Auto insurance: The 6 worst myths, busted
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Car insurance has always held a strange spot in America’s popular imagination. Even though nearly 90% of us need coverage, buying a policy and getting a good rate is seen as one part consumer research, one part black magic.
Misunderstandings and myths about car insurance are widespread. Some of them are silly and benign - and some are downright dangerous. Today, we’re naming these myths and busting them wide open. Here are 6 of the most common:
1. Buying the bare minimum is good enough.
Each state has its own legal requirements for you to operate a motor vehicle. In Florida, for instance, you only need liability coverage for $10K in property damage (PD), $10K in personal injury protection (PIP), and bodily injury (BI) coverage of $10K per person / $20K per accident. New York state, on the other hand, requires 5X more BI coverage per accident, 5X more personal injury protection, and an additional policy for uninsured / underinsured motorists. In other words, the legal requirements vary tremendously from place to place.
But what every state has in common is that the bare minimum may be far less than you need. A significant accident can easily cause hundreds of thousands of dollars in financial damage. Buying the minimum policy can leave you on the hook for these massive additional costs. That’s why consumer groups generally recommend BI coverage of at least $100K per person and $300K per accident. Anything less is putting your long-term financial health in grave danger.
2. It pays to be loyal to your insurance company.
Most businesses reward you for your loyalty. The longer you stay with your bank, for instance, the more special rewards and benefits they’ll offer you.
Car insurers are different. It’s a standard practice across the insurance industry for carriers to raise their members’ monthly premiums. This means, in essence, that the longer you’re with your auto insurer, the higher your rates get. It’s exactly the opposite of the savings you’d expect.
The solution, of course, is to periodically switch insurers. According to research by JD Power, consumers who change to a different insurance agency save $300 on average. In other words, loyalty just doesn’t pay. (Read more about the common mistakes people make when shopping quotes for car insurance - and how to avoid them.)
3. You don’t need to report an accident if you’re not at fault.
Many people wrongly believe you only need to report an accident when you’re at fault. Falling victim to this myth can get your entire insurance policy canceled just when you need it most.
How? Check the terms of your insurance policy. It almost certainly requires you to report any accident - even if no one was injured, and even if you’re not at fault. That means you’ve signed a legal contract agreeing to do just that. If you breach the terms of the contract by failing to report an accident, the insurer may be within their rights to cancel your policy. That could leave you on the hook for the next accident - which might be very serious, and very expensive.
And if the other driver ends up making a false claim against you, your insurance company can only protect you if you reported the incident in the first place. That’s why notifying your insurance agency after an accident isn’t just your legal responsibility - it’s a way to protect yourself down the line.
4. The color of your car affects your rates.
According to a 2015 survey, nearly half of all licensed drivers believe that red cars are more costly to insure. Red cars, people say, are more likely to be pulled over by cops. Or their drivers are generally more reckless. Or the cars are more likely to be stolen. And insurers know this, so they charge you more.
The only problem with this story is that it’s completely, 100% false. This weird little myth has been floating around for years, and it’s just not true.
When you get an insurance quote, you probably won’t even be asked for the color of your car. Insurers want to know its make and model, your vehicle identification number (VIN), your driving history, your marital status, and many other details. All of these things are important and can affect your monthly insurance premiums. But the color of your car is a non-issue.
5. Full coverage insurance covers every possible issue.
The first problem here is that “full coverage” insurance is a popular consumer term, but it isn’t a technically accurate one. You can’t buy a “full coverage” policy from your insurer - it’s not a thing. Generally, what people mean when they refer to “full coverage” is a combination of collision coverage and comprehensive insurance policies.
Collision insurance covers damages to your car in driving-related incidents - e.g. if you crash into a tree. Comprehensive insurance, meanwhile, goes even further than this. It covers non-driving-related damages, such as hail, vandalism, theft, fire, and so on. But even if you have both collision and comprehensive coverage (“full coverage”), there are still countless scenarios that _aren’t _covered. These include:
- Your own medical bills, which you need a Personal Injury Plan (PIP) to safeguard against.
- Accidents involving uninsured or underinsured motorists.
- Towing and roadside assistance costs.
- Damages to a rental car you’re operating.
- So-called “gap coverage” - i.e. if your car is totaled while you still owe more than it’s worth.
We recently published an entire article about full coverage vs. liability insurance - read up for the details!
6. You shouldn’t bother shopping around.
This is hands-down the weirdest myth out there. Many consumers seem to think insurance policies are all the same - and it’s just not true.
Finding great car insurance is like any other consumer journey. You have to see what’s on the market, compare quotes, check out the fine print, and read real consumer reviews before you make a purchase. In the inimitable words of Stevie Wonder, you better shop around.
So if you’re ready to get started, search for insurance quotes via OnlineAutoInsurance and see what options are available. You’ll be glad you did.