Myth 1 – Red Cars Cost More to Insure
Color is irrelevant. Speedsters may be inclined to purchase flashy red cars, but color is not a reliable metric for determining auto rates. Other vehicle characteristics do though count, such as car makemodel, body type, engine size and the age of the vehicle, as well as the car’s sticker price, the cost to repair it, its overall safety record and the likelihood of theft. Also, insurance companies look at the driver’s age, driving record and sometimes (in states where it’s not illegal to do so) the credit history of the driver.
Myth 2 – The Older You Get the More Insurance Costs
Not at all. Drivers over 55 years of age can get a reduction in their auto insurance premium if they successfully complete an accident prevention course (available through local and state agencies as well as through the AAA and AARP). Retirees or those who aren’t employed full time—and therefore, who are driving less—may also be eligible for a car insurance discount. Older driver programs and discounts vary by state and insurance carrier and driver age, so if you think you may qualify, check with your insurance professional.
Myth 3 – Insurance companies can’t use credit scores to develop your insurance rate
Only California, Hawaii, and Massachusetts prohibit insurers from using credit scores to determine auto rates. Insurance Information Institute says that “A good credit score demonstrates how well you manage your financial affairs and has been shown to be a good predictor of whether someone is more likely to file an insurance claim so many insurance companies take it into consideration when you want to purchase, change or renew your auto insurance coverage. People with good credit—and, therefore good insurance scores—often end up paying less for insurance.”
Myth 4 – Your insurance will cover you if your car is stolen, vandalized or damaged by falling tree limbs, hail, flood or fire
This is only true if you opt for comprehensive and collision coverage along with your standard policy. If a car is worth less than $1,000, or less than 10 times the insurance premium, purchasing these coverages may not be cost effective—but you do need to have collision and comprehensive insurance to fully protect your vehicle from all types of damage.
Myth 5 – You only need the minimum amount of auto liability insurance required by law
That is true. At least in every state except Florida. But the minimum limits in most states haven’t changed in decades and they are far too low to protect drivers found liable in serious collisions. The III and consumer groups generally recommend a minimum of $100,000 of bodily injury protection per person and $300,000 per accident. If you have substantial personal financial assets to protect in the event of a lawsuit, you may even want to consider an umbrella liability policy.
Myth 6 – If another person gets into an accident driving your car, his or her auto insurance will cover the damages
The opposite is true in most states. The auto insurance policy covering the vehicle is considered the primary insurance. This means that the car owner’s insurance company must pay for damages caused by an accident, regardless of who is driving. Policies and laws differ by state, so make sure you understand the rules before allowing another person to drive your car.
Myth 7 – Soldiers pay more for insurance than civilians
Current military personnel—regardless of which branch—qualify for discount on auto insurance. Just supply documentation that lists your name, rank and the time that you will be enlisted in the service (in some situations, you might be able to have your commanding officer make a phone call on your behalf). Some auto insurance companies also provide discounts for former members of the military, as well as their families.
Myth 8 – Personal auto insurance also covers business use of your car
If you are self-employed and use your vehicle for business purposes, you are likely not covered by personal auto insurance while driving for business. Be sure to let your agent know, so you can purchase proper vehicle insurance. If you have other people—such as employees—using your vehicle, regularly check their driving records.