s not always the case. Sometimes, higher-end cars have better safety ratings, lower rates of theft, and other factors that reduce the cost of insurance.
21. Anything in My Car is Protected by Car Insurance
If your laptop is stolen from your vehicle, then you might assume it’s covered by car insurance. However, possessions inside your vehicle are never covered by car insurance. You should be able to make a claim through homeowners or renters insurance using your personal property coverage.
22. Insurers Can’t See My Driving or Claims History from a Previous Insurer
Some drivers assume insurers don’t share information. That’s not true: insurers in most states share information through the Comprehensive Loss Underwriting Exchange (CLUE) database and similar platforms. In other states, the DMV tracks all driver record information. Insurers can request this information easily – and they will always check your driving record before assigning a policy. If you have a DUI, a previous at-fault accident, or any other incident on your driver record, then you should assume it will be discovered.
Insurance is complicated, and there are plenty of myths about car insurance and how it works.
By educating yourself on these myths, you can avoid being surprised when you go to purchase your auto insurance policy.