When it comes to car insurance, a good number of Americans have some pretty odd ideas. Car insurance myths are rather prevalent, in fact, says the Insurance Information Institute, a nonprofit that helps consumers understand insurance and how it works.
What’s more, believing these popular myths can make it difficult to find the best car insurance coverage for you and your family.
Think you know all there is to know about car insurance? Test your /business-financing/insurance IQ against these popular myths and facts.
Myth One: Your credit score has no effect on your car insurance rates.
In most states,*car insurers factor in what is called your “credit-based insurance score” when determining your car insurance rates. Although not quite the same as a FICO score, the credit-based insurance score takes into account your credit history as reported by the three major credit bureaus. The reason for this is simple — statistics show that people with higher credit scores have fewer accidents and, as a result, pose less risk. So if you want to qualify for the lowest insurance rates, you need to pay your bills on time and keep your credit utilization low.
*The practice is prohibited in California, Hawaii and Massachusetts.
Myth Two: The color of a car affects car insurance rates.
This myth is probably linked to another popular misconception: that red and yellow cars get ticketed more often by the police. But the truth is that, statistically speaking, the color of a car has nothing to do with the likelihood that the driver will be pulled over by a police officer, and does not affect insurance rates at all. The make and model of the car, however, does. According to Bankrate.com, the most expensive cars to insure are those that are involved in the most accidents, a list that includes the Subaru Impreza WRX, the Mitsubishi Lancer, the Acura RSX, and the Nissan Sentra SE-R. Not coincidentally, these cars all tend to be popular with young drivers, who are involved in more crashes.
The cost of a vehicle also plays a part in the premiums you pay. A Mercedes Benz SL550 Roadster that retails for about $103,000 is going to be more expensive to insure than a Honda Civic with a sticker price of $20,000.
Myth Three: You save money by getting the minimum amount of liability coverage required by law.
This myth is at least partly true: You can save money on your car insurance premiums if you buy the minimum amount of liability coverage required in your state. However, this is a risky choice that can cost you a fortune in the long run if you are at fault in a serious accident. Most state minimum coverages are in the neighborhood of $25,000 per person for personal injury, $50,000 for the entire accident and $10,000 for property damage.This would be nowhere near enough if you caused an accident in which several occupants of a late model vehicle were seriously injured, and the vehicle needed costly repairs. In that case, the injured parties would most likely sue you personally to recoup their costs, and the money you saved on premiums would be gone in a flash.
Myth Four: Car insurance pays for personal items that are stolen from a car or damaged in a car crash.
Most car insurance policies do not pay for personal items that are stolen from your vehicle or damaged in an accident. If a thief breaks your car window and steals your laptop, for example, your car insurance will pay to repair the window, but your homeowner’s or renter’s insurance covers your stolen property. Similarly, if you’re carrying valuable items in your car’s trunk and someone hits you from behind, your car insurance will pay to repair your car, but it won’t pay to replace the items in your trunk.
Myth Five: If someone else has an accident while driving your car, their insurance company picks up the tab.
Although state laws vary, in most states, the car, not the driver, is insured. This means if you allow a friend to drive your car and he’s involved in a car crash, your insurance, not his, will cover the damages.
Myth Six: Personal car insurance covers a car you use for business
If you use your personal vehicle for business purposes and are involved in a car crash, your personal car insurance will typically not cover your damages. You need a commercial auto insurance policy for the vehicles used in your business, even if you are the only person driving the car.
At Carmoon Group, we offer a variety of car insurance policies to meet your and your family’s changing needs. Whether you need new coverage, are adding someone onto an existing policy or simply want better terms than you currently have, we can help. Give us a call at 516-292-3780 any weekday between 9 a.m. and 6 p.m. to schedule your insurance review, or simply contact us online and we’ll get back to you right away.