Myth: Red cars cost more to insure.
Reality: Car color doesn't affect insurance rates. Factors such as make, model, age, and driving record are more influential.
This persistent myth likely stems from the association of red cars with speeding or reckless driving. However, insurance companies don't consider car color when calculating premiums. Instead, they focus on statistically significant factors correlating accident risk and repair costs. While some high-performance sports cars, which are often red, may have higher insurance rates, this is due to their power and value, not their color.
Myth: The minimum coverage required by law is enough.
Reality: Minimum coverage might not adequately protect you in all situations. Consider your needs and potential risks.
While state-mandated minimum coverage keeps you legal on the road, it often provides inadequate protection in serious accidents. For example, many states require only $25,000 in bodily injury liability per person. If you cause an accident resulting in severe injuries or long-term disability, medical costs could easily exceed this amount, leaving you personally liable for the difference. Additionally, minimum coverage often doesn't include comprehensive or collision coverage, leaving you without protection for your own vehicle in a wide variety of scenarios – many of them beyond your control.
Myth: Your credit score doesn't affect your insurance premium.
Reality: Many insurers use credit-based insurance scores to determine premiums. A better credit score can often lead to lower rates.
In most states, insurance companies use credit-based insurance scores as a factor in determining premiums. These scores are similar to but distinct from regular credit scores. Insurers argue that there's a statistical correlation between credit history and the likelihood of filing claims. People with higher credit scores are often seen as more financially responsible and less likely to file smaller claims. Some states, like California, Massachusetts, and Hawaii, have banned the use of credit scores in insurance pricing, but if you're in a state where it's allowed, improving your credit score could potentially lower your insurance rates.
Myth: Your auto insurance covers personal belongings stolen from your car.
Reality: Personal belongings are usually not covered by your auto insurance. You'd need a separate renter's or homeowner's policy for that.
Auto insurance primarily covers damage to the vehicle itself and liability for injuries or damage you cause to others. Personal items like laptops, smartphones, or other valuables stolen from your car typically fall under homeowners or renter’s insurance policies. These policies usually cover your personal property, even when it's outside your home.
Myth: Your insurance covers you if you drive for a rideshare company.
Reality: Most personal auto policies don't cover driving for hire. You'd need specific rideshare insurance or a commercial policy.
The rise of rideshare services has created a gap in traditional auto insurance coverage. Personal auto policies typically exclude any commercial use of the vehicle, including rideshare driving. This means that if you get into an accident while driving for a company like Uber or Lyft, your personal insurance might not cover you. Rideshare companies usually provide some level of coverage, but it may have limitations or high deductibles.
Myth: Older drivers always pay more for insurance because they are more likely to get in an accident.
Reality: While younger drivers typically pay more due to less experience, older drivers can get discounts for safe driving and low mileage.
Insurance rates are based on risk; what is true is that statistically, young adult and elderly drivers are more likely to be involved in accidents. However, drivers in their 50s and 60s often enjoy some of the lowest rates due to their experience and typically cautious driving habits. Many insurers offer mature driver discounts, especially for those who complete defensive driving courses. Additionally, older drivers who are retired or drive less may qualify for low-mileage discounts.
Myth: Your insurance covers you if your car is used for business.
Reality: Personal auto insurance usually doesn't cover business use. You'll need a commercial policy for that.
Personal auto policies typically exclude coverage for business use of your vehicle, except for some limited situations like commuting to work. If you use your personal vehicle for business purposes such as delivering goods, visiting clients, or transporting work equipment, you may need a commercial auto policy or a business use endorsement on your personal policy.
Myth: Buying insurance directly from an insurance company is cheaper.
Reality: Insurance rates can vary based on numerous factors. Sometimes, buying through an agent might get you better deals or discounts.
While buying directly from an insurance company can sometimes result in lower prices due to reduced overhead costs, it's not always the case. Independent insurance agents often have access to multiple insurance companies and can compare rates and coverage options to find the best deal for your specific situation. They may also be aware of discounts or bundling options that you might miss when buying directly. Additionally, agents can provide personalized advice and advocacy if you need to file a claim. The best approach is to get quotes both directly from insurers and through agents to compare your options. Remember that the cheapest option isn't always the best – consider the coverage limits, deductibles, and the company's reputation for customer service and claims handling when making your decision.
Myth: Your insurance will cover a rental car.
Reality: Not all policies automatically cover rental cars. You might need to add rental reimbursement coverage.
There are two aspects to consider with rental cars: coverage for a car you rent while traveling, and coverage for a rental while your car is being repaired after an accident. For the former, many personal auto policies extend your coverage to rental cars, but it's crucial to verify this before declining the rental company's insurance.
Myth: Getting into an accident always raises your rates.
Reality: It depends on the circumstances. Some insurers offer accident forgiveness programs or may not raise rates for minor accidents.
While accidents often lead to rate increases, it's not always the case. Many factors influence whether an accident will affect your rates, including the accident's severity, who was at fault, your driving history, and your insurance company's policies. Minor fender-benders might not impact rates as much as major collisions.
