Do owners of red cars pay more for auto insurance? Is liability coverage required in every state? Do you know the truth about auto insurance? Read on to see some of the most commonly mistaken myths about car insurance:
10. Every state requires liability insurance.
FALSE. While most states do require liability insurance, some states do not. Despite whether the state requires liability or not, it is never a good idea to drive without liability coverage. If you were in an accident, were found at-fault and had no liability coverage- you could be sued for all of the damages.
9. Standard collision coverage protects me against damages caused by windstorms, hail, animal accidents and theft.
FALSE. While collision and liability coverage will cover damages caused by your car colliding with another vehicle or object, you have to have comprehensive coverage if you want to be covered for windstorms, hail, theft or accidents with animals. Many drivers mistakenly think, for example, that if they hit a deer that this will be covered under their auto collision coverage. This is not true.
8. My new car is covered under my insurance policy automatically.
True and False. While most car insurance companies will automatically cover a new vehicle, this coverage is temporary and it is your responsibility to tell them about the new vehicle within the amount of time specified in your contract.
7. If my friend gets into an accident in my car their insurance will pay for my damages.
FALSE. Because it is your car- it needs to be covered by your insurance. While the other driver’s insurance might be used to pay excess damages, it is still primarily paid by your insurance. Also, even if you were no where near the scene of the accident, your insurance score may be affected.
6. Drivers of red cars pay more for their auto insurance
FALSE. It is a common belief that car insurance rates are affected by the car color. In actuality, the color of a vehicle does not affect the premium at all. Some factors that do affect your premium are the make and model of car, its safety features, where it is parked most often and what city you live in.
5. No-fault insurance means my premium won’t be affected even if I am in an accident that is my fault.
FALSE. No-fault insurance means that your insurance company will pay for your damages no matter whose fault the accident is. It does not mean that your insurance score won’t be affected or that your premiums won’t go up.
4. Males under 25 years old pay the highest insurance rates.
FALSE. While young men under 25 do pay higher insurance rates than female drivers- they are still not the highest paying customers by age group. Teenagers and senior citizens typically pay the highest rates due to the fact that they are involved in more accidents than other age groups.
3. If I want to switch insurance companies I should just let my current policy lapse.
FALSE. Letting your current policy lapse can reflect negatively on your credit score. If you want to switch insurance companies you should officially notify your insurance company that you are cancelling your policy and pay any fees or premium that they require.
2. My personal insurance will also cover my business use of my car.
FALSE. If, even occasionally, you use your auto for business purposes, you will need to extend your personal car insurance to cover your business use as well.
1. My credit score does not affect my insurance rate
FALSE. Your credit score information does play a small role in determining your rates. Insurance companies will typically reward drivers with lower rates if they have a good credit rating. When you are shopping for auto insurance, companies may check your credit score. The type of inquiry made is called a “soft inquiry” and does not negatively impact your credit rating. Inquiries from credit card companies, banks and other lenders are considered “hard inquiries” and can negatively impact your credit score.
