If you own a vehicle, chances are you have an auto insurance policy – coverage is legally required in almost every state. But how well do you understand your car insurance? Myths and misunderstandings abound, but fear not. Bankrate is here to help you navigate the confusion. We use our 47 years of combined insurance experience to bust 10 of the most common car insurance myths – things we’ve heard time and time again when we’ve held various positions in the insurance industry – for you. help you better understand how your coverage works.
10. If someone else drives your car, they cover any damage
Kicking us off at number 10 is the myth that insurance follows the driver, not the car. Bad; It’s the opposite. Auto insurance follows the car, not the driver. If you lend your car to a friend and he causes an accident, your policy will be the main insurance. Your friend’s policy could take effect secondarily, but only if your policy limits were exhausted. Some policies may also have driver exclusions, which may mean no one else is covered to drive your vehicle, so make sure you understand how your policy works before allowing someone else to drive your car. .
9. Drivers with red cars pay more for insurance
The theory goes that drivers of flashy red vehicles are more likely to engage in risky driving behaviors and pay more for car insurance. Luckily for anyone who owns a red car, it’s a complete myth. The truth is, your car insurance company probably doesn’t know what color your car is. Color is not information auto insurance companies use to rate your policy. The exception would be if you’re paying extra for coverage for a custom paint job, but even then the extra price isn’t so much for the color as for the custom paint itself.
8. New cars are more expensive to insure
That’s not always true, but it’s still a bit tricky because there are many different facets of a car’s age that impact rates. First, new cars are more likely to have advanced safety features that could reduce the risk of an accident and reduce the likelihood of serious injury should one occur. Both of these things could lower your rate. Newer cars are often eligible for a new vehicle discount, which can save you money on your car insurance premium. However, newer cars are also likely to be more expensive to repair or replace, which could increase prices compared to an older model. Finally, newer cars are more likely to need comprehensive coverage and collision coverage than older cars, and more coverage usually means higher premiums. The age of your car affects your rate in several ways, but it’s not as simple as “new cars are expensive to insure.”
7. A non-at-fault accident will not affect my rates
If the other driver’s coverage takes care of everything and you don’t file a claim with your insurance company, or if you and the other driver handle the problem out of pocket, this should be true. Unfortunately, if you file a claim with your insurance company, even if you are not at fault, there is a risk that your premium will increase. You shouldn’t be penalized or overcharged for the claim since it wasn’t your fault, but if you have a car insurance discount with no claim, you could still lose it, which can lead to a higher premium.
6. All car insurance companies are the same
Far from there! Although most car insurance companies offer similar coverage, other factors set them apart. Each company has its own pricing system, which means you’ll get different rates from different companies, even for the same coverage. Different companies also have different endorsements. Some common add-ons exist, like car rental coverage and roadside assistance coverage, but you might be looking for a company with a more specialized option, like ride-sharing insurance. The discounts are similar – you’ll likely find common discounts with most insurance companies, but some carriers offer more unique savings. Some companies have local agents, while others do everything digitally. Finally, third-party customer satisfaction scores and financial strength ratings vary widely, and these can help you develop a comprehensive view of an operator.
5. Your quote is what you will pay
A quote is just that – a quote. Many companies will give you a car insurance quote based on the information you provide. If this information is not correct, your quote may change when you are ready to purchase the policy. Car insurance companies write two reports – a CLUE (Comprehensive Loss Underwriting Exchange) report and your Motor Vehicle Record (MVR) – before presenting you with the final price and allowing you to purchase coverage. These reports show your history of insurance claims and traffic incidents. If you didn’t include this information on your quote, or if the information you included was incorrect, you will likely see an increase in your final price.
4. You only need minimal coverage
Although you only need your state’s minimum coverage levels to drive legally, you may need more coverage depending on your situation. If you have a loan or lease for your vehicle, you will likely need to purchase comprehensive coverage. Even if you own your entire vehicle and can legally drive with only the state’s minimum coverage, purchasing higher liability limits is usually a good idea. The price difference is usually not huge and you get much more financial protection.
3. Full coverage covers everything
“Comprehensive Coverage” is an industry term that means your policy includes Comprehensive Coverage and Collision Coverage, which covers damage to your vehicle from various perils. But having a comprehensive insurance policy doesn’t mean you’re covered for all eventualities. Intentional damage, for example, is never covered. Your policy may also have exclusions regarding who is permitted to drive your vehicle, the types of vehicle use covered and the countries in which your vehicle is covered. When reviewing your coverage with an insurance agent, discuss your policy’s coverage options. Everyone’s interpretation of full coverage is slightly different, and you want to make sure you have the coverage you expect.
2. You don’t need medical payments if you have health insurance
If you’re trying to save on your auto insurance, you may be considering not covering medical expenses, especially if you have health insurance. It’s not a great strategy. Medical expenses cover covers your medical expenses and those of your passengers in the event of an accident, regardless of fault. In some states, Personal Injury Protection (PIP) is available (often required) instead of medical payment coverage. Even if you live in a state where these types of coverage are optional and you have health insurance, you should still consider purchasing the available option. Limitations in your health insurance policy may result in reimbursable expenses. Your medical coverage can also help cover your health insurance deductible. And in states where PIP is available, you can get more than just medical expenses, like help with child care costs, household responsibilities, or lost income.
1. You can negotiate your premium
Pass the microphone so we can say it loud and clear: Wrong! Negotiating the price you pay for car insurance is impossible. Auto insurance companies use proprietary algorithms to determine how risky you are, and your rate reflects your level of risk. If you get a lower rate from another company, that company’s algorithm considers you a lower risk. You cannot offer this lower quote to other carriers and expect them to match it; these carriers cannot change their pricing algorithms to obtain or retain your business. You can influence your premium by choosing appropriate cover and using discounts, so there are ways to lower your price.
The bottom line
Auto insurance can be complex, which has led to misunderstandings. Knowing the truth about auto insurance is important to making informed decisions about your coverage. Plus, now that you know the truth about common auto insurance myths, you can help set the record straight whenever the topic comes up.