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11 weird auto insurance myths revealed here

Auto insurance is one of the most important and widely used financial products by drivers in the United States. However, it is also one of the most confusing and misunderstood. There are many myths about auto insurance and erroneous beliefs that can affect when choosing a policy, paying a premium, or filing a claim.

Do you know the most common myths about auto insurance and how you can avoid them?

This article will explain some of the most frequent auto insurance myths and the truths you should know about auto insurance. This way, you can make better decisions and save money on your coverage.

Keep reading and discover what auto insurance can do for you!

1. If I lend my car to a friend, and he has an accident, his insurance company will cover all the damages.

It is a myth to believe that in the United States, if you let your friend use your car, and he has an accident, then his insurance company will cover all the damages. The reality is that auto insurance usually follows the vehicle, not the driver.

That means that if you lend your car to a friend, your own auto insurance is the one that typically takes responsibility for anything that may happen to your car or the driver during that time. Your friend’s insurance frequently would not cover the damage from an accident when he is driving someone else’s vehicle.

Your insurance generally pays for your friend’s accident, as long as your friend has a driver’s license and does not use your car regularly. So, your friend’s insurance would be considered secondary coverage if your insurance limits are exhausted because the damages and injuries exceed the amounts of your policy.

However, not all policies are the same in this regard. For example, some insurance policies exclude other drivers, even family members who live in your home, unless your policy explicitly specifies those drivers.

2. Believing that red car policies are more expensive is one of the most widespread auto insurance myths

It is a myth to believe that drivers with red cars pay more for insurance.

In fact, the color of the car is not a factor that insurers consider when calculating the insurance premium. Usually, insurers rely on other vehicle data, such as the year, make, model, and vehicle identification number (VIN), as well as the driver’s driving history and credit. Insurers often do not even ask about the color of the car when giving a quote.

The color of the car could only matter if it is a custom paint, which could be considered as a custom part or equipment and increase the insurance premium slightly.

There could also be a relationship between the color of the car and the likelihood of it being stolen, but red cars are not among the most stolen. Therefore, there is no reason to think that having a red car affects the cost of insurance.

3. Policies for older drivers are more expensive

The cost of insurance depends on many factors, such as driving history, credit, type of vehicle, and coverage chosen. Older drivers usually have an advantage over younger drivers, as they have more experience and a cleaner record.

That means insurance rates for drivers aged 60 and older are typically lower than for drivers in their 40s or 50s.

However, insurance rates may start to rise once drivers reach 70 or older, due to the increased risk of accidents and injuries they face. That’s why it’s important to compare prices and look for special discounts for older drivers in order to save money and get the best possible coverage.

4. Auto insurance rates are set by the government

The federal government has a limited role in regulating auto insurance.

Certainly, there is a federal insurance office within the Treasury Department that monitors the insurance sector, represents the United States in international insurance matters, and administers the federal terrorism risk insurance program.

However, this office does not have the authority to regulate auto insurance or to set rates. Therefore, the cost of auto insurance depends mainly on market conditions, competition among insurers, and risk factors of the driver and vehicle.

Auto insurance is a product that is offered in the private market and that is regulated by state insurance authorities. Each state has its own office or department of insurance that oversees the activities of insurers operating in its jurisdiction. These state authorities set the minimum coverage requirements, approve rates and policy forms, and monitor market conduct and financial solvency of insurers.

In short, it is an auto insurance myth to believe that auto insurance rates are set by the government.

5. Personal auto insurance covers the use of the car for business

It is a myth to believe that, in the United States, personal auto insurance covers all the times that the car is used for business. Personal auto insurance is designed to cover personal use of the vehicle, such as going to work, school, or running errands. Usually, personal auto insurance does not cover commercial use of the vehicle, such as transporting goods, delivering products, or providing services to customers.

That is, if you use your car for business and have an accident, your personal auto insurance may not cover the damages or injuries caused.

To be protected when you use your car for business, you need to have commercial auto insurance or additional coverage for commercial use in your personal policy. Commercial auto insurance offers broader and higher coverage than personal auto insurance, as commercial vehicles often have more risks and liabilities than personal ones.

6. A no-fault accident does not affect the cost of premiums

No-fault insurance, also known as personal injury protection (PIP), is a type of insurance that covers your own medical bills if you are injured in an accident, regardless of who is at fault. Your bills are paid by your own insurance company. This differs from other types of auto insurance, such as liability insurance, which only pays when one party is proven to be at fault in an accident.

No-fault insurance does not imply that there is no one responsible for the accident or that there are no legal or financial consequences. In some states, no-fault insurance limits your ability to sue for damages from the other party, unless your injuries exceed a certain monetary or severity threshold. In other states, no-fault insurance only covers part of your medical expenses, and you can claim the rest from the other party or their insurer.

Additionally, no-fault insurance does not protect you from your insurance company raising your rates after an accident.

In short, do not fall for false auto insurance myths, if you are considered responsible for the accident or have multiple claims on your record, it is likely that your insurance premium will go up.

7. All insurers are the same – “Great auto insurance myth”

It is a myth to believe that all auto insurance companies are the same. Auto insurance companies vary in many aspects, such as the coverages they offer, the rates they charge, the customer service they provide, and the way they handle claims. That’s why it’s important to compare different options before choosing an insurer for your vehicle. Some differences you can find between auto insurance companies are: 

  • Coverages: Some insurers offer additional or special coverages that others do not have, such as rental reimbursement, roadside assistance, or protection against uninsured drivers.
  • Rates: Auto insurance rates depend on many factors, such as the type of vehicle, driving history, credit, and where you live. However, each insurer has its own way of calculating premiums and offering discounts, so you can find big price differences between them for the same coverage.
  • Customer service: Customer service is a key aspect when selecting an insurer, as it can affect your satisfaction and your experience with the company. Some insurers have a better reputation than others in terms of customer service, ease of getting a quote, availability of local agents, and transparency in information.
  • Claims handling: Claims handling is another important factor to consider, as it can determine how an accident or damage to your vehicle is resolved. Some insurers have faster, simpler, and fairer processes than others to process claims, pay damages and resolve disputes.

These are just some differences you can find between insurers, and that disintegrate the auto insurance myths. That’s why it’s advisable to compare several options.

8. The credit score does not affect auto insurance premiums

It is an auto insurance myth, the belief that credit score does not affect auto insurance. In fact, a credit score is one of the factors that auto insurance companies use to determine the risk of a driver and the cost of their policy.

The credit score is based on a person’s financial history and reflects their ability to pay their debts and meet their obligations. Auto insurance companies use a special credit score called insurance score, which is similar to the traditional credit score, but with a different emphasis on some aspects.

The insurance score is used to predict the likelihood of a driver filing a claim or causing an accident. Studies have shown that there is a correlation between credit score and claim risk, as people with lower scores tend to file more claims and have more accidents than people with higher scores.

That’s why auto insurance companies usually charge higher premiums to drivers with lower scores, as they represent a higher risk for the insurer.

9. Insurance covers cases of theft, damage from falling trees, hail, flood, and fire

These types of damages are not covered by liability insurance, which is the minimum mandatory insurance in most states. Liability insurance only covers the damages or injuries that you cause to other people or their property in an accident.

To be protected against these risks, you need to have an additional coverage called comprehensive or all-risk coverage. This coverage reimburses you the cost of repairing or replacing your vehicle if it suffers damage from causes other than a collision or rollover. Some examples of these causes are theft, vandalism, fire, falling objects, hail, flood, or impact with animals.

10. Soldiers pay more for car insurance

It’s a myth that, in the United States, soldiers pay higher car insurance premiums. On the contrary, soldiers can benefit from special discounts and exclusive advantages for their military service. Some of the options that soldiers have to save on car insurance are:

  • Choose an insurance company that specializes in the military market and that offers discounts and special services.
  • Compare prices and coverages among different insurance companies, since some may offer better deals than others depending on the driver’s profile, the type of vehicle, and the place where they live.
  • Take advantage of other benefits offered by the federal or state government to soldiers. For example, the exemption from vehicle tax in some states or the possibility of keeping the plates and registration of the state of origin if they change their residence for military reasons.

Therefore, soldiers can pay less for car insurance than civilians if they know how to choose the right company and take advantage of the discounts and benefits available to them.

11. Only the minimum amount of liability insurance required by law is needed, as I have never been involved in an accident.

This is one of the most widespread auto insurance myths. Liability insurance is the basic insurance that covers the damages or injuries that you cause to other people or their property in an accident.

Each state has its own minimum liability coverage requirements, which vary from $10,000 to $50,000 per person and from $20,000 to $100,000 per accident for bodily injury liability, and from $5,000 to $25,000 per accident for property damage liability.

However, these minimum limits may not be enough to cover all the expenses that are generated in a serious accident. In addition, liability insurance only covers damages to third parties, not to yourself or your vehicle. To be protected against other risks, you need to have other additional coverages, such as collision coverage or comprehensive coverage.

Therefore, it is advisable to have liability coverage higher than the minimum required by law, as well as other optional coverages that suit your needs and budget. This way you can drive with more peace of mind and avoid financial problems in case of an accident.

Final words

We have reached the end of this article, where we have debunked some of the most common auto insurance myths. We hope you learned something new and that you feel more confident when choosing a policy for your vehicle.

If you want to hire car insurance that suits your needs and your budget, we invite you to contact our company. We are experts in the insurance market, and we offer you the best coverage and the best prices. Plus, we provide you with personalized and quality service, so that you are always protected and satisfied.

Don’t hesitate any more and request a free and no-obligation quote.

We are at your disposal to answer any questions or inquiries you may have. Don’t miss this opportunity and hire with us the car insurance you deserve!

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This Post Has One Comment

  1. Luis Morales

    Great information, thanks for these tips.

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