In the world of auto insurance, it can be difficult to distinguish fact from fiction. Many popular car insurance myths, such as older drivers paying higher premiums or red cars being more expensive to insure, have been regularly accepted as truth. Not knowing the correct car insurance facts and how to spot a tired misconception could affect your auto insurance cost and coverage down the road. Follow along as we bust up the most common car insurance myths.
1. Myth: full coverage means everything is covered
One of the most pervasive car insurance myths is that full coverage insurance means absolutely everything is covered. Unfortunately, this is false! Full coverage is not an actual type of coverage, but rather a specific combination of different types of coverage such as liability, collision, and comprehensive protection. Even if you are the owner of a ‘full coverage’ policy you may not be covered for other benefits such as uninsured motorist protection, reimbursement for emergency roadside assistance, or rental cars. For example, intentional vehicle damage, routine maintenance, and repairs caused by wear and tear would not be covered by a ‘full coverage’ insurance policy.
2. Myth: older drivers always pay more
Senior citizens need not fret, as drivers over 55 will not necessarily pay more for their auto insurance. In fact, due to their years of on-the-road experience, these drivers often receive lower premiums than their teenage counterparts. While it is true some seniors may suffer from physical and mental decline, there are many factors such as driving history, location, and risk-taking that influence premium rates. Older drivers, especially retirees, may even be eligible for special discounts on auto insurance. If you think you may be eligible for a senior discount, reach out to your agent at Infinity Insurance Agency, Inc. at, 1-855-478-3705 for a free estimate.
3. Myth: your credit history doesn’t affect your insurance premium
Managing your money may seem unrelated to how you drive, but car insurance companies do care about your credit history. Depending on where you live, your coverage premium could be determined by information derived from your credit history. Eight states in the US have strict limitations on use of credit history with regard to auto policies. In some cases, poor credit history has been found to be an indicator of a person filing more and higher value claims. For this reason, insurance companies may assign a higher premium to individuals with a poor credit history. You can improve a poor credit history by paying bills on time, paying off debt, and only applying for new credit cards or loans when necessary.
4. Myth: personal auto insurance covers business use
Many people are unaware of the differences between personal car insurance and commercial auto insurance. The truth is that personal coverage might not cover you when you are driving for business purposes. Personal auto insurance can cover driving for leisure, commuting, and personal reasons. However, when you begin to use your vehicle for work activities, such as hauling supplies or meeting with clients, you may require commercial auto insurance. Commercial coverage could be necessary if you are engaging in activities such as delivery of products, traveling between job sites, or even having other employees drive your car.
5. Myth: insurance follows the driver, Not the Vehicle
Generally, insurance follows the vehicle, not the driver. This means that if you let your friend borrow your car and they get into an accident, your policy could be the primary insurance policy. Every policy offers different coverage, so be sure to check in with your provider before you let someone else get behind the wheel. Some policies may contain driver exclusions while others have permissive use statements. Permissive use is an agreement where the policyholder can allow someone who is not listed on their policy to drive the insured vehicle with their permission. If someone will be driving your vehicle regularly you could investigate a non-owner policy which offers some financial coverage for bodily injury or property damage for a driver using a borrowed or rented car.
6. Myth: your insurance will cover the market value of your car
A brand-new car might seem like a flashy investment but be wary that a vehicle is a depreciating asset. Your insurance company will likely pay no more than the fair market value of your car if it is totaled. If your vehicle gets destroyed shortly after purchase, it is still your responsibility to pay off the balance of your loan and unless you have paid down your loan significantly, your insurance payout may not cover everything you owe.
Insurance providers may use actual cash value (ACV) to calculate how much to pay for your damaged or stolen vehicle, considering depreciation. As a result, you may only be covered for the depreciated value of your car minus any deductible. Typically, an ACV payout will be lower than a replacement value payout. Gap insurance is designed to bridge this ‘gap’ in your policy by covering the difference between the Actual Cash Value (ACV) and the amount you owe on your car loan. You can purchase gap insurance through the bank, your car dealer, or by calling your trusted insurance agent.
7. Myth: insurance rates are the same everywhere
Location is a huge factor when determining insurance rates. Insurance rates can vary widely from state to state and even within the same region. Companies use complex algorithms that account for a multitude of elements including state regulations, location, and even weather. Every state has minimum insurance requirements, and some states demand more coverage. Rates are also determined by aspects such as road conditions, traffic density, cost of living, and percentage of uninsured drivers. For example, an individual pursuing coverage in a highly populated inner-city area with high crime may be charged a higher premium.
8. Myth: minor violations won’t affect your premium
Think a fender-bender won’t affect your premium? Even minor violations such as a busted bumper could affect your insurance cost. Insurance companies consider many factors such as the number of offenses and where they occurred to determine whether a violation will impact your coverage. Since insurance companies are always assessing risk, a high number of infractions, however small, could indicate you are at greater risk of filing more claims in the future. In certain states, minor offenses such as speeding tickets can lead to increased insurance costs of over 30%.
Maintaining a clean driving record by utilizing the following tips can keep your premiums from rising:
- Always follow all traffic laws
- Practice defensive driving
- Avoid distracted or impaired driving
- Take a driving safety course
9. Myth: red cars are the most expensive to insure
Are red cars more expensive to insure? Thankfully, you do not need to avoid purchasing a vehicle in your favorite shade of fire-engine red. This popular auto insurance myth is 100% false. Insurance companies do not care about the color of your car. What impacts your rate is the vehicle’s make, model, body type, engine size, safety features, and year. Other key factors that could contribute to your coverage rate include the driver’s record and chosen deductible.
False information and auto insurance misconceptions can be found everywhere. Through educating yourself on the most common car insurance myths, you can gain invaluable knowledge. Learning the ins and outs of auto insurance and reviewing your policy can help you better understand what is and is not covered under your policy.
If you're curious about your coverage or want to learn the truth about more auto myths, give our Infinity Insurance Agents a call at 1-855-478-3705.