The color of my car determines my auto insurance rate. My credit score has no bearing on my insurance premium. I have auto insurance coverage so my new car is already covered... right? Maybe not! Below is a list of auto insurance myths many car owners believe and drive by each day. The truth behind these auto insurance questions just might make you change course.
Car Insurance Myth #10: "No-fault insurance means it's not my fault!"
False. Basically, no-fault insurance means that your own insurance company pays for your injury-related bills regardless of who's at fault.
Car Insurance Myth #9: "The color of my car affects my insurance rate."
False. The color of your car does not impact your car insurance rates. What does influence your rate is your vehicle's year, make, model, body type, and engine size, along with your credit history and driving record.
Car Insurance Myth #8: "If I lend my car to a friend and that friend is in an accident, his or her insurance company will pay for the damages."
False. Your car, your responsibility! However, your friend's insurance could act as excess insurance if the damages exceed your policy's limits. And guess what, even though you weren't present at the time of the accident, it will go on your insurance record and your insurance premium could go up.
Car Insurance Myth #7: "My insurance rate is set by the government."
False. The government does not set your car insurance rate. Your state's insurance department only regulates the rates car insurance companies are allowed to set. Where you live, your credit score, marital status and your driving record is what actually affects your premium.
Car Insurance Myth #6: "I recently paid my insurance premium, so the new car I just purchased is covered."
True, up to a point. Most insurance policies require that the policyholder notify the car insurance company or agent within a specified number of days after purchase.
Car Insurance Myth #5: "It's a fact. Males under the age of 25 pay more for auto insurance."
True and false. Males under 25 years old usually pay more for car insurance than female drivers under 25. However, across the board, teenagers and seniors pay more for auto insurance, in large part because these age groups are typically involved in more automobile accidents.
Car Insurance Myth #4: "My credit score has no effect on my insurance rate."
False. Your credit score really does matter! Many insurance companies take your credit score into consideration when you want to purchase, change, or renew your auto insurance coverage.
Car Insurance Myth #3: "Even without comprehensive coverage, I'm still covered for theft, windstorms, hail and deer accidents."
False. Many drivers believe that if they only purchase collision coverage – which covers damage to your car resulting from driving accidents – that they will also be covered for incidents that involve vandalism, hail, animal accidents and fires. That auto insurance myth simply is not true. You need to purchase both collision and comprehensive coverage in order to fully protect your vehicle from all of these situations.
Car Insurance Myth #2: "My personal auto insurance covers both my personal and business use of my car."
Be careful. The answer to this auto insurance myth is that it might be able to cover it, but you need to check with your car insurance company. If you occasionally use your personal car for business purposes such as transporting clients, going to and from meetings or hauling business equipment, then you will more than likely need to extend your personal car insurance to cover your business use. Plus, if your employees use their car while working for you, you will want to also obtain a separate non-owned car insurance policy.
Car Insurance Myth #1: "I've never had or been involved in a car accident, so I don't need automobile insurance."
False. Some drivers are lucky enough to avoid accidents. However, car insurance is the best protection you can have in the event of an auto accident. You are also legally required* to have some form of auto insurance or other proof of financial reponsibility, and failing to do so can carry strict penalties.
Do you have other auto insurance questions or comments? Please let us know.
Originally posted April 6, 2006.