Monday, May 20, 2024
Auto Insurance

Debunking 6 Common Car Insurance Myths That Cost You Money

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Car insurance myths, often spread by people with poor insurance knowledge, can result in a misunderstanding of how car insurance works. And, believing them can influence you to make a bad auto insurance decision and cost you money down the line.

6 Auto Insurance Myths Debunked

Below, we dispel the six common myths about car insurance to help you better understand what does or doesn’t impact your auto insurance premiums.

The color of your car impacts your premiums rate

One of the most common auto insurance myths is that the color of your car influences your premium rate. Proponents of this myth opine that “red cars cost more to insure”, which is not true.

Factors that insurers use to determine your auto policy rate include driving record, car make & model, car usage, where you park your car, etc. None of these have anything to do with the color of your car.

Premiums are negotiable

The auto myth that you can bargain your premium to get a lower rate is not true. That’s because insurers use algorithms to assess your risk level, and the rate you get is a reflection of that.

The only way to get a lower rate is to comparison-shop rates from different companies or take advantage of auto discounts.

Car insurance covers everything

Auto insurance is simply a blanket term under which different types of policies exist. While a standard auto policy covers you in the event of an accident, it doesn’t cover “acts of God” like hail, floods, fire, theft, or vandalism by falling objects.

If you want coverage against these damages, you’ll have to purchase more coverage, including comprehensive, collision, and others.

Insurance covers any type of car usage

This is a common auto insurance myth that can be costly to individuals using their cars for business activities. If you’re self-employed and plan to use your car for business, you may need to purchase a business insurance policy. Otherwise, you may not get paid if you file a claim for business-related incidents.

The good thing is, you can write off car insurance premiums as a business expense when filing taxes and save money if you use your car for business purposes.

Credit score doesn’t impact your premium

This is a common car insurance myth among individuals who tend to be careless with money. The fact is that your credit rating plays a big role in determining your auto premium rate in most states.

So make sure you maintain a good FICO score because if you have a poor rating, your policy rate is likely to reflect that. That said, some states like California, Hawaii, Massachusetts, and Michigan have ruled out the use of credit scores in calculating auto insurance rates.

All insurance companies are the same

This is a prevalent auto insurance myth that makes most policyholders stick with the insurance company that their parents use or the one recommended by their car dealer.

The fact is, insurance companies are not the same, and they offer different auto insurance rates and discounts. To find the best insurance company and lock in a low rate, make sure you get rates from at least three companies and analyze their claim payment histories.

Myths About Car Insurance: Bottomline

Clearing up car insurance myths equips you with the knowledge you need to shop for the right policy. That said, there’re many insurance companies out there, and finding the best deal can be a hassle.

You can easily navigate the challenge and get the most comprehensive coverage at a lower rate by engaging the services of an independent insurance agent. An agent can also help debunk any auto insurance myths you may have.

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