The Most Common Misconceptions About Car Insurance (2024)

Car insurance is an essential aspect of car ownership in the United States, yet many drivers still need help navigating the fog of misconceptions. From believing that red cars are more expensive to insure to thinking that full coverage auto insurance covers every single peril, there are endless myths people widely perceive to be true. It is essential to clear such misconceptions to make an informed decision when choosing an auto insurance plan.

In this post, we will be busting some of the most widely believed misconceptions linked to car insurance.

Busting the Most Common Car Insurance Myths

With the spirit of learning something new and unlearning some old misbeliefs, let us guide you toward the top ten most common myths associated with car insurance:

1. The Insurance Follows The Driver

Imagine you have a friend over who lives in a different state, and he asks to borrow your vehicle for the time he's here. When somebody else drives your vehicle, you are lending not just your car but also your car insurance, except for instances where you have consented in writing to exclude a particular person.

Now, you may think this is great news until you realize that even if your friend possesses greater coverage limits than you, your coverage limits might potentially exhaust when they are behind your steering wheel and something goes wrong. By the same logic, if you are driving somebody else’s car, your coverages won’t help you.

2. Red Cars Have The Highest Insurance Rates

Red might be the color of grandiosity and luxury, but it does not affect your insurance policy. Your insurance cost considers many factors, such as the model of your car, its engine size, the car make, etc; however, it does not consider the “color” of your vehicle.

This belief emerges from another popular myth, which states that police officers are inclined to issue tickets to those who drive vermillion cars—again, nothing but a myth. You are safe if you refrain from purchasing a red vehicle solely because it would skyrocket your insurance premiums.

3. Credit Score Doesn't Affect Premiums

You may believe credit scores have no bearing on insurance costs, but it's not entirely true. While your insurance provider may not utilize your actual credit score, they do take into account something known as a “credit-based insurance score.” This score is calculated from your credit history and used by insurers to forecast your likelihood of filing claims. Since a higher score implies a lesser risk, insurance rates are usually cheaper for those with higher scores, and vice versa. However, some states may not follow this criteria.

4. The Minimal Legal Insurance Requirement Is Enough

In almost all states of the US, there are defined standards of auto insurance that every citizen must possess, such as the “30/60/25” minimum liability requirement in Texas. These limits ensure that those not at fault in an accident receive fair compensation for their losses.

However, liability insurance only covers the other party's damage costs. If you want to ensure your vehicle's repair and replacement costs are covered in case of unforeseen circumstances, you must purchase additional coverages. For example, collision coverage pays for the damages if you get into an accident, while comprehensive coverage financially protects against non-collision-related damage.

5. Insurance Covers Rentals Like Your Car

It's a common misconception among drivers that their auto insurance immediately covers the use of rented vehicles. It's vital to verify your policy and speak with the insurer about the level of coverage provided because some plans may only offer limited coverage for rental automobiles.

Additional insurance from rental car businesses may be deemed essential to guarantee protection.

6. New Cars Cost More to Insure

New motor vehicles are more likely to contain cutting-edge safety technologies that lower the chance of intense, hence lessening the possibility of severe damage. These two factors may reduce the price you pay. It may come as a surprise, but you pay less for car insurance if you drive a new minivan than someone driving an old sports car.

It is also essential to consider that despite integrating more advanced technology into their building, newer cars also possess increased repair, replacement, and maintenance costs, which can also be a factor.

7. Clean Record Means No Insurance Needed

Having a good driving record does not turn you into Mr. Immortal. It does not mean that you will never get into an accident, and what is the guarantee that someone else might not cause an accident that you will be involved in? Just because you are a safe driver doesn’t mean everyone else is.

Besides, auto insurance is not just for collisions and accidents; it protects your car against theft, vandalism, fire, hailstorms, etc. It is not in your best interests (legally and in other aspects) to refuse insurance in any scenario.

8. Full Coverage Means Complete Protection

Whenever someone hears the term “full coverage,” they are misled to believe their selected policy will cover every possible unforeseeable circumstance. However, no matter what company you choose, they cannot ensure every incident.

Liability, collision, and comprehensive insurance are usually included when referring to full coverage. These will protect you from natural catastrophes, animal collisions, accidents caused by you, vandalizing your property, etc. Nevertheless, “full coverage” is an industry terminology, and there will always be rare instances when insurance might not suffice.

9. Quote Equals Final Price

A quotation is just the amount quoted by the company based on the information you gave them. If you provide complete details regarding your vehicle and history, the final costs will remain the same as those based on false or incomplete information. This does not mean that people deliberately miss out on information; sometimes, it is inevitable.

Before presenting a quote, all auto insurance companies thoroughly analyze two reports: CLUE (Comprehensive Loss Underwriting Exchange) and MVR (Motor Vehicle Record). These reports include your previous claims and traffic violations. If the details you provided are inaccurate, you must pay more.

10. Insurance Covers Commercial Use

Most self-employed individuals use their vehicles for business, such as for delivery, transferring goods, etc. Sometimes, they even lend their employees their cars to conduct business activities.

You should know that your personal car insurance will not pay you if you get into an accident WHILE working. Your provider can rightfully claim that you were doing your job during the accident. Hence, personal insurance will no longer be applicable. It is better to purchase business vehicle insurance immediately to protect yourself and your vehicle in a scary situation.

Wrapping Up

Many people refrain from purchasing the right insurance policy because society perpetuates auto insurance myths without any logical basis. Awareness is the key to making the right decisions and choosing the right coverage for your vehicle.

By clearing these ten popular misconceptions, you can make a more informed choice regarding premium payments and insurance types. Stay updated by regularly reviewing your policy and staying in frequent contact with your insurer—"An ounce of prevention is worth a pound of cure.”