6 Myths about Auto Insurance

When it comes to auto insurance, people have a lot of crazy ideas about rates, which results in people making misinformed decisions when choosing coverage. Here are the six most common auto insurance myths, and whether or not they are accurate.

Myth 1: Red cars are more expensive to insure.

Facts: The insurance industry is color-blind and the color of the car is never a factor in the cost of insurance. Instead, the decision will be based on your driving history, how often and far you drive, and where you live.

Myth 2: Four-door cars cost less to insure than two-door cars.

Facts: This is a true/false response. Generally, two-door cars are more expensive to insure because they are often higher-end sports models driven by younger, risk-taking men. They are also more likely to be stolen. However, there are exceptions based on the make, model and year of the car. A non-sporty two-door car may not be more expensive to insure than a four-door car, but it will depend on the owner’s driving record.

Myth 3: Your credit rating will impact your insurance rate.

Facts: Unfortunately, this is true in most states. Also, people with no credit, and therefore no credit report, can pay as much as 67% more for car insurance than someone with excellent credit. Credit scores can have a significant impact on how much you pay, so it’s a good idea to check your reports to ensure that they are accurate before applying for car insurance.

Myth 4: Your personal auto insurance covers the business use of your car.

Facts: This is another true/false answer because it depends on how you are using the vehicle. If you simply commute to work or a job site, then your personal insurance is probably enough. If you are hauling equipment to the work site, driving long distances to meet with clients, or are using your car to generate extra cash (such as delivering pizzas or driving for Uber or Lyft), then you need business auto insurance. If you continually use your vehicle for work but don’t have business auto insurance, your insurance company can deny claims, drop your coverage or raise your rates to reflect this different usage.

Myth 5: If you are in an accident and don’t report it, it won’t affect your rate.

Facts: Before we talk rates, let’s discuss something more important – the law. In most states, you are required by law to report an accident. Several states, such as Florida, give you 10 days to file a report with your local police department but it must be done unless the incident is very minor.

Next, let’s discuss practicalities. If you don’t report the accident to your insurance company, the other driver may come back to you later with claims of more serious damage to the car or even personal injury. If you file a claim with the insurance company, they can and will protect you from being coerced into paying for damage that didn’t occur.

Finally, will filing a claim raise your rates? By itself, no. Factors that can impact whether your rate will increase depends on who was at fault, your driving history, and the severity of the accident. In no-fault states, your rates are more likely to go up because the company will have to pay something regardless of who caused the accident. If you have a policy with “accident forgiveness” on small claims, it will not impact your rates.

Myth 6: Your rates go up as you age.

Facts: Age of the driver is a primary consideration when determining a car insurance rate. From age 16 until age 65 or so, car insurance rates tend to drop steadily for responsible drivers. At age 65, most car insurance rates begin to increase, but cap at age 85 at an amount slightly less than the price paid by a 21-year-old. The truth is that senior drivers do pay more, but the rate increases are often minimal if the person has a good driving record.

Purchasing the right car insurance for your needs can be confusing. At Alliance, we will help you get the coverage you need at a price that fits your budget. Contact us today to receive a free quote.

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