If you own a car, you likely have a car insurance policy – coverage is legally required in nearly every state. But how well do you understand your car insurance? Myths and misunderstandings abound, but do not be afraid. Bankrate is here to help you overcome confusion. We use our combined 47 years of insurance experience to break down 10 of the most common myths about auto insurance – things we’ve heard over and over when working in various positions in the insurance industry – to help you better understand how your coverage works.
10. If someone else drives your car, it covers any damage
Our 10th entry is the myth that insurance follows the driver, not the car. wrong – wrong – wronged; On the contrary. Car insurance follows the car, not the driver. If you loan your car to a friend and it causes an accident, your policy will be the primary insurance. Your friend’s policy can start secondary, but only if the restrictions on your policy are used. Some policies may have driver exceptions as well, which may mean that no one else is covered to drive your car, so make sure you understand how your policy works before giving someone permission to drive your car.
9. Red car drivers pay more for insurance
The theory goes that drivers of bright red vehicles are more likely to engage in risky driving behaviors and pay more for car insurance. Fortunately for anyone who owns a red car, this is a complete legend. The truth is that your car insurance company probably doesn’t know the color of your car. Color is not part of the information that auto insurance companies use to evaluate your policy. The exception might be if you’re paying extra to cover a custom paint job, but even then, the extra price isn’t as much about color as the custom paint itself.
8. New cars are more expensive to insure
This isn’t always true, but it’s still a bit tricky because there are so many different aspects of a vehicle’s age that affect rates. First, new cars are more likely to have advanced safety features that can reduce the risk of an accident and reduce the likelihood of serious injuries if they do occur. Both of these things can lower your rate. Newer cars often qualify for a new car discount, which can provide savings on your car insurance premium. However, newer cars are also likely to be more expensive to repair or replace, which can increase prices compared to an older model. Finally, newer cars are more likely to need comprehensive and collision coverage than older cars, and greater coverage generally means higher premiums. The age of your car affects your rates in many ways, but it’s not quite as simple as “new cars are too expensive to insure.”
7. A non-directed accident will not affect my prices
If the other driver’s coverage takes care of everything and you didn’t file a claim with your insurance company, or if you and the other driver dealt with the problem, this should be true. Unfortunately, if you file a claim with your insurance company – even if you are not wrong – there is a risk of your premium being increased. You shouldn’t be penalized or charged extra for the claim because it wasn’t your fault, but if you have a no-claims car insurance discount, you can still lose it, which can lead to a higher premium.
6. All car insurance companies are the same
far from it! While most auto insurance companies offer similar coverage, there are other factors that set them apart. Each company has its own rating system, which means that you will get different rates from different companies for even the same coverage. Different companies also have different endorsements. There are some common add-ons, such as rental car coverage and roadside assistance coverage, but you might look for a company that has a more specialized option, such as passenger share insurance. The discounts are similar – you’ll likely find shared 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 your carrier.
5. Your quotation is what you will pay
The quote is just a quote. Many companies will give you a quote for car insurance based on the information you provide. If this information is not accurate, the quote may change when you are ready to purchase the policy. Auto insurers pull two reports – a comprehensive loss underwriting exchange report (CLUE) and your vehicle’s record (MVR) – before they offer you the final price and allow you to purchase coverage. These reports display the history of your insurance claims and traffic accidents. If you do not include this information in your quote, or if the information you included is incorrect, you will likely see an increase in the final price.
4. You only need minimal coverage
While you only need the minimum levels of coverage in your state to drive legally, you may still need more coverage depending on your state. If you have a loan or lease on your car, you will likely be required to purchase full coverage. Even if you fully own your car and can drive legally with minimal government coverage, buying higher liability limits is usually a good idea. The price difference is generally not huge and you will get much more financial protection.
3. Full coverage covers everything
“Full coverage” is an industry term that means your policy includes comprehensive coverage and collision coverage, which covers damage to your vehicle from various risks. But having a full coverage policy doesn’t mean you’re covered for all possibilities. Intentional damage, for example, is never covered. Your policy may also contain exclusions about who can drive your vehicle, the types of vehicle use that are covered and the countries your vehicle covers. When reviewing your insurance coverage with an insurance agent, discuss your policy coverage options. Everyone’s interpretation of full coverage is slightly different, and you want to ensure that you get the coverage you expect.
2. You do not need medical payments if you have health insurance
If you’re trying to save on your car insurance, you might consider skipping Medi Payments coverage, especially if you have health insurance. This is not a great strategy. Medical Payments coverage covers the medical costs for you and your passengers if you have an accident, regardless of fault. In some states, Personal Injury Protection (PIP) is available (often required) instead of medical payments coverage. Even if you live in a state where these types of coverage are optional and have health insurance, you should still consider purchasing the available option. Health insurance policy restrictions may result in out-of-pocket costs. Covering your medical payments may help cover your deductible health insurance, too. And in states where PIP is available, you may get more than just coverage for medical bills, such as help with childcare costs, household responsibilities, or lost income.
1. You can negotiate your premium
Slide the microphone so we can say out loud: Wrong! Negotiating the price you pay for car insurance is impossible. Car insurance companies use special algorithms to determine the amount of risk they offer, and your rate reflects your level of risk. If you get a lower rate than another company, that company’s algorithm considers you less risky. You cannot take that low price to other carriers and expect them to match it; These carriers cannot change their evaluation algorithms to acquire or keep your business. You can influence your premium by choosing the right coverage and taking advantage of discounts, though, there are ways you can lower the price.
Car insurance can be complicated, resulting in 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 make things right whenever the topic comes up.
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