When purchasing auto insurance, it’s important to understand the factors that affect your policy costs and coverage and not to make decisions based on myths, misconceptions, and falsehoods. Unfortunately, there’s plenty of false information that passes for “common wisdom”, and buying into it could lead you to incur some unwanted costs in the event of an accident or a claim.
Have you heard of the following misconceptions? Do you know the real facts of auto insurance? If not, don’t worry. We’re here to let you know the truth.
Myth #1: Vehicle Color Determines Premiums
It doesn’t matter whether your car is a flashy bright color or more camouflage. It doesn’t actually factor into your auto insurance costs. The price of your auto policy is based on variable factors, such as car make, model, body type, engine size and the age of the vehicle. Sticker price, repair costs, overall safety record and the likelihood of theft can impact premiums too. Insurers also take into account the age, driving record and sometimes the credit history of the driver.
But the color of your car? Completely unrelated to the cost of your insurance.
Myth #2: The Older You Get, The Higher the Cost
If you continue to get into accidents or get traffic violations as you get older, then yes, your costs may increase. However, they will not automatically rise with each year you age. In actuality, older drivers may be eligible for special discounts. For example, those over 55 years of age can get a reduction in their auto insurance premiums if they successfully complete an accident prevention course. Retirees or those who aren’t employed full time—and therefore, driving less—could also be eligible for a discount. You’ll need to speak with your auto insurance agent to see what you qualify for.
Myth #3: Credit Doesn’t Affect Your Rate
Your credit-based insurance score (derived from your credit history) could make a difference. A good credit score demonstrates how well you manage your financial means and is a strong indicator of whether someone is more likely to file an insurance claim. Therefore, insurers take it into consideration when you want to purchase, change or renew coverage. Those with good credit and therefore good insurance scores, typically end up paying less for insurance.
Myth #4: Auto Insurance Covers Theft, Vandalization, or Damaged by Natural Occurrences
This is only true if you opt for comprehensive and collision coverage along with your standard policy. Depending on your vehicle’s worth, purchasing these coverages may not be cost-effective, but you do need to have collision and comprehensive insurance to fully protect your vehicle from all types of damage.
Never make any assumptions about what’s included in your coverage. Thoroughly read through your policy, and contact your auto insurance agent if you have any questions.
Myth #5: Only the Minimum Legal Requirement is Necessary
Almost every state requires you to buy a minimum amount of auto liability coverage but purchasing only the minimum amount of liability means you’re likely to pay more out-of-pocket for losses incurred after an accident—and those costs may be steep.
A minimum of $100,000 of bodily injury protection per person and $300,000 per accident is recommended. If you have substantial personal financial assets to protect, consider an umbrella liability policy.
Myth #6: If Another Person Drives Your Car and Gets in an Accident, Their Policy Will Cover Damages
Typically, the auto insurance policy covering the vehicle is considered the primary insurance. This means that the car owner’s insurance company must pay for damages caused by an accident, regardless of who is driving. Policies and laws differ by state, so make sure you understand the rules before allowing another person to drive your car.
Myth #7: Personal Auto Insurance Covers Business Use
If you use your personal vehicle for business purposes, personal auto insurance may not protect you. In that case, you and your employer will want to discuss business automobile insurance. If you have employees using your vehicle, regularly check their driving records.
Do you have any more questions about auto insurance? Discuss your coverage needs with a Germantown auto insurance agent today.
About Moody Insurance Worldwide
Moody Insurance Worldwide, a division of Moody & Associates that was founded in 1914, is a leading provider of risk management programs and insurance coverage to individuals and businesses across the East Coast. We write all sizes of businesses, with technical expertise in many key industry areas, and provide personal insurance programs for estates and high net worth individuals. Our licensed, experienced commercial account managers can work with you to determine the coverage that you need at a competitive rate. Contact us today at (855) 868-0170 to learn more about what we can do for you.