14 Common Car Insurance Myths
December 19, 2024There is a lot of misinformation that exists pertaining to the subject of insurance in general. Of all the types of insurance, auto insurance is possibly the one that has the most “myths”, misinformation, and misconceptions surrounding it. Here are some of the most common car insurance myths:
Myth #1 – Red Cars Cost More to Insure
One of the most common car insurance myths is that the color of your car affects your rates. It’s difficult to say exactly where this myth got started or how it got any momentum. But, to put it plainly, the color of your car does not affect your insurance rates. Perhaps this false notion was tied to the idea that police officers target red vehicles at a disproportionate rate for traffic infractions such as speeding?
While it is true that your driving record, in terms of violations or at-fault accidents, affects your rates when receiving an insurance quote, the color of your car doesn’t matter. The make, model, body type, cost, actual cash value, engine size, and more of the car may be taken into account, but the color is not. If you have a perfect record and drive a red vehicle and someone driving the same model in blue has three speeding violations and an at-fault accident on their record, their quoted rate will be higher than yours, all other things being equal.
Myth #2 – Comprehensive Coverage is Complete Protection
One of the car insurance myths that can leave you uninsured or underinsured if you believe it is that comprehensive coverage covers everything. This isn’t true. The term “full coverage” on a car insurance policy references the presence of both Comprehensive and Collision auto coverage on the policy declarations page.
Comprehensive Alone Does Not Include Damage From Collision
While it is true that Comprehensive coverage offers protection for a wider variety of causes of loss, such as falling objects, animal collisions, fire, water damage, etc., it does not provide you with protection for damage that your vehicle sustains in a collision. This is why it is important to evaluate and ensure you have both Comprehensive and Collision auto coverage on your policy.
If you are in an accident with your vehicle, aside from contacting an animal, you will need to have Collision, or Physical Damage, coverage on your policy in order to receive a payment from your insurance carrier for the cost of repairing the damage to your car.
You Can’t Guarantee Someone Else Will Have Sufficient Coverage
If someone else is at fault in the accident and strikes your vehicle with theirs, you may be able to collect payment for the damage to your vehicle from their policy’s property damage liability. Of course, that is assuming the other party indeed has an active insurance policy, or a high enough property damage liability limit to cover the extent of the damages your car sustained in the accident.
In No-Fault states, all you may be able to collect from their policy is the cost of your Collision Coverage deductible, with the remainder of the claim payment coming from your own policy. In this scenario, if you only have Comprehensive coverage on your policy in this scenario, you could be looking at an unpaid claim. This is something to consider when evaluating uninsured and underinsured motorist coverage.
Low-Value Vehicles May Not Need Collision Protection
For lower-value or older vehicles, it could be a good choice to only purchase Comprehensive coverage for your vehicle or to remove Physical Damage coverage from an existing policy, if the vehicle value is so low that it doesn’t make sense to spend several hundred dollars per year to purchase collision coverage.
This decision should be made on a case-by-case basis when customizing your car insurance policy and with the assistance of a trusted independent agent so you can properly weigh the options and determine the cost-effectiveness of the Collision coverage against your vehicle’s actual cash value.
Myth #3 – Shopping Your Car Insurance Every Year is the Way to Get the Best Rate
There are prime times to consider shopping for car insurance. But, contrary to popular belief, it isn’t always in your best interest to shop for new car insurance every year. While it is a good idea to periodically ask your independent agent to check the market and ensure that you are getting the best rate and coverage combination, shopping your insurance every single year can have unintended consequences.
There May Be Fewer Monoline Options Available
With tighter underwriting restrictions across several types of policies, higher risks, and more, insurance trends are moving more toward bundling policies and limiting monoline policies. For some insurers, they may no longer offer monoline, or single-line, policies to new insureds. In this case, you may only be able to get an insurance proposal for bundled policies. This could limit how much you can “shop around” for car insurance.
You Could Forfeit Loyalty Discounts
Insurance companies often reward loyalty through discounts that are available to insureds who have held a policy with them for a certain period of time. This is one of the common discounts for personal lines policies. If you are constantly moving from company to company, you may never be able to take advantage of loyalty discounts that end up saving you money over time.
You May Become Ineligible For Claim-Free Discounts
Some companies may also add a loss-free discount after a certain number of years if the customer has been insured with them and remained claim-free. This may or may not be available to new insureds. So, in some cases, you might have to be insured with the same company for a few years before this discount applies.
There Could Be a Risk of Non-Renewal
Insurance companies also reward loyalty by looking at the duration of their business relationship with you over time and how profitable it has been. If you have been with an insurance company for quite some time and have your first claim, it is much less likely that they will issue a non-renewal at the conclusion of your policy term.
There are a few things you need to get a personal auto quote quickly, easily, and accurately. But, if you find yourself with a notice of non-renewal after a claim, it can limit your options when shopping for new coverage and also make that new coverage more expensive in some circumstances. Insurance companies appreciate customer loyalty and most often choose to reward it by maintaining a policy on their books even after a costly claim that may have “wiped out” years of profitability from your account.
Myth #4 – State Minimum Limits of Liability Coverage Are Enough
Insurance customers buying auto insurance know that it is a required purchase they must make in order to drive legally, or in some states, in order to get their vehicle inspected for the year. Sometimes customers just want the “cheapest” insurance they can find. And, to lower costs, they opt to purchase their state’s minimum limits of liability insurance in order to be able to drive legally. But, are state minimum limits enough?
Simply put, in almost every case, state minimum limits do not provide an adequate amount of liability insurance. This makes assuming state minimum limits are enough one of the common car insurance myths. It is important to remember that just because you have the legal limits of insurance, it doesn’t mean you can’t be sued for damages that exceed what your insurance policy pays to a third party that brings a liability claim against you after an accident that was your fault.
For example, in the state of Pennsylvania, the minimum legal limits on a “split limit” policy are $15,000 per person, $30,000 per accident for bodily injury liability, and $5,000 per accident for property damage liability and for medical benefits. Aside from the obvious inadequacy of these limits in terms of bodily injury liability given the rising costs of medical treatment, $5,000 of property damage liability often does not even cover the bumper damage to a newer model car in a fender bender.
If you are driving on state minimum limits of liability insurance, you will be “legal”. But, it does not mean you won’t be looking at paying large sums of money, out-of-pocket, if you are at fault in an accident. If this occurs, you will be looking at a much higher cost than simply a few extra dollars of insurance premium to purchase more substantial liability limits on your car insurance policy.
Myth #5 – Older Drivers Pay Higher Premiums
One of the car insurance myths is that older drivers pay higher premiums. Although some older drivers may pay higher premiums depending on the coverages and limits on their policies, or due to infractions on their driving records, the higher premium isn’t because of their age.
In many cases, older drivers are eligible for special discounts. For drivers who have been insured since they were teenagers, they may have received a discount once they turned 25. The AARP, AAA, and other state or local agencies may offer an accident prevention course available to insureds 55 or older.
Completing this course, association memberships, etc. can provide a reduction in premiums for these drivers. At the same time, if an older driver drives less, they may be considered a lower-risk driver than someone who drives a lot more and may see lower premiums as a result.
Myth #6 – Insurance Rates Are Not Affected By Credit Scores
Insurance is all about managing risk and you do have a credit-based insurance score. This is a score that is based on your credit score and credit history. Although it may not be used in every case, it can be a factor that is taken into consideration and may have an effect on your insurance rates.
In general, good credit scores are indicators of financial responsibility and they have been correlated with how likely someone is to file a claim. Often, a good credit score and credit history mean a better credit-based insurance score and can mean paying less for insurance.
Myth #7 – Someone Else’s Insurance Covers Your Car If They Are Driving It
Although state laws and policies vary, you cannot rely on someone else’s insurance to cover damages to your car if they are driving it. In most states, the primary insurance for a car is the policy that is covering that car, not just the driver. In most cases, it is the car owner’s policy that must pay for damages in an accident no matter who was driving.
There is a chance that you could attempt legal action to have the other driver take responsibility for the damage they caused to your car and costs incurred, in which case their liability coverage may come into play. However, this is a separate avenue that you could take, is often a lengthy and expensive process, and may not result in what you expect. In the meantime, you would still have to rely on your policy to repair or replace your car and deal with any costs associated with that yourself.
Myth #8 – Your Personal Auto Policy Covers Your Vehicle For Business Use
One of the car insurance myths is that your personal auto insurance covers you for any use of your vehicle. If you are using a personal vehicle for business purposes, a personal auto policy may not be enough to protect you. The right auto insurance policy type depends on the type of vehicle, how it is titled, and how it is used.
Depending on your situation and use case, a business auto policy might be a better fit for your needs. At the same time, there may be specific endorsements you need to add to ensure you don’t have first-party benefit gaps or are lacking necessary coverage in other areas. If you are self-employed or use your personally-titled vehicle for business, it’s important to talk to your insurance agent to make sure you have the right auto policy and all the coverage you need.
Hired and Non-Owned Auto Insurance
There is also a risk of a claim being denied in situations where employees are using personal vehicles or rented vehicles for business use. In the case of an employee using a vehicle not owned by a company for business purposes for that company, you can’t rely on their personal policy or a standard business auto policy to cover them. This exposes that company to risk. In those cases, the company would need to have hired and non-owned auto insurance.
Rideshare Insurance
Another consideration when it comes to personal auto insurance and business use cases, is ridesharing. If you are a driver for Lyft, Uber, or another rideshare business, there can be gaps between when your personal auto policy is in effect and when the rideshare company coverage comes into effect.
Specifically, the time between turning on the rideshare app to become an active driver and receiving a ride request can be a transition area. Coverage also depends on the rideshare company and the coverage they offer.
Without the right coverage on your policy to cover this period of business use before rideshare company coverage would kick in, you could find yourself uninsured for any damage that occurs. A rideshare gap endorsement could ensure you have the protection you need.
Myth #9 – A Ticket or an Accident Automatically Increases Your Premiums
A single incident automatically increasing your insurance is one of the common car insurance myths. Although a speeding ticket or an accident can increase your premiums, it does not necessarily automatically increase them. Many insurers reward drivers for loyalty, clean driving records, and remaining claim-free.
If you have been with an insurer for a while, have a clean driving record, and haven’t had a claim on your account, your insurance rates may not increase. Some insurers offer “accident forgiveness,” which operates on this principle. If it’s a first infraction or if you need to remove marks on your driving record, you can sometimes do so with state-approved safe driving courses.
That being said, if you do not have a clean driving record, another ticket or accident is likely to increase your rates. Multiple tickets or accidents within a certain time period make you a higher-risk insured and higher risk often means higher rates.
Myth #10 – Military Members Pay More For Car Insurance Than Civilians
In many cases, active military members are eligible for military discounts with several insurers, provided they have clean driving records. With proper documentation, military members often qualify for car insurance discounts.
Additionally, active military members may have access to exclusive insurers and policies. Some insurers may also extend benefits and discounts to veterans, family members of veterans, dependents of active military, and other family members of active military. For active military who are deployed away from home or overseas, they may need to put vehicles in storage.
Although there should be insurance for a car that’s in storage and won’t be driven, active military may be able to work with their insurance company to reduce coverage or pause certain types of coverage while they are deployed and the car is not being driven. This could mean lower rates during deployment and, paired with other military discounts, could be lower than rates for a civilian with a car in storage.
Myth #11 – Your Car Insurance Always Covers a Rental Car
One of the common car insurance myths is that your car insurance always covers rental cars. Although many personal auto policies often have coverage for rental cars, you need to make sure it is included on your auto policy. It may be an optional coverage that has to be purchased separately. In some cases, you may need to select to add rental reimbursement coverage to your policy.
It’s important to know what coverage you have related to rental cars on your policy to ensure you are also covered for any damage should you get into an accident in a rental vehicle. This will affect whether you need rental car insurance in addition to your auto policy.
Myth #12 – You Don’t Need to Worry About Car Payments If Your Car is Totaled
Cars are assets and if you still owe on it, that asset is technically owned by the lienholder. Although you may get a reimbursement from the insurance company for the totaled vehicle, there isn’t a guarantee that it will cover what is left on your loan. If you still owe a balance on the auto loan after any reimbursements are processed, you are still responsible for making those payments.
Cars depreciate in value quickly. This can result in gaps between what the car is worth and what you still owe on it. If this is the case when you are taking out an auto loan to purchase a car, it is best to also invest in loan/lease gap coverage on your auto insurance policy for the new car. In the event your car is totaled, gap insurance ensures that the balance of your car loan is covered.
Myth #13 – Your Car Has to Be Demolished to Be Totaled
Although cars that sustain enough damage to be “demolished” are totaled and considered a total loss by insurance companies, damage does not have to reach that point for a vehicle to be considered a total loss. What matters is the value of the vehicle and the estimated cost to repair the damage when an insurance company is evaluating whether it is practical to repair the car or declare it a total loss.
Regardless of what the damage looks like, if the cost to repair it is more than the value of the vehicle, it will likely be totaled. At this point, you would have the option to either take the total loss and whatever reimbursement that comes that is determined by your policy or you could choose to forgo it and repair the vehicle out of pocket.
Myth #14 – Auto Insurance Covers Personal Property in the Car
Another one of the common car insurance myths is that auto insurance covers personal property in the car. It’s important not to leave valuables in your vehicle. Should personal property in your vehicle be stolen from it or damaged in an accident, your auto insurance policy generally does not cover it. A homeowner’s policy or renter’s policy could provide coverage for personal property in these cases, but there can be limits on certain items and there may also be a deductible involved.
High-value items and other types of items need to be scheduled on a personal property floater or separately insured in order to be covered. Depending on your situation and types of property, it’s worth talking to your insurance agent to make sure you have the right policies, specific coverage and endorsements, etc.
Make Sure You Have Adequate Auto Insurance Coverage
These are just a few common car insurance myths. Before you purchase any insurance policy, it is important to be educated about the product, as well as be informed about the myths and misconceptions that may abound concerning it.
If you have additional questions or concerns, you should consult with a trusted and reputable independent agent who is experienced in personal lines insurance and knows how to navigate the insurance landscape. If you would like to receive a competitive and customized insurance proposal for your car insurance, please contact the professionals at Ruhl Insurance, a division of Horst Insurance, today at 1-800-537-6880 or 717-665-2283.
Disclaimer: Information and claims presented in this content are meant for informative, illustrative purposes and should not be considered legally binding.