11 Car Insurance Myths Debunked

Auto insurance is essential to car ownership, as it offers protection and peace of mind in case of unexpected events such as an accident, injury, or theft. However, there are a lot of myths and misconceptions surrounding car insurance, which can lead to confusion and misunderstanding among young and older drivers. Falling for these myths could also land you in legal trouble or make you miss out on a better insurance deal.

Knowing the truth behind common auto insurance myths is essential for making informed decisions and ensuring sufficient coverage for your car. Here are 11 common auto insurance myths that usually leave drivers puzzled.

Your credit score has no impact on the insurance rate

Your credit-based insurance score (delivered from your credit history) plays a crucial role in determining the cost of your insurance policy. A healthy credit score shows how well you manage your finances. It's also a tell-tale indicator of whether an individual is more likely to file an insurance claim, meaning most insurance companies will consider it when you want to buy, change, or renew your car insurance coverage.

Therefore, people with good credit usually pay less for auto insurance than those with poor credit. The good news is that you can improve your credit score by paying your bills on time, keeping your credit utilization low, and regularly reviewing your credit report.

Comprehensive coverage allows you to drive any car

While this used to be a standard feature of comprehensive coverage, it's far less common today. It's good to check your documents rather than assuming you can drive another vehicle. Check out for "driving other cars" (DOC) coverage in your insurance policy.

It's also important to note you will only be covered for third-party liability when DOC is included in your policy. That means you won't be covered for any damage to the car you are borrowing. You will have to pay that out of your pocket.

The color of your car determines your insurance premium

The color doesn't factor into your auto insurance costs, whether the car is "Hide in Plain Sight White" or "Arrest Me Red." The price of your auto insurance is based on other aspects like the car's make, model, engine size, body type, and age of the vehicle. The vehicle's sticker price, overall safety, the cost of repairing it, and your driving record might also determine the price of your auto insurance.

Full coverage covers everything

Simply stated, there is nothing like "full coverage." This term is usually used to refer to a combination of collision and comprehensive coverages, which indeed cover a lot of dangers. However, regardless of your insurance company, they certainly don't cover everything.

Comprehensive and collision covers are optional unless you are leasing or financing a car. In such cases, you can count on them to protect you against collisions, theft or vandalism, fire, or any damage to your car resulting from accidents you cause. However, note that comprehensive coverage doesn't cover any stolen personal belongings along with your car.

Car insurance follows the driver, not the car

Different from the common brief, auto insurance mainly follows the vehicle, not the driver. For instance, if you lend your car to a family member or friend, you are lending not just the vehicle but also your auto insurance. That means your insurance coverage will apply if they get into an accident unless you have specifically excluded them in writing with your insurance company.

However, it's worth noting that you could be liable for negligence if you lend your car to someone and they get in a wreck. This is particularly true if the insurer determines that you shouldn't have entrusted them with your vehicle in the first place.

New cars are more expensive to insure

This is not always the case. Modern cars usually come with the latest safety features, and these innovative enhancements can play a crucial role in preventing accidents and reducing injuries in case of an accident. As a result, your insurer might view your car as a lower risk and offer a reduced insurance premium, which could benefit the policyholder. In addition, cars that are less than 3 years old can usually qualify for a new vehicle discount, often between 10% and 15%.

With that said, since new cars have more technology built into them, replacement and repair costs are usually higher. However, the cost of repairing older vehicles can be high, too, since certain automotive parts become more difficult to find as models become obsolete. In turn, this can potentially lead to increased insurance premiums.

Auto insurance costs increase with age

The opposite is actually the truth. Young drivers can expect to pay higher insurance rates than older drivers. According to most insurance companies, middle-aged drivers are less safe and more prone to accidents, making them likely to file more claims.

However, after 65 years of age, there is a chance that your insurance premiums will begin to increase. This is because older age means higher chances of being injured or killed in a car crash. Fortunately, as a senior citizen, you can save on auto insurance by keeping a safe driving history, taking a driving course, or taking advantage of senior driver discounts.

Your insurance premium will rise after an accident

A car crash can indeed affect your insurance premium, but not every accident automatically leads to an increase. Your insurer will generally consider several factors when determining your premium rates, including the severity of the accident, who was at fault, driving history, and the overall claims filed.

While a minor crash or a no-fault accident might not increase insurance premiums, it's always important to inform your insurer about the incident. If you fail to tell your insurer about the incident and they somehow find out, you might face legal action, and your insurance premium will certainly increase.

Personal car insurance covers business use

Most people think that their personal auto insurance policy covers them when using their car for business purposes, which is far from the truth. Personal auto insurance only covers those cars being driven for personal uses such as running errands or commuting to and from work. You will require commercial auto insurance in order to protect any vehicles you and your employees use for job purposes.

Putting your policy in a parent's name will lower your premium

Some young drivers will say an aged or more experienced person is the main driver to reduce their insurance premiums. However, this is illegal, and it's known as fronting. If the case is taken to court, you might lose your insurance, get disqualified, or even be fined heavily.

However, a parent or someone else can be added as an additional driver to your policy, which could reduce your premium rate. You might also want to consider black box or telematics if you are a young or first-time car buyer.

It's best to let your policy automatically renew every year

There is no price for staying loyal to your insurer when it comes to auto insurance. You can always find a cheaper deal by shopping around. While you could be enticed by the convenience of letting your insurance policy renew each year, it might be costing you greatly.

The Financial Conduct Authority (FCA) introduced new rules in January 2022 to stop insurance companies from discounting and penalizing customers who don't shop around. However, it pays to ensure you are getting the best deal. Compare coverage levels and terms, not just price.

Conclusion

Finding the right auto insurance can be complicated, which has particularly resulted in misconceptions cropping up. Luckily, understanding the truth behind most of the commonly believed auto insurance myths can help you make a better decision to purchase or upgrade your policy next time. If you are looking for affordable auto insurance rates in your area, myAutoloan is here to help you find the cheapest rates based on your profile.