The world of auto insurance is often sprinkled with an assortment of half-truths and glaring falsehoods. Some of these have stood the test of time, where despite their inaccuracy, they’re still considered to be gospel. This can sometimes lead to confusion, mistaking auto warranty options for insurance selections
In order to set the record straight and separate fact from fiction, here are several of the most common auto insurance myths that are out there and where the truth lies:
Myth No. 1: Auto insurance always covers theft
Car theft doesn’t occur nearly as frequently today as it has in the past, according to the National Insurance Crime Bureau. But it still happens, despite the increased security measures used. Fortunately, auto insurance covers you if your car is stolen, but people often mistake liability auto insurance for comprehensive. Comprehensive, or all-perils, provides for issues besides cases in which you may be at fault for an accident. However, unlike liability, comprehensive is optional. This is why people often don’t get it when they’re buying coverage for the first time.
Myth No. 2: Color of car affects rates
“The color of car you drive won’t influence what you spend on insurance.”
You may care what color your car is, but your insurer doesn’t. Somehow, it’s gotten into people’s heads that certain shades, like red, are more likely to draw police officers’ attention who are checking for speeding. Traffic violations can affect how much you spend on premiums.
Your insurer is interested in what your car looks like, but it’s more interested in model type, year, body style, nameplate and engine size.
Myth No. 3: My credit score has no impact on rates
Everyone who has used a credit card or obtained debt consolidation quotes has a credit score. A credit score serves as a numerical representation of your financial reputation. It tells creditors how good you are at handling money, like debt management and paying off bills on time. A high score can yield lower interest rates on a mortgage or credit card, for instance. Similarly, if you have a strong credit profile, your premiums may be lowered as a result of responsible money management.
Myth No. 4: If someone uses my car and gets in an accident, they’re responsible
An insurance policy follows the owner. This means that no matter who is driving your car, the person whose name is on the policy is the one who’s responsible. Thus, if someone asks to borrow your car and they get into a fender-bender, your policy is the one that’s impacted, not theirs.
Myth No. 5: All you need is the minimum amount of car insurance
“It’s highly recommended that you buy more than your state’s minimum amount of coverage.”
Yes and no. True, you’re only obligated to have the minimum amount of liability coverage that your state requires. However, because repairs can be expensive – not to mention medical treatment for injuries – the minimum may not be sufficient. In other words, you may have to pay out of pocket if the damage exceeds the limits of the policy.
For more details on these and other myths, visit the Insurance Information Institute’s website.