Common Car Insurance Myths
There are quite a few myths and misconceptions floating around when it comes to what car insurance covers and what it entails. It's important to separate fact from fiction whether you're a first-time auto insurance buyer or would like to change your current policy.
Below, we'll explore and debunk some common auto insurance myths.
Everything Is Automatically Covered
A lot of people think that signing up for basic auto insurance means everything is covered. Plain and simple, this is wishful thinking.
Most damages won't be covered if you only pay for standard liability coverage. It's necessary to purchase comprehensive and collision coverage if you want to protect against any and all potential incidents.
Here are some common incidents that are only covered if you opt to pay for additional coverage:
- Vehicle theft.
- Natural disasters.
- Fallen objects (like trees).
- Collisions with animals.
Somebody Else is Financially Responsible When Driving Your Car
Many people incorrectly assume they aren't responsible if an accident occurs while a friend is driving their car. However, a car insurance policy always follows the car that is insured.
This means any accident that occurs while another person is driving your car will have to be dealt with using your policy. Policies vary slightly by state. It's always important to understand the rules in your state BEFORE you hand your keys over to anyone.
The Items Inside Your Car Are Covered
It's never a good idea to leave valuables in your car unattended. One of the biggest car insurance myths floating around is that personal property inside of your vehicle will be covered under your auto insurance policy.
In reality, your policy won't cover items that are stolen from your vehicle or damaged during an accident. This means you won't receive any compensation for things like electronic devices, clothing or sporting equipment. The good news is that you may be able to file a claim through your homeowner policy if personal property left inside your car is stolen or damaged.
Older Drivers Are Charged Higher Premiums
Many people assume that insurance companies see older drivers as being riskier than younger drivers because of diminishing eyesight or slowing reflexes. However, the opposite is true.
Many insurance companies offer reduced rates for drivers over the age of 55. Drivers who happen to be retired can get discounts because they drive much less than people who commute to work every day. Mature drivers can also receive discounts for completing safety courses.
Your Car Loan Will Be Paid When Your Car Is Totaled
An auto insurance company will only pay for the market value of your vehicle if it's totaled while you're still making payments on a loan. This means you may be responsible for the difference if you owe more on your car than its market value at the time of the accident. Many people acquire gap coverage when financing new vehicles to avoid this type of situation.
Car Insurance Is Separate from the Rest of Your Life
Most people think their car insurance policy is completely isolated from other aspects of life. However, your financial behaviors can have a big impact on how much you pay for insurance premiums.
Insurance agencies are increasingly pulling up the credit scores of customers to determine the rates they will charge. A poor credit history may show an insurance agency that you have difficulty managing financial obligations and responsibilities. This paints you as a bigger risk to your car insurance provider, and could result in higher premiums.
Just how big of a role does your credit score play in determining your premium rate? A 2015 Consumer Reports study found that your credit score is sometimes more important than your driving record when it comes to how your rate is determined. The good news is that having a good credit score could help shave a few bucks off your premium.