True or False? Debunking the Mysteries of Auto Insurance

auto insurance mythsIt can be hard to decipher between what is real and what is false when it comes to rumors about auto insurance. We have listed below some popular rumors regarding the mysteries of auto insurance, hoping to help others gain a better understanding of auto insurance.

My red car is more expensive to insure than her white car
Auto insurance premiums are usually not based on the color of the insured vehicle, but rather they are based on the model, make, and year of the vehicle. If the vehicle has safety features, it will be cheaper to insure than a vehicle that doesn’t have them. A fast sports car will be more expensive to insure than a family minivan. Policy price is not based on the driver alone, it also includes the details of the car that will be driven.

Young male drivers pay higher auto insurance premiums than their female peers
True, and it makes sense when you really think about it. As a whole group, young males are less mature and are seen as more reckless than young females. Statistically young females are involved in less accidents than young males, therefore auto insurance companies find them to be lower risk drivers. Drivers who are labeled as high risk have been thought of as having a higher chance of filing a claim for the auto insurance company to have to pay out.

I have an auto insurance policy so all of my cars are covered, right?
False. Just because you have an auto insurance policy does not mean any vehicle you purchase is automatically added to that policy. Any time a policyholder wants to add a new vehicle to their policy, they must contact their auto insurance agent and request to add another vehicle. Your policy is not a blanket that covers anything you desire. You must have written proof that each vehicle is on your policy. Once you have added a car to your policy, it is covered according to the insurance you have purchased. If you are looking to save money on your auto insurance, check with your insurer before you purchase your car to see how much that particular car will add on to your policy price. You might be able to find a car whose insurance is cheaper.

Auto insurance rates are set by the insurance company
This is true. An auto insurance rate is typically set by the company, but there is a little more that goes into it. While the base rate may be a set minimum amount, the final amount may be more expensive according to the driver’s information. As mentioned earlier, auto insurance companies will charge a driver more money if they believe that driver poses a greater risk to file a claim.

However, the minimum amount that each driver must carry on their policy is actually determined by the state and not the auto insurance company. Every state varies in how much they require a driver to carry, so check with your state’s Department of Motor Vehicles if you are unsure of how much you need.

My vehicle and my medical bills will be paid for with my auto insurance policy
The answer to this is dependent upon what kind of auto insurance you have purchased. If you only purchased the state minimal requirements of bodily injury liability and property damage liability, you would be told “False” as an answer to this question, and here’s why.

The minimal amount of auto insurance required by the state is only for the other party involved in your accident. It is there so another person is not required to pay for damage you have done to them or their property. It is not intended for you to use to fix your damages. To fix your damages, you must have additional insurance coverage that goes beyond the state’s minimum requirement. Some of these coverage options are personal injury protection (which may be required by your state) and comprehensive and collision coverage.

My premiums won’t increase when the accident isn’t my fault
Again, this is another one that is both true and false. When you are in an accident that is not your fault and you live in a state that follows the tort law, the other driver’s insurance is responsible to pay for your damages. Your premium will not increase if you do not use your insurance company to pay for any damages.

Your answer to this question would be “false” if you filed a claim with your insurer and expected them to pay for the damages, even though the accident was not your fault. This is typically experienced in a no-fault state. Unfortunately, because you made a claim and had the insurer pay out money, the insurer will make up for their lost profit by increasing your premium.

I don’t need auto insurance because I rarely drive and don’t own a car
False. If you had said you “never” drive instead of “rarely” drive, you would be correct. But, even getting behind the wheel rarely means you do drive occasionally. Any time a driver is operating a vehicle, that driver needs to have auto insurance to financially protect him/her. It is a law, and if you are found driving without auto insurance you will be penalized.

There are those times when you will be driving a borrowed vehicle that has auto insurance through its owner; you’re just not on the policy. Yes, the vehicle is covered on a policy and the policyholder’s insurance will be responsible for accident-related costs, but that will increase the policyholder’s premiums and they will be responsible to pay any deductibles or remaining balance of costs if the expenses exceed the insurance limit. There is a chance that policyholder — the owner of the car you borrowed — may sue you to get the monies needed. Purchase an insurance policy for your situation.

Get answers to other common auto insurance questions and debunk the mysteries and myths circulating the Web.