7 Car Insurance Myths That Are Costing You a Fortune
There are a lot of car insurance myths that continue to be spread around by consumers. One of the biggest reasons for car insurance myths is that you do not exactly know how your car insurance is calculated by your insurance company. These calculations are a closely guarded secret by most car insurance companies, but there are a few clues as to what makes our car insurance rates rise.
It is important when you compare car insurance rates to understand as much as you can about how your car insurance rates are calculated and to debunk the popular car insurance myths in order to ensure that you are saving money on car insurance as much as possible.
Myth #1 — The Color Of Your Car Does Not Matter
The color of your car does not affect the price you way for your car insurance premium. This is one of the most popular car insurance myths that continue to circulate throughout the country and across generations. But, the fact of the matter is that car insurance companies do not car what color your car is when they calculate your car insurance premiums. There are many many auto insurance leads that you can check out to compare insurance premiums.
Red cars do not equate to a higher insurance rate simply for the fact of being red. Car insurance companies care about their historical data on the likelihood that your make, model, and year of car will be damaged. They care about your history of driving and the likelihood that they will have to payout a claim against your policy more than anything else when determining the price they will charge you for your insurance premium.
Myth #2 — Sports Car Drivers Always Have Higher Car Insurance
Owning a sports car does not automatically equate to having higher car insurance. Studies have shown that there are many other types of car classes, certain makes, and models that are much more costly to insure than sports cars.
Car insurance companies set car insurance premiums based on the cost and likelihood of a claim based on each individual person and the type of car insured. Some cars have historically higher repair costs and higher replacement parts costs that can significantly increase the cost of their insurance premiums.
Myth #3 — You Are Responsible Even If Your Friend Is Driving
For most car insurance policies, the insurance policy remains with the vehicle and not the driver. So, if you allow your friend or someone else to drive your car, you and your insurance company could still be still responsible for any damages or injuries from an accident.
Once your insurance policy has been maxed out, you may be able to tap into the driver’s insurance policy in the event of an accident with a lot of damage and loss. Do not make the mistake in believing the car insurance myth that you are not responsible when you loan your vehicle to someone. You and your car insurance could still be on the hook.
Myth #4 — I’m Covered If My Car Is Totaled
Your car may not be completely covered by enough insurance to pay off your loan if it is totaled. Often borrowers roll old car loans into new car loans, and most new cars depreciate significantly as soon as you drive it off of the car lot. This can create a gap between the true value of the car and the amount of money that you owe the bank on your car loan.
Almost all car insurance policies have a clause that they will only payout the cost of your vehicle. They will not pay the amount of your loan balance if your car is worth significantly less. You need gap insurance which is a separate and specific type of car insurance used just for this purpose. Gap insurance covers that gap between the amount your car insurance will payout and the rest of your loan balance on the car.
Myth #5 — My Car Insurance Covers My Rental Car
You need to check with your car insurance company before you rent a car to ensure that you have the proper car insurance clauses that cover rental cars on your insurance policy. Not all policies cover rental cars. It is not an automatic entitlement. You need to have it added to your current car insurance policy, and typically this is a very inexpensive provision to add to your policy.
Depending on the credit card you use, you may already have car insurance as a credit card benefit. Many credit card companies offer car insurance coverage for rental cars when you use their credit card. You should check to see if you’re covered for rental car insurance by your credit card.
Myth #6 — Items In Your Car May Not Be Covered
You may find that your personal property, like a laptop or cell phone, may not be covered under your car insurance policy. These types of items are typically excluded from your car insurance policy, and claims must be filed under your homeowner’s insurance or renter’s insurance. This may not be very cost effective though depending on your homeowner’s insurance deductible which often tends to be higher than a simple car insurance policy’s deductible.
Myth #7 — Using Your Personal Car Insurance For Business
You must have a separate business car insurance policy for your automobile if you use your car for business purposes. Your personal car insurance policy does not cover your car if you are using it for business related activities.
You need separate personal and business car insurance policies in order to be fully covered. Also, most business loans have clauses that you carry the proper insurance coverage for commercial car insurance and not just a personal policy.
There are many car insurance calculators on the internet that can help you find the best prices for a policy. Green Slip Calculator can help you find the lowest available prices for greenslip insurers based on your vehicle and details instead of car insurance myths.
Car insurance companies care about their historical data on the likelihood that your make, model, and year of car will be damaged. They care about your history of driving and the likelihood that they will have to payout a claim against your policy more than anything else when determining the price they will charge you for your insurance premium.
Everything else is a car insurance myth that continues to circulate through society. Knowing as much as you can about these car insurance myths and how insurance is actually calculated will help arm you with the information you need to save more money on car insurance.
About Hank Coleman
Hank Coleman is the founder of Money Q&A, an Iraq combat veteran, a Dr. Pepper addict, and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications. Hank holds a Master’s Degree in Finance and a graduate certificate in personal financial planning. Email him directly at Hank [at] MoneyQandA [dot] com.