8 Common Car Insurance Myths and Facts

Introduction

Nowadays, more and more people buy car insurance. When there are risks, the insurance company will compensate the car owner to minimize the damage. However, have you ever asked the question where the premium will go and whether the money is worth it? Let's find out 8 common car insurance myths and facts!

Myth 1: It’s believable to purchase from a dedicated agent

The truth: With the same car insurance package, if you ask 5 agents in different companies, you may receive 5 different insurance quotes. This difference is because of the coverage, level of responsibility, repair options, and so on. That is not to mention the difference in time and procedures for compensation.


So, if you wish to find low-cost, high-quality insurance, shop around for your own comparison or find an independent agent. Don’t believe in the offer from only a dedicated agent.

Myth 2: Higher premiums for a red car

The truth: Red cars can attract the look, but owning a red car does not mean you must pay more premiums than other-color cars. Surprisingly, 44 percent of US drivers have this concept in the 18 to 29 age range.

In fact, your vehicle colors have no effect on your car insurance rates. To identify the rates, the insurers have set the features of safety, repair, or replacement costs of a vehicle. Specifically, some factors to account for include the car model, engine size, body type, sticker price, and your age, driving record, etc. You can feel secure that owning a red car will not cost you more than any premium compared to other-color ones.

Myth 3: Your rates won’t raise in case of not reporting an accident

The truth: In case you fall into a car crash with another driver, he is likely to make a compensation for damages or injuries. It takes a short time for the injured party's insurance company to file a claim you and your insurer. As a result, your premiums can go up. In addition, your driving record will mark the accident ticket and then the rates will increase.

Myth 4: Your car insurance company will be liable for all loans if your car is completely damaged

The truth: In reality, the insurer is only responsible for paying your car’s fair market value. That is the original price of the car with low depreciation. This standard is also commonly used by the insurers, especially, in situations where the asset value is evaluated in order to compensate the policyholders. For example, when a customer claims the damages in a car accident, the insurer will indemnify the injured party with the market value of the vehicle. Most of the cases, your loan balance is more than this sum. As an owner, you have the responsibility to the difference.

For instance: What will happen if you purchased a car for $50,000 that is also your total loss in a car crash?
You are likely to pay a debt $50,000 on your loan. However, a fair market value is $39,500. So, the insurance company will only pay the current value of $39,500. If you don’t have GAP insurance, you are liable for the difference is that $10,500.

A lot of car insurers launch GAP coverage with an eye to supporting the difference between the car’s current value and the loan balance. Therefore, it is better to look for the coverage type in the situation of your current loan.

Myth 5: The older the driver, the higher the premium

The truth: It is said that older people have a tendency to fall into an accident because of poor eyesight or slow reactions, so the insurers offer higher premiums for them. Hence, it is a misbelief.


Most of the drivers at the age of 55 might have enough conditions to receive the reduced premiums for the policy. Since the majority of insurance companies always have a discount on car insurance policy for mature people finishing a safe driving course. Every insurance company has a different discount, so check with the carrier.

Myth 6: Credit ratings have no effect on premiums

The truth: Credit score is one of the most important factors to consider your premium rates because it shows whether the way you manage the financial affairs is good or not. A lot of insurers base on credit score in case you would like to buy, renew, or change a car insurance policy.

According to the Conning & Company Inc., about 92% of insurance companies use your credit information as a factor to determine premiums. So, a low credit-based insurance score will increase your premiums (unless you live in California, Hawaii, or Massachusetts, which do not allow this calculation).

All are about risk. Studies show that people with bad credit tend to file more and higher claims. Although rates may vary, be sure to pay between 20% and 50% if you have a bad credit profile. All in all, driving safely and keeping a fine driving record are the most vital things to get cheap car insurance.

Myth 7: The insurance company will pay for the stolen car

The truth: Many drivers claim that stolen automobile accessories will be covered by insurance policy. The fact that this is quite the opposite, the stolen properties can be compensated by car renters or real estate insurance providers rather than car insurance companies. Therefore, to ensure, you should carefully check with the insurance provider in case of theft.

Myth 8: Don’t select the deductible

The truth: Many people do not understand the premiums when buying car insurance, and they usually choose low deductibles. However, if you are confident in your driving ability, you should choose the high level of deduction. That is the part where the customer accepts the risk sharing with the insurance company.


As a result, premiums will be able to save up to 40%. Besides, people will increase awareness of traffic, drive more carefully, and protect their assets. However, it is not advisable to opt for a too-high deductible because in many cases, you will not be compensated by the insurer. So, you have to consider choosing this level of deductible carefully!

Conclusion

As you can see, there are many car insurance myths and facts that seem to be simple, but not everyone is aware of. Some of them make the premiums increase and vice versa. With this helpful information, we hope you realize some mistakes you can get to better understand car insurance. Thank you for reading!
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