Top 5 auto insurance myths

Published April 6, 2016|3 min read

Policygenius Image

If you steered clear of buying a red car because you thought your insurance rates would go up, you’re not alone. In fact, 46 percent of those surveyed by Insurance Journal thought this myth was true. But stop and think about it: Has your insurer ever asked for the color of your car when pricing out rates? We didn’t think so. When it comes to car insurance rates, the industry is color-blind.

Myths aside, buying car insurance or shopping for lower rates can be confusing enough. To help you separate fact from fiction, we’ve debunked five other top insurance myths. Take a look:

Myth #1: I can get by with minimal liability insurance

Well, maybe. But do you really want to drive around with the bare minimum in coverage? For a bit of background, liability insurance covers bodily injury and property damage (not damage to your car - this is covered by collision insurance). Although you’re required to have liability insurance in every state except for New Hampshire, the required amount can be as low as $15,000 in some states. Most insurance experts will tell you that it’s a smart idea to carry more than the minimum required amount. Why? If you’re in an accident and have resulting injuries, your medical costs may be much higher than the amount of your liability insurance. Also, if there is property damage, this could easily exceed that minimum too. Without enough insurance, you’d have to pay for the costs out of pocket.

Another thing to consider: If you’re in an accident that leads to a lawsuit, and you don’t have enough insurance coverage, your assets could be at stake. To be on the safe side, the insurance industry recommends a minimum of $100,000 of bodily injury coverage per person and $300,000 per accident, according to the Insurance Information Institute.

Myth #2: That one speeding ticket is going to raise my rates

In some cases, one speeding ticket can raise your rates. Your driving record and how fast you were going are indeed factors that insurers take into consideration when determining your rates. For the most part, however, you’ll have to get at least two tickets before you see an increase in your insurance, according to Progressive.

Myth #3: Your gender doesn't matter when it comes to insurance rates

This would be nice, however, women tend to pay less than men for insurance in all states except for Massachusetts, Hawaii, and North Carolina. There are many reasons for this, but namely, women are statistically safer drivers than men. With this said, your personal driving record is still the most important factor when it comes to your insurance rates. So, if all things are equal, a man with fewer accidents on his driving record than a woman will likely pay less for insurance. And, as a general rule, rates become more equitable between women and men once men are older than 25. Generally speaking, this is because older men are considered safer drivers than younger men.

Myth #4: My neighbor's insurance rate is low — I should get the same rate!

In a perfect world, this would be ideal. But your rate has nothing to do with your neighbor’s. Your rates are based on personal factors such as your driving record, age, the type of car you drive, and whether you’re married or single.

Myth #5: I'm not responsible if someone driving my car gets in an accident

Actually, you could very well be held accountable for that accident even if you weren’t driving. In most states, the auto insurance policy on the car in question is considered the vehicle’s primary coverage — regardless of who is operating the car. This means that your insurance is responsible for paying for damages caused by the collision.

If your insurance, however, doesn’t provide enough coverage to pay for all the damages, the driver’s insurance may then kick in to cover the remaining costs. Insurance regulations are different from state to state, so if you want to find out how a scenario like this would play out in your state, it’s best to contact your insurance agent or company.

Image: Tony & Wayne

Get essential money news & money moves with the Easy Money newsletter.

Free in your inbox each Friday.

Easy Money phones image