Common Auto Insurance Myths Debunked

Introduction

It is important for all drivers to have auto insurance since it protects a person from some of the financial devastation that an accident, theft, or natural disaster can cost. But there are a lot of myths regarding car insurance that continue to confuse and fool people into making expensive errors. This whitepaper aims to set the record straight on some of those auto-insurance-related myths and give everyone looking for coverage a clearer idea of what it is they are deciding upon.

Traditional Car Insurance Myths

Myth 1: Red Cars Cost More to Insure

The Truth

More often than not people think that having a red car will get you higher insurance premiums. This myth likely comes from the common belief that red cars are indicative of fast and dangerous driving. The color of your car does not affect insurance rates at all. A variety of factors go into what your premium will actually be with insurance companies, including the make and model (and age) of car you’re driving as well as any safety features, among many others.

What Matters Instead

Name: The year, make and model of your car

Security features: High-theft devices, airbags and anti-lock brakes.

Driving record – Accidents, Violations and Claims History

Location: Where You Live and Park Your Car

Myth 2: Older Cars Don’t Need Comprehensive and Collision Coverage

The Truth

True enough, older cars will not need as much coverage from new ones but it is inaccurate to say that they do away with both comprehensive and collision completely. Ultimately, it is based on the value of your car and where you are at financially. This means that if the annual cost of comprehensive and collision coverage are 10% or higher then it may not be worth carrying these coverages. However, it might be prudent to continue using insurance even if you are unable to replace your vehicle and must stop for traffic, at the side of the road, or in a garage for repairs.

Considerations

Value of the car: Most importantly asses whether coverage cost is worth considering Car’s Market Value.

Assess your Financial Capability – can you pay for the damage to replace or repair a car without insurance

Myth 3: It Does Not Matter if You Have a Good Credit Score or Not

The Real Story

Your credit score can affect your car insurance. Insurers use credit scores to predict the likelihood of a claim. Higher credit scores often lead to lower premiums because insurers view those individuals as low risk. On the other hand, for those having bad credits pay more.

Getting Better Rates

Credit Monitoring: Regularly review your credit report for errors and fix them.

Timely Payment of Bills: Prompt payments reflect well on your credit rating.

Reducing Debt: Lower debt levels will have a positive impact on your credit score.

Myth 4: The Minimum Required Coverage is Enough

The Reality

State-mandated minimum insurance coverage might not be enough after a serious accident. Although it usually consists of liability insurance, minimum coverage does not include property damage, medical expenses, or uninsured/underinsured motorist. Proper insurance will depend on your own financial status as well as potential threats.

Recommended Coverage

Liability Insurance: Greater than state minimums.

Comprehensive and Collision: Protects car for various events.

Uninsured/Underinsured Motorist: Drivers who are inadequately insured cannot harm you.

Medical Payments (MedPay) or Personal Injury Protection (PIP): It provides medical costs cover.

Myth 5: You Are Insured When Driving a Rental Car

The Truth

Most drivers think that their own auto insurance covers rental cars automatically, which may be the case depending on your policy. Collision and comprehensive coverage usually goes with rental vehicles however liability limits may not. Before you rent a vehicle, always consult your insurer to know what your policy entails.

Steps to Take

Verify Coverage: Talk to your insurance provider concerning car-rental insurance.

Consider Additional Insurance: Find out whether there is need for extra coverage from the renting firm.

Myth 6: Insurance Follows the Driver, Not the Car

The Truth

Generally, auto insurance covers the car rather than the person driving it. If you lend your vehicle to someone else who then has an accident, your insurance will usually pay out first. Depending on your policy limits, the cover provided by the driver’s insurer may be considered as secondary.

Major Points

Firstly, insurance that covers your vehicle irrespective of its driver is regarded as primary coverage.

Secondly, if necessary, a person’s insurance will take effect.

Myth #7: No One is at Fault with No-Fault Insurance

The Truth

No-fault insurance pays for damages regardless of who is at fault for the accident. This does not mean that you are not found at fault. If you are found to be at fault, your rates could still be affected. The primary purpose of no-fault is to streamline the claims process and reduce court involvement.

Main Ideas

Claims Process: The insurer pays your damages which streamlines the claim process.

Fault: If you are found at fault, the involvement could still lead to a rise in premiums.

Conclusion

To make informed decisions and prevent big mistakes, you have to know the truth behind misconceptions about car insurance. This list of misconceptions will help you understand car insurance better and make sure you have the right amount of coverage. If you have any questions, reach out to your insurance provider for clarification and to add or remove coverage to create your own policy. Knowing about car insurance and making the right moves will keep you safe on the road.