8 Auto Insurance Myths

To get the best price for your auto insurance plan, know the facts about it.

When considering purchasing an auto policy, it's important to be aware of the factors that influence your costs and coverage. Unfortunately, there is a lot of erroneous data in circulation about so-called "common knowledge" regarding car insurance. We separate fact from fiction.

Myth 1 – Car insurance cost can be affected by color.

The coloring of your car doesn't figure into the price of your auto insurance. The cost of a policy is based in large part on the make, model, body type, engine size, age and sticker price of your vehicle, as well as the total cost of repairs to the vehicle, its safety record, and so on.

Myth 2 – The cost of the insurance policy increases with age.

Older drivers are usually given discounts auto insurance. For example, those over 55 years of age may qualify for a lower premium if they successfully complete an approved accident avoidance course (available through local agencies, government agencies, and also through the AAA and AARP). Retirees or those who aren't employed full time and therefore, who are driving less may also be eligible for a car insurance discount. Older driver programs and discounts vary by state and insurance carrier and driver age, so if you believe you may qualify, consult an insurance professional.

Myth 3 – Your credit history has no effect on your insurance rates.

Your credit score as determined by your credit history can be influential when buying insurance. Insurance companies take credit score into account when issuing policies, because it has been linked to the likelihood that you file for a claim. With good credit and the ideal insurance score, you could end up paying less for your insurance coverage.

Myth 4 – Your insurance policy will cover you if your car is stolen, damaged by fallen tree limbs, hail, flood, or fire.

Only collision and comprehensive insurance are necessary if you arrange for comprehensive and collision coverage together with your standard policy. If a car is worth between $1000 and $10,000, or equal to or more than 10 times the annual premium, these coverages are cost-effective but collision and comprehensive insurance are necessary as your automobile is fully protected against all types of damage.

Myth 5 – You only need to have the minimum level of liability insurance required by the law.

Every state requires you to secure a certain amount of automobile insurance, but paying for the minimum possible coverage level means you're more likely to pay out-of-pocket for losses incurred after an accident and those costs may be high. The insurance industry and consumer groups generally recommend obtaining a minimum of $100,000 of bodily-injury protection coverage per individual and $300,000 per incident. You may want to think about an umbrella liability policy if you have substantial financial assets to protect.

Myth 6 – In an accident, if someone else drives your car, their auto insurance will cover the damages caused.

In most states, the automobile insurance covering the vehicle is classed as primary insurance. This means that the auto owner's insurance company must pay for any damages resulting from an accident, regardless of who is driving. Policies and regulations differ by state; make sure you understand the regulations before you allow someone else to drive your car.

Myth 7 – Soldiers often pay more for their insurance than civilians.

If an individual is in the military regardless of which branch of the service they qualify to receive a discount on auto insurance. You will have to provide documentation that shows your name, rank, and the date that you will be enlisted in the military (in some instances, your commanding officer will be able to make a phone call on your behalf). Some auto insurance companies offer a variety of discounts for former members of the military and their spouses.

Myth 8 – Personal auto insurance covers business use of your car.

If you're self-employed and use your vehicle for business purposes, personal auto insurance may not be a viable solution, so it is vital to source business car insurance. If you have other employees such as employees using your vehicle, regularly check their driving histories.