When it comes to auto insurance, it pays to be knowledgeable. Understanding how auto insurance works can save you time, money and hassle. From coverage options to deductibles, discounts and premiums, there’s plenty to learn. There’s also an abundance of auto insurance myths circulating. Test your auto insurance knowledge below by quizzing yourself on the top 10 auto insurance myths.
Auto Insurance Myth #1: My auto insurance will vary depending on the color of my car.
FALSE. Although some people believe that a red car attracts more attention, and therefore may lead to more traffic tickets, the color of your car has nothing to do with determining your auto insurance premium. Instead, your credit rating is the most important factor used to determine your auto insurance rates, followed by your automobile’s year, make, model, body type, engine size, age and driving record.
Auto Insurance Myth #2: I’m a male under 25. I’m in the highest insurance rate bracket!
FALSE. While it’s true that males under the age of 25 may pay more for auto insurance than their female counterparts, it’s important to remember that overall, teenagers and senior citizens generally pay higher rates because they are at an increased risk of accidents.
Auto Insurance Myth #3: Sometimes I use my car for business purposes. If I’m in an accident, my personal auto insurance will still cover me.
FALSE. If you are delivering pizzas part-time, occasionally transporting clients or driving to meetings, you may need to extend your auto insurance coverage to include business use. If an accident occurs while on a business errand, your personal coverage probably won’t cover you.
Auto Insurance Myth #4: Help! I had one speeding ticket (or accident). My auto insurance rates are going to hit the roof!
FALSE. Sometimes this is true, but many companies offer “first time forgiveness” – which means your first ticket or accident won’t affect your auto insurance rates. It’s more likely that you will need two tickets before your rates increase. However, your driving history, how fast your were going and the length of time with your auto insurance company can also affect whether or not your rate increases. If you are cited in an accident, it doesn’t necessarily mean that your insurance rates will increase. Auto insurance companies generally conduct their own investigations, and then base their decisions on who was responsible for causing the crash. They will consider all of the facts, not just who was cited for the accident.
Auto Insurance Myth #5: My friend borrowed my car and was in an accident. I don’t have to worry because his auto insurance will cover the damages.
FALSE. Even if you aren’t present, if your car is in an accident, you could be responsible. Also, there is a good chance that your auto insurance rates could be affected.
Auto Insurance Myth #6: My car is totaled. My auto insurance company will cover the cost to replace it with a new one.
FALSE. Read your policy closely. If your car is totaled, most types of auto insurance coverage will only cover the “actual cash value” of your car – not the replacement cost. Then it becomes your responsibility to cover the gap between your settlement and the cost of purchasing a comparable vehicle. There are some auto insurance companies that offer “Gap Coverage” to protect against the depreciation, but you will have to request it. If you are leasing a car, Gap Insurance is particularly important. Due to the low lease costs, chances are what you will still owe on the vehicle won’t be covered by the settlement.
Auto Insurance Myth #7: I’ve moved, but I already paid my car insurance premium. If I get into an accident, I’ll still be covered.
FALSE. If you move, inform your auto insurance company immediately. If you wait too long and are involved in an accident, your auto insurance company could refuse to pay any claims. This is especially important if you move out-of-state because your auto insurance company may not offer coverage in your new state. In addition, you may need to adjust your coverage. For example, you may want to increase your car insurance coverage to protect a new, more expensive home. If you downsize, you may be able to lower your insurance coverages.
Auto Insurance Myth #8: My auto insurance will always cover me for vandalism, theft and random acts of nature.
FALSE. If you only have liability insurance, which covers damage to your car due to an accident, you won’t be covered. If you want protection from hail, theft, vandalism, deer accidents and other random acts of nature, you’ll have to add comprehensive coverage to your policy.
Auto Insurance Myth #9: I mailed my car insurance payment late. I’ll still be covered by the grace period if I’m in an accident.
FALSE. Health and life insurance companies often offer a grace period, but that’s not true of auto insurance companies. Each state has its own laws governing when an auto insurance company can cancel your policy, and how quickly a cancellation can take effect. Although most auto insurance companies value your business and won’t drop you if your payment is a few days late, there is no grace period. Your policy could be canceled even if it’s a day late. Since on-time payment means your premium was received by the due date, dropping your payment in the mail on the due date doesn’t count. Once you have a record of cancellation due to non-payment of your premium, it will be more difficult and more expensive to get new car insurance coverage. Don’t risk it – mail your payments in advance, so they will be received in plenty of time.
Auto Insurance Myth #10: My rates will be the same no matter which auto insurance company I choose.
FALSE. Annual premiums can vary by hundreds of dollars depending on the auto insurance company you choose, so it’s in your best interest to shop around. The reason rates can differ by so much is because each auto insurance company bases rates on their own experience.
Learn more about car insurance coverages at Nationwide’s auto insurance resource center, or find out how much your auto insurance will cost with a free online auto insurance quote. If you are self-employed, or use your vehicle for business purposes, you can also get a quote for small business auto insurance.
