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Fact or Fiction? Understanding Car Insurance Myths

Do red cars really cost more to insure? Understanding car insurance is easy with these myth-busters from AAA.

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 misconceptions that drivers face, and one that influences choices on the car lot all too frequently. Like most myths, it is grounded in truth – two truths to be exact. 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 also will use some of this information to assign risk. However, color is not one of the determining factors.

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Your friend who has a red car may pay more for insurance, but likely this is due to the model, the need for expensive parts or even the number of violations on the driver’s record.

A ticket will increase my insurance rates

Not all tickets are equal. If you recently parking 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 (DUI), driving with a suspended license, and other major violations, you can expect to see an increase.

Insurance companies consider the type and number of violations when determining the cost of your auto insurance. Certain violations such as speeding may not cause your premiums to go up unless they are categorized as reckless driving by your state. Each company also differs when it comes to the amount your premiums will increase for violations.  If your policy includes accident forgiveness, you can even avoid increases if you are ticketed due to an accident.

If I don’t report an accident, my 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 my car is totaled, my 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 you loan someone your car, you insurance will still be the primary policy liable for costs in case an accident occurs.

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

This is another persistent 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.  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 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.

Want us to bust another car insurance myth? Let us know what your myth is in the comments section below.

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

Top photo credit: Jeep

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