Busted! The 7 biggest car insurance myths debunked


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Licensed Auto Insurance Agent
UPDATED: 2021-03-01T20:49:23.030Z
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Insurance is complicated, and the last thing you need is to fall victim to one of the many myths commonly believed about car insurance. We uncovered seven of the common myths that people believe about car insurance. Let’s dive in.

Myths covered in this blog:

Myth #1: Full coverage covers everything

The term “full coverage” is often used to describe car insurance coverage, but it’s actually misleading because it doesn’t cover everything. That’s why a lot of car insurance companies refrain from using the term to describe car insurance coverage because most people think their insurance will cover everything if they have the so called “full coverage” policy.

When you hear someone say they have full coverage, it typically means they have comprehensive, collision and liability car insurance coverage. While their policy covers a lot of situations in which their car could be damaged, there are still some exclusions. To name one, damage to your car that is caused by normal wear and tear is not covered by car insurance. You also may not be covered if an uninsured motorist hits your car and injures you.

Fact: Car insurance companies don’t offer policies that cover everything

Unfortunately, car insurance companies don’t offer policies that cover all car related repairs, but full coverage with comprehensive, collision and liability coverage is almost as close as you can get.

Car insurance companies also offer specialty coverage types that you can add on to your policy. They’ll cost you a little more on your premium, but you’ll be better covered. A few examples of optional car insurance coverage that you can add to your policy, include gap insurance and roadside assistance.

According to Esurance, full coverage typically doesn’t include coverage for medical payments, uninsured motorists/underinsured motorists, custom parts and equipment, rental car, gap insurance and roadside assistance.

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Myth #2: Car insurance is more expensive for red cars

If you’ve been scared away from buying a red car because you thought they were more expensive to insure, you’ve been tricked by this myth. Often times, you won’t even be asked what color your car is when getting car insurance quotes.

While there are many factors that determine the cost of car insurance, the color of your car is not one of them. People who own a red car won’t pay more than someone who has a blue car, just because of the color.

Fact: The type of car you drive affects your car insurance rates, but your car’s color doesn’t

Although the color of your car doesn’t matter when it comes to determining car insurance rates, the type of car you drive does. Your car’s make and model can affect how much you pay for car insurance.

Your car could cost more to insure if you buy a luxury car with top-of-the-line features rather than the base model. It depends on your car’s value, how much it would cost to repair it, how expensive replacement parts are and so on.

Myth #3: Items stolen out of your car are covered by car insurance

Imagine a thief breaks into your car, vandalises the inside causing damage and steals your laptop out of your car. Your car insurance will help replace the laptop, right? Not quite.

Car insurance doesn’t actually cover personal belongings in your car. While comprehensive car insurance coverage does cover theft, it only covers theft of your vehicle or any car parts, such as your car’s radio.

Additionally, if your car is vandalised or damaged from a break-in, the damage to your car would be covered by the comprehensive portion of your policy. But the theft of any personal items aren’t covered by car insurance.

Fact: Items stolen out of your car may be covered by renters or homeowners insurance

Even though car insurance doesn’t cover the cost to replace items stolen from your car, your renters insurance or homeowners insurance policy typically does cover theft of items from your car.

Renters and homeowners insurance policies include coverage for personal belongings, up to a certain limit specified by your policy. It typically covers your personal items while in your home or apartment as well as while traveling, including items in your car.

So as long as you have renters or homeowners insurance coverage, your stolen laptop would be covered by one of these coverages as long as you have enough coverage for it after you pay your deductible. If you need renters or homeowners insurance, you can visit the links below to see which companies consumers recommend.

If your car insurance company offers renters insurance as well, it’s often cheap to add renters insurance and bundle it with your car insurance. You can also check out companies that focus on renters insurance only. Lemonade is a highly rated renters and homeowners insurance company that offers policies at a low rate. The company operates using technology to offer a more modern insurance experience.

Myth #4: Your credit score doesn’t affect your car insurance rates

For the majority of drivers in the U.S., credit affects car insurance rates. Unless you live in California, Hawaii or Massachusetts, your credit history can affect your car insurance rates.

These three states have laws and regulations that prevent insurance companies from using credit history as a factor for determining your premium. In all states but these three, credit history is fair game for insurance companies to use.

Fact: In most states, your credit can affect your car insurance rates

The reason behind this is because there is a correlation between a driver’s credit score and how much the driver costs an insurance company. It’s been concluded that the lower your credit score is, the higher the probability that you’ll have a loss.

Like Allstate, some insurance companies use your insurance score as a determining factor of your price. Your insurance score calculates how risky you are to insure based on factors related to your credit.

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Myth #5: If your friend drives your car and gets into an accident, their insurance will cover it

If you let a friend borrow your car and they get into an accident with it, your car insurance is responsible for the damage. A lot of people think that car insurance follows the driver, but it doesn’t.

Fact: Car insurance doesn’t follow the driver; it follows the car

Your car insurance follows your car and not the driver. The same would go for if you drive someone else’s car and get into an accident. In that situation, the insurance of the owner of the car would cover it.

If you let your friend borrow your car, you’re putting a lot at risk. If the driver gets into an accident in your car, the claim goes on your insurance policy. This means that it will be on your claim history and could affect your car insurance rates when you go to renew your car insurance and for years after.

Note: If you have roommates, they should be listed on your car insurance policy.

Myth #6: New cars are always more expensive to insure

Newer cars can cost more to insure than older ones, but not necessarily. It’s not a guarantee that your new car will be more expensive to insure than an older one. There are many factors that affect the cost to insure your car and sometimes, parts for newer cars are easier to find and cheaper than some older cars.

Fact: New cars can be more expensive to insure than older ones, but not always

Car insurance companies consider a few things about your car when determining how much it costs to insure, but it’s not a given than a newer car will cost more to insure than an older one. Insurers also look at if your car’s make and model is one that’s targeted by thieves or if it has safety features. Newer cars usually have the best safety features, which can earn you a lower premium.

Some older luxury cars are more expensive to insure than newer ones. Old parts can be hard to find and usually expensive. Liberty Mutual says that thieves target high-demand parts. Parts on an older car may be commonly stolen, which would increase the cost of insurance.

Myth #7: Car insurance rates always decrease when you turn 25

Age is a factor that affects car insurance rates, but your rates don’t automatically decrease once you reach your 25th birthday. All companies treat it differently, but generally your car insurance rates may begin to decrease around when you reach age 25 as long as your driving record is clean and everything else is okay.

Please note that it could happen before or after you’re 25. There’s no hard and fast rule.

Fact: Age affects car insurance rates, but your rates don’t automatically decrease at age 25

Your age works hand in hand with the number of years you’ve been a licensed driver. Both affect your car insurance rates and are both related to how many years of driving experience you have. Younger drivers with less experience are more likely to file a car insurance claim and therefore tend to pay a higher premium.

However, the age that you see a decrease in car insurance rates can depend on how long you’ve had your license for. You could be 25 years old but only got your license a few years ago when you were 22. In this case, you may not see your rates decrease until much later.

If you got your license when you were 16 and have been driving for a while and kept a clean record, you could see your rates decrease closer to age 25.

Car insurance rates for young drivers are some of the most expensive rates around. It may be worth it to test the market and shop around each year when it’s time for you to renew your policy.

Visit our car insurance rankings page to find a list of the companies consumers have rated as the best in your area and see if you can get cheaper quotes than what you’re paying now. Be sure to get quotes from multiple companies in order to compare your rates and find the cheapest one. You can also try an online car insurance marketplace.

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