Car insurance can be confusing, leading many drivers to believe common myths that could cost them money. In this extensive guide, we will debunk some of the most widespread car insurance myths and provide the real facts you need to make informed choices about your policy. Keep reading to learn the truths behind these common car insurance myths.
Myth #1: My Credit Score Doesn’t Affect My Car Insurance Rates
Truth: Your credit-based insurance score plays a major role in determining your car insurance premiums. Insurance companies have found a direct correlation between credit scores and the likelihood of filing claims. Drivers with poor credit are statistically more likely to file claims, so they pay higher premiums. Maintaining an excellent credit score can lower your car insurance rates substantially.
Myth #2: Paying Monthly Increases Your Insurance Cost
Truth: Paying for your car insurance premium monthly does not increase the overall cost of your policy. Insurance companies calculate your total 6-month or 12-month premium upfront. Whether you pay in monthly installments or upfront in a lump sum, the total cost remains the same. Monthly payments only spread out the cost into smaller, more manageable chunks.
Myth #3: Insurance Follows the Car Owner, Not the Driver
Truth: Your car insurance follows the driver, not just the car owner. If you lend your insured vehicle to a friend or family member, your insurance still covers the car with you as the policyholder. However, coverage does not extend to other vehicles that the driver uses but are not listed on your policy. Their driving history and record will also impact your premium when they use your car.
Myth #4: Insurance Rates Are Based Solely on Your Driving Record
Truth: Driving history is just one of many factors that affect your insurance premiums. Insurance companies take a holistic approach and consider other criteria like your age, gender, location, vehicle type, credit score, and insurance history. While a clean driving record can help lower rates, other factors influence your risk profile. Two drivers with identical driving records can pay vastly different premiums.
Myth #5: Any Gap in Coverage Will Jack Up Your Rates
Truth: Short gaps in auto insurance coverage, like switching policies when moving states, will not drastically impact your rates. However, long gaps without valid insurance, especially if your license was suspended, will certainly raise your premiums. Brief gaps are generally acceptable, but avoid going more than a couple weeks without coverage. Maintaining continuous insurance shows financial responsibility.
Myth #6: Adding Teenage Drivers Will Skyrocket Your Premium
Truth: Adding teenage drivers to your policy does increase rates, but not necessarily skyrocket them. Insurers recognize that teens are riskier to insure, so premiums do go up. However, many factors determine the size of the increase. Teens with excellent grades, advanced driving courses, and restricted licenses may only mildly impact premiums. Shop around for discounts to offset rate hikes.
Myth #7: Red Cars Are More Expensive to Insure
Truth: Vehicle color does not affect insurance rates, despite long-held myths about red cars costing more. Insurance companies do not consider color when determining risk factors for premium calculation. However, some colors, like red, may correlate to higher rates of speeding tickets. But it is the violations that increase rates, not the actual color.
Myth #8: Your Rates Won’t Change If You Have Insurance History
Truth: Maintaining continuous insurance coverage, or insurance persistency, can earn you long-term policyholder discounts. However, your rates still fluctuate at renewal based on the latest rating factors. Improved driving record, higher credit score, newer car, and clean claims can lower your premium over time. Rates regularly change even for long-time customers.
Myth #9: It’s Not Worth Comparing Rates Annually
Truth: You could save hundreds of dollars per year by comparing car insurance rates at every renewal. Companies regularly adjust their pricing algorithms. As your circumstances change, one insurer may become more affordable than your current company. Running quotes takes little effort and could reveal cheaper coverage options.
Myth #10: Carrying Comprehensive Coverage is Unnecessary for Old Cars
Truth: Comprehensive coverage makes sense even for older, low-value cars. A comprehensive claim has no impact on your premiums or eligibility for discounts. Comprehensive coverage protects against theft, vandalism, weather damage, fire, and animal collisions, likely risks even for old cars. The small premium investment could save you from major repair bills.
Conclusion:
Don’t let myths distort your car insurance decisions. By understanding the truth about common misconceptions, you can make informed choices about your coverage to maximize savings. Consider all the rating factors insurance companies use to determine premiums and shop around regularly to find the best rates. Leverage discounts and maintain continuous stable coverage. Debunking car insurance myths puts you on the road to smart savings.
