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Top 10 Auto Insurance MYTHS
Have you ever heard that red cars are more expensive to insure than other colored cars? I wish someone had dispelled this common misconception for me before I bought my first car. That candy-apple red, sports coupe would have looked beautiful in the driveway! But car color isn’t the only insurance myth regarding auto insurance. Here are 10 of the most common.
1. A new car is more of a theft target than an older car.
A shiny, new BMW may look more appealing than a 20-year-old Honda, to a thief who is scoping out his surroundings for a vehicle to heist, but the most recent National Insurance Crime Bureau’s (NICB) Hot Wheels report shows, in fact, 1997 Honda Accords and 1998 Honda Civics topped the list of most-stolen vehicles in 2016. Smart keys and advancements anti-theft technologies have been shown deter auto theft in late model vehicles.
2. If I don’t understand a question on an insurance application, it’s ok to provide a wrong answer.
While one may not intend to misrepresent themselves, incorrect information pertaining to drivers, annual mileage, garaging location and vehicle details may be grounds for an insurance company to void a policy, creating a gap in coverage and unexpected out of cost expenses. Claiming discounts that you are not entitled to may also result in a reduction of coverage. It is important to provide accurate information to your carrier not only at the time of application, but upon annual review of your policy. Life sometimes gets busy making it easy to forget or disregard potential changes that could impact coverage such as: a child attending college, a change in jobs, marriage/divorce/co-habitation or moving into a new home. Unfortunately, incorrect or outdated information on your policy can have very serious repercussions.
3. A more expensive car costs more to insure.
Comprehensive and collision coverage rates for a specific model of car are determined by the “loss history” of a vehicle–or how many claims have been paid on a certain model—as well as the cost to repair or replace that vehicle. A mid-priced sedan may have higher insurance premiums if they have a high loss history and cost more to repair than a similar, upscale model.
4. My rates won’t go up if an accident isn’t my fault.
Depending on the type of accident you are involved in, where you live, the amount of a claim, your insurance company and your driving history, you may pay higher rates regardless of who (or what) caused an accident. While comprehensive claims such as hitting a deer or hail damage generally do not raise rates, there are instances when your insurance carrier may be forced to pay all or a portion of a claim that was not your fault, which may result in a rate increase.
5. My insurance company will pay my car loan if my car is totaled.
Auto insurance is designed to pay the fair market value of your car at the time of a loss. Fair market value is the original cost of your car, less depreciation (i.e. mileage, age and overall condition). A common misconception is that auto insurance secures the value of the loan which may or may not hold true in the event of a total loss. Many insurance companies offer supplemental GAP Coverage to address this issue. GAP coverage is designed to cover the difference in loan value vs market value to prevent out-of-pocket expense (outside of your deductible).
6. My health doesn’t affect my insurance policy.
While it is unlawful for insurance companies to discriminate against those with a medical condition, they can restrict, alter or offer additional coverages which may increase rates. It is always important to discuss such concerns with a licensed agent regarding state laws and different policy options your insurance company may offer surrounding medical conditions.
7. It will cost more to insure my car when I get older.
Some insurance companies offer as much as a 10 percent discount for drivers in their golden years, after successfully completing an accident prevention course. Those enjoying retirement or part-time employment—therefore driving less—may also be eligible for an additional discount of up to 5 percent on car insurance.
8. Soldiers pay more for insurance than civilians.
Active military members, veterans and sometimes their families often qualify for a discount on auto insurance. In many situations, a valid military ID is all that is needed to secure this discount. Some companies may only provide this discount for active duty members and additional documentation may be required to determine eligibility. It is important to shop around and speak with a licensed agent to determine the best rates for your current situation.
9. Shopping around for car insurance won’t save me much money.
A recent study showed that nearly 40% of all insured drivers have been with the same auto carrier for 3 or more years despite a favorable economic market and softening of insurance rates. It was reported in June 2017, on average insured drivers could save $416.52 by comparison shopping for auto insurance.
10. My auto insurance policy will cover items stolen from my car.
Many people believe their auto policy covers everything inside their vehicle, however auto insurance will only cover damage or theft of the vehicle itself, provided you carry comprehensive coverage. Personal property is covered by homeowner and renter’s insurance policies and is subject to that policy’s deductible.
Before making decisions about auto insurance based on “coffee-talk”, contact a licensed insurance agent to discuss any questions or concerns you may have regarding your policy. That candy-apple red, sports coupe you’ve always dreamed of may be more affordable than you think!