10 Common Myths About Auto Insurance

Auto insurance is a critical aspect of car ownership, yet it's a topic filled with misinformation. From assumptions about red cars being more expensive to insure, to the belief that older drivers always pay more, the myths are endless. In this article, we'll debunk ten common auto insurance myths and help you navigate the insurance maze more accurately.

1. Myth: Red cars are more expensive to insure

The color of your car has no impact on your insurance premium. Insurers consider variables like make, model, age, engine size, and the driver's age and driving record.

This myth likely stems from the idea that red cars are often sportier and thus driven more recklessly, leading to more accidents. However, insurance companies don't base their rates on car color. They're more concerned about factors such as the car's safety ratings, its likelihood of theft, and how costly it is to repair or replace. So, whether you're driving a red convertible or a blue sedan, your car's color won't directly impact your premium.

2. Myth: Older drivers pay higher premiums

Age does factor into insurance premiums, but older drivers don't necessarily pay more. Often, mature drivers with clean records enjoy lower rates than younger, less experienced drivers.

The assumption that older drivers pay more could stem from the notion that age-related health issues might affect driving ability. However, insurance companies actually often view older drivers as more responsible, and therefore, less risky to insure compared to young drivers. Young drivers, particularly males under 25, typically pay higher premiums due to their lack of experience and higher accident rates. As long as an older driver maintains a clean driving record, they can often enjoy lower insurance rates.

3. Myth: Your personal auto insurance covers business use

Most personal auto insurance policies exclude extensive business use. You might need commercial auto insurance if you use your vehicle for business purposes frequently.

It's a common misconception that your personal auto insurance automatically extends to cover any form of vehicle use. However, if you're using your vehicle primarily for business purposes such as delivering goods or ferrying passengers, your personal auto insurance may not cover you in the event of an accident. Business use typically presents different risks and liability concerns which are not addressed in a standard personal policy. Therefore, if you're using your personal vehicle for business purposes frequently, it's crucial to explore commercial auto insurance to ensure you're adequately covered.

4. Myth: Insurance pays off your loan if your car is totaled

In reality, insurance pays the actual cash value of the car, not the remaining balance of your loan. Gap insurance can cover the difference.

This misunderstanding can lead to unpleasant surprises when an accident happens. When your insurer pays for a totaled car, they cover the car's actual cash value - essentially, what the car is worth at the time of the accident. If you've taken out a loan to buy your car and it gets totaled, there might be a 'gap' between what your insurer pays and what you still owe on your loan. This is especially likely if your car depreciates quickly or if you've taken a long-term loan. Gap insurance is specifically designed to cover this difference, giving you peace of mind that your financial investment is protected.

5. Myth: You don't need insurance if your car is old

Even if your car is older, insurance is critical for liability coverage. It pays for injuries or damage to others if you're at fault in an accident.

While it's true that older cars might have a lower value, leading some to believe that insurance isn't necessary, this is a dangerous myth. Even if the value of the car isn't high, the potential cost of an accident can be. Liability insurance, which is a part of your auto insurance policy, covers the cost of any damage you might cause to others in an accident, including property damage and medical expenses. Without this coverage, if you're at fault in an accident, you could be personally responsible for these costs. Moreover, older cars may lack the advanced safety features found in newer models, which can increase the risk of significant damage or injuries in an accident.

6. Myth: Your credit score doesn't affect your insurance rate

Many insurers use credit-based insurance scores in their rate calculations. A better credit score might mean lower insurance premiums.

It may surprise you, but your credit score can indeed influence your auto insurance rate. Insurance companies have found through statistical analysis a correlation between a person's credit score and their likelihood to file a claim. Individuals with higher credit scores are less likely to file insurance claims and, therefore, are often rewarded with lower premiums. That's not to say that you can't secure insurance with a less-than-stellar credit score; it just means that you might end up paying more. Keeping a close eye on your credit report and taking steps to enhance your credit can help you secure more favorable insurance rates.

7. Myth: Auto Insurance automatically covers theft and vandalism.

Many people believe that their standard auto insurance policy will cover them for everything including theft and vandalism. In reality, you often need to have comprehensive coverage included in your policy to cover these non-collision damages.

A basic auto insurance policy typically includes liability coverage and often collision coverage, but these won't cover damages resulting from theft or vandalism. These non-collision incidents are covered under the comprehensive portion of an auto insurance policy. Comprehensive coverage, as the name suggests, provides a broader range of protections and covers the costs if your car is stolen or damaged by things like fire, natural disasters, or even an encounter with wildlife. If your car is at high risk for theft or vandalism - for example, if you live in a city where such incidents are common - you may want to consider adding comprehensive coverage to your policy.

8. Myth: Comprehensive insurance covers everything

Despite its name, comprehensive insurance doesn't cover everything. It typically covers damage from events like theft or natural disasters, not damage due to a collision.

Although the term 'comprehensive' might suggest total coverage, it's important to understand its limitations. Comprehensive insurance typically covers damage to your vehicle that's not caused by a collision with another vehicle. This could include events such as theft, vandalism, fire, natural disasters, or damage from animals. However, it doesn't cover damage to your car from a collision, nor does it cover medical bills or property damage from an accident. These would fall under collision coverage and liability coverage respectively. For the most complete protection, many people opt for a full coverage policy, which is a combination of liability, collision, and comprehensive insurance.

9. Myth: No-fault insurance means you're not at fault

"No-fault" insurance simply means that your insurer will pay your injury claims no matter who caused the accident.

The term 'no-fault' can be quite misleading. It does not mean that nobody is at fault in an accident. Instead, 'no-fault' insurance refers to the agreement that your own insurance company will cover some portion of your economic losses, regardless of who was at fault in the accident. This can include medical expenses and lost wages, but doesn't usually cover property damage. The main advantage of no-fault insurance is the prompt payment of claims without having to identify the at-fault party. It's worth noting that no-fault laws vary from state to state, and not all states have no-fault insurance systems.

10. Myth: If someone else drives your car and crashes it, their insurance will cover the damages

Many people mistakenly believe that if they lend their car to someone and they crash it, the driver's insurance will cover the damages. In reality, it's usually the car owner's insurance that comes into play first.

This misunderstanding can potentially lead to substantial financial implications. Auto insurance policies generally follow the car, not the driver. So, if a friend borrows your car and causes an accident, it's likely your insurance policy that would be responsible for covering the damage. There are exceptions to this, such as if the person driving your car is explicitly excluded from your policy, but generally, the vehicle owner's policy takes precedence. This is something to keep in mind before lending your car to someone. It's always a good idea to verify their insurance coverage and driving abilities before handing over the keys.

Remember, it's always best to consult with an insurance professional to understand your policy thoroughly.

Give us a call at 517-490-0233 or book online with us today to review your auto policy.

Understanding your auto insurance policy can save you from future headaches and financial burden. Don't let these myths steer you in the wrong direction.