Reality check: 9 myths about your auto insurance policy

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Reality check: 9 myths about your auto insurance policy
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When you’re shopping around for the best auto insurance rate – which everyone should do from time to time – you might feel a bit confused by the whole process. After all, how can different insurance companies give widely different quotes for the same coverage?

Perhaps the mystery surrounding the criteria used by insurance companies has helped spread myths about how they do business. So here is your reality check.

Debunking auto insurance myths once and for all!

MYTH: A red car costs more to insure

A lot of people believe this, but Progressive says it’s not true. In fact, they don’t even ask about your car’s color when you get a quote. Here’s what does matter: the year, make, model, body type, engine size and age of your car, plus the drivers on your policy.

MYTH: If someone else wrecks my car, their auto insurance will cover them

According to Geico, the car owner’s insurance will pay for damages caused by an accident – at least in most states. That’s why it’s so important to know the laws in your state before handing over your keys to someone else!

MYTH: If an accident is not my fault, my rates won’t go up

If you’ve been involved in a no-fault accident, you might already know the answer. Yes, even if the accident isn’t your fault, your rates could go up, Progressive says. And of course, accidents that are your fault have a negative impact on your rate.

MYTH: Personal auto insurance covers business use of your car  

Personal auto insurance might not protect you if you’re self-employed and use your car for business reasons, says the Insurance Information Institute.

MYTH: Thieves prefer to steal new cars

No, the bad guys are actually after older vehicles. That’s because they’re easier targets, according to Insure.com. And there’s high demand for used parts, which thieves know they can sell for a lot of money.  

MYTH: My credit doesn’t affect my rate

Studies show that how you manage your finances can predict the likelihood that you’ll be involved in an accident, according to Geico. That’s why a lower credit score can result in a higher monthly premium. It’s just one more reason to get all of your monthly bills paid on time.

MYTH: Auto insurance will cover me if my car is stolen, vandalized or damaged from hail or fire

You won’t be covered for any of these things unless you have comprehensive coverage, according to Insure.com. In most states, a bare-bones policy only requires you to get liability coverage.

The general rule is when the cost of comprehensive and collision exceeds 10% of your old vehicle’s value, that’s the time to dump it and just have liability coverage. You can determine your vehicle’s value at Edmunds.com, KBB.com or NADA.com.

MYTH: It costs more to insure your car when you get older

The Insurance Information Institute says drivers over 55 can qualify for lower auto insurance rates if they complete an accident prevention course. It’s an easy way to save up to 10% off your premium.

MYTH: Smokers pay higher insurance rates

Not so. In fact, Progressive says they don’t even ask if you’re a smoker.

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Michael Timmermann paid off his mortgage in two years. Now, he shares his money-saving tips on his blog, MichaelSaves.com.
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