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Fact or Fiction? Understanding Car Insurance Myths

Do red cars really cost more to insure? We separate the truths from the half-truths and the full-on myths.

understanding car insurance

Have you ever received a parking ticket and been afraid your car insurance would skyrocket? Maybe you passed over a red car because you were told your premiums would be higher. With all the misinformation circulating about auto insurance, it’s time to debunk common car insurance myths.

Understanding car insurance is easy with these answers.

The AAA Guide To Understanding Car Insurance Myths

A red car is more expensive to insure 

This seems to be one of the most common car insurance myths, and one that may influences choices on the car lot. Like most myths, it is grounded in truth. When you request a quote, the insurance company will ask you the color of your vehicle, along with its model, make and other descriptive information. It will use some of this information to assign risk; however, color is not one of the determining factors. Your friend who has a red car may pay more for insurance, but this is more likely due to the model, the need for expensive parts or even the number of violations on his record.

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A ticket will increase your insurance rates 

Not all tickets are equal. If you park illegally at a shopping mall, your insurance rate will not increase. The same is true for a minor violation such as failing to show proper vehicle registration. If, however, you are guilty of reckless driving, driving under the influence, driving with a suspended license or other major violation, you can expect to see an increase. Insurance companies consider the type and number of violations you have when determining the cost of your auto insurance as they are indicators of how big of a risk you are.

If you don’t report an accident, your rates won’t change 

After being involved in an accident, some drivers are tempted not to inform their insurance company, thinking it can remain hidden. If you received a ticket, it will be included on your driving record, where it won’t remain hidden for long. When you renew a policy, the insurer will review your record to see if anything has changed. Additionally, the other party may contact your insurance company as they pursue a claim for damages you caused. The sooner you contact your insurance company, the better they can help you to navigate the aftermath of an accident.

If your car is totaled, your insurance company will replace it 

Collision and comprehensive coverage can protect you in the event your car is totaled by another vehicle, a storm or another covered circumstance. This does not mean that your insurance company will cover the entire cost of replacing your vehicle. Insurers take depreciation into account when determining the value of your totaled vehicle.

New car owners know depreciation all too well. As soon as you drive off the lot, your car already is depreciating, which takes a serious toll on value. If your car is a total loss, an adjuster will determine the fair market value of your vehicle and the company will pay you this amount. You are still responsible for the balance of your loan, even if your insurance company has paid a lower figure.

To protect yourself, invest in gap insurance. This covers the difference between the fair market value of a totaled vehicle and what you owe to a lending institution.

understanding car insurance

When I loan someone my car, I’m not responsible for a crash 

This is another persistent car insurance myth that many policy owners believe. Auto insurance is coverage for your vehicle, which means that anyone who has permission to drive your car has the same protection as you do. When you loan someone your car, you are assuming the risk that they could get into an accident. If one occurs, your insurance will be the primary policy liable for costs.

Everything in my car is covered by my policy 

We use our cars for a variety of purposes, both business and recreational. We need to transport tablets, laptops  and other equipment, subjecting them to the possibility of being damaged or even stolen. While your auto insurance policy is designed to cover items such as car electronics, it isn’t necessarily intended to cover all your belongings. Your homeowners policy, however, may.

For this myth, the truth is in the fine print. Your policy will specify what is covered. If you still have questions, consult with an agent who can help you with understanding the car insurance you currently have.

Understanding car insurance can be complicated enough without these persistent myths. Toss them aside and you will find it easier to navigate your policy and make decisions that impact your auto insurance.

Did you believe any of these car insurance myths? Tell us in the comments. 

To learn more about car insurance, visit AAA.com/Insurance

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