Auto insurance can be complex and difficult to understand. With all the information available to policyholders, it can be challenging to decipher the facts from myths. Knowing what's covered under your auto policy and the factors that determine your premium is crucial. What's more, not understanding your coverage may lead you to believe you're covered when that may not be the case.
To help clear up any misinformation surrounding your auto insurance policy and put your mind at ease, here are eight of the most common auto insurance myths — debunked.
Myth 1: The color of your vehicle can affect your premium
It doesn't. Insurers don't price by paint color. What they do look at includes:
- The vehicle's safety features and ratings
- The vehicle's make, model, year, body type and engine size
- The likelihood that the car will be stolen or vandalized
- The cost to repair or replace the vehicle following an accident
Myth 2: If someone else is driving your car and gets into an accident, their insurance will cover it
The insurance held by the owner of the vehicle is typically considered the primary insurance in the event of an accident. So, regardless of who was driving when the incident occurred, the vehicle owner's insurance is what will serve as the primary coverage to help pay medical bills or damages.
Myth 3: Your credit score has no effect on your insurance rates
Your credit score is a significant factor insurance companies consider when they determine your premiums. It can show how well you manage your finances and how likely you are to file an insurance claim. People with good credit tend to pay less for their car insurance since they are seen as lower risk.
Myth 4: The minimum liability coverage required by your state is enough
Although purchasing the minimum amount of coverage required by law may reduce your premiums, you may pay more out of pocket in the event of an accident. In many cases, it is advisable to select limits above your state's minimum requirement. Severe accidents can be very costly when you consider the rising cost of medical expenses, court settlements and vehicle repairs. Liability coverage is broken down into two basic segments:
- Bodily injury liability: Helps cover medical bills that may come from an accident if you are found at fault. It has two limits — the per-person limit (the maximum your insurance will pay per person) and the per-accident limit (the maximum it will pay for bodily injury per accident).
- Property damage liability: Covers damage to another person's property.
Myth 5: If your car is totaled, insurance will pay for a new car
If your insurance reimburses you for a covered total loss, depreciation is taken into consideration. Depreciation is the decrease in an item's value over time from age or wear and tear. Depending on your coverage, you may get money for your totaled vehicle, but it will most likely not equal the original purchase price.
Myth 6: Personal auto insurance also covers business use of your vehicle
Driving for business purposes has its own set of risks, which require different types of coverage that your personal auto policy may not include. If you use your vehicle for work or drive for a rideshare service like Uber or Lyft, check with your insurance agent to confirm that you are properly insured.
Myth 7: The more expensive the car, the more it costs to insure
The price tag on your vehicle doesn't necessarily determine your insurance costs. However, how much your vehicle costs to repair, the model's loss history and other characteristics can influence your premium. If your car model is associated with more accidents or traffic infractions, or is costly to repair, it may be more expensive to insure.
Myth 8: A traffic violation will automatically increase your premium
One traffic violation doesn't always lead to a higher premium, especially for minor incidents. However, if your violations become more severe or you continue to accumulate tickets, you will probably see an increase. Maintaining a clean driving record after a violation will help soften the financial impact.
With so much false information surrounding auto insurance, it's best to work with a trusted insurance professional. Contact Aegis Service Corp. today for a clearer understanding of your auto insurance options.
