7 Biggest Misconceptions about the Auto Insurance Industry
Go ahead and tell your grandparents, coworkers, or neighbors that you’re about to buy new auto insurance. Then be prepared for all the unwelcome advice. You’ll probably hear lots of horrible stories about car insurance companies ripping them off and how it’ll happen to you too. No doubt, most of these stories will include at least ten common car insurance myths.
Now we don’t want you to have an anxiety attack over getting new car insurance. There are way bigger things to freak out about in life like taxes. (Your friends and family can tell you plenty of horror stories about taxes too.)
Okay, back to the real reason you stopped by. Let’s make sense of the top auto insurance myths and facts.
Myth 1 | My Car Is Red So I Have to Pay More for Insurance
The car color insurance myth is 100% false. Your independent insurance agent is not even gonna ask for the color of your vehicle. That’s because the insurance company really doesn’t care.
(Let’s repeat that for the people in the back: Insurance carriers don’t care about your car’s paint color.)
Your auto insurance premiums will be based on lots of other factors like the car’s year, make, model, engine size, market value, and potential repair costs. Plus, the overall safety rating for the vehicle and the likelihood of it being stolen. Auto insurers will also consider certain driver facts when calculating pricing like the driver’s age and driving record.
Myth 2 | Letting My Friend Borrow My Car Isn’t a Big Deal
This auto insurance myth seems reasonable but (depending on your state) it’s false, false, false. In some states and for some policies, occasional drivers that borrow your car are covered under your policy even if they aren’t listed as a driver. Of course, an occasional driver is someone that doesn’t have easy access to your vehicle. That means people that don’t live in your home.
Keep in mind, if an accident happens while your friend is driving, then you may be financially impacted. Like your auto insurance may increase at renewal even though you weren’t driving. Also, if your friend doesn’t have the money to cover any damage that exceeds your policy limits, then you’ll be expected to absorb that cost (plus pay the deductible).
We suggest you talk with your independent insurance agent to find out the rules for your state and your particular auto policy. When in doubt, ask.
Myth 3 | My Credit Score Doesn’t Matter to Auto Insurance Companies
That’s 100% false. Over the years, auto insurers have determined that the better a person’s credit-based insurance score (which comes from their credit report), then the less likely they are to file claims. A good credit score makes the driver seem lower-risk, which will earn them a lower premium. Managing your finances and keeping an eye on your credit score is a great idea. The better your number, the better your auto insurance rates when you first purchase a policy, as well as when you change or renew the coverage.
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Myth 4 | Buying the Minimum Auto Liability Amounts Is Good Enough
This myth is completely false and could cost you a lot more cash in the long-run. Just about every state sets a minimum amount of auto liability that must be purchased. Of course, buying a policy with the lowest liability limits means your premium will be low and you’ll still be driving legally.
The big BUT here is that any accidents resulting in damage beyond the policy’s limits will have to come out of your pocket. In extreme situations, if you can’t come up with that extra money, you’re in danger of losing personal assets. Nobody wants that. According to the Insurance Information Institute, it’s recommended that you get a $100,000 minimum of bodily injury per person and $300,000 per accident.
Myth 5 | I Have Auto Insurance So I’m Covered for Anything That Happens
Big time false! If you have just liability insurance, the other driver and vehicle are covered in case you cause an accident. That’s it. To protect your vehicle from things like hail damage or vandalism or a broken windshield or being replaced when stolen/destroyed, you’re gonna need the whole enchilada.
That means you need to pay for comprehensive and collision coverage along with your liability. You should double-check with your independent insurance agent to find out if you have other things like roadside assistance and rental car coverage.
Myth 6 | Driving My Car for Business Is Okay
Auto insurance carriers would disagree. If you frequently use your personal vehicle for business purposes (say you’re a traveling salesperson or you’re a plumber that goes on calls in your minivan, you may not be covered during those work drives. You see, personal auto insurance is just that...for personal use. It’s important to verify what your particular policy will tolerate, and if needed, buy a commercial auto policy for work hours.
Another tip: If you carry work equipment in your personal vehicle, it may not be covered should it be stolen or damaged. Plumbers, painters, electricians, etc. that use their personal vehicles for work usually need a commercial/business auto plan to protect their work tools and materials.
Myth 7 | I’m Being Charged More Because I’m Getting Older
This myth is...you guessed it...false. In fact, older drivers can snag special discounts to help keep their auto insurance rates low. One way to do this is by successfully completing an accident prevention class offered by AAA or AARP. Also, retirees typically drive less since they are no longer commuting to work daily, and should notify their insurer of this for another possible discount.
Talking with an independent insurance agent will help clear up any confusion about what programs and discounts are available in your state and age group.
Seven Common Car Insurance Myths Destroyed
We just destroyed seven of the most common insurance industry myths. Don’t feel bad if you believed most of these were true when they are actually false. You’re not alone. An insurance survey reported that 46% of participants falsely thought insuring red cars did cost more.
The same survey also reported that 1 in 4 people falsely thought their auto insurance wouldn’t have to pay if a friend crashed their borrowed vehicle. See, lots of insurance consumers besides your grandparents, coworkers, and neighbors believe such myths. Now that you know better, you can spread the word.
Knowledgeable, independent insurance agents are always available to answer any questions you may have about your various insurance coverage options. These agents can assist you in reviewing your current policy and help you compare the premium and coverage options from different insurance providers.
With the help of an independent insurance agent, you can be sure the insurance policy you choose offers the lowest premiums with the best coverage. Talk to an agent in your area today.
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