Auto Insurance Myths: Busted!


glass shattering

The following auto insurance myths are so common, they may sound right intuitively, but believing them could be costing you money. Which ones are news to you?

1) “Car insurance rates aren’t affected by zip code.”

Most people know that your drive record (if you have an DUIs, at-fault accidents, etc.) can really impact how much your monthly premium will be. However, it can come as a bit of a shock to know that what state, city, even zip code you live in could really affect how much you pay. According to our 2018 State of Insurance data that compared literally millions of car insurance quotes across the USA, we found the most expensive state for car insurance is Michigan, with the average quote being $2,610, while the least expensive state is North Carolina (only $865). This means you could be paying more for car insurance than your across-the-street neighbor!

2) “Thieves are more likely steal new or fancy cars.”

Here’s a list of the top ten most frequently stolen cars, compiled by the National Insurance Crime Bureau. The most stolen car in 2016 across the country was the 1997 Honda Accord. If you’re confused, we get it — logically it doesn’t make a lot of sense. However, the parts of older vehicles are more in-demand and more versatile, and while many people don’t know this, most professional car thieves traffic only in parts. They’re not stealing your car because they want to go on a joyride; they’re actually planning on making money off of your catalytic converter. Most thieves can’t do much with newer, electric-energy parts, so your Leaf might actually doing good for the planet, as well as warding off potential theft.

3) “If I’ve been with the same insurance company for years, they’re giving me the best rate I could get.”

As much as we hate to say this, consumer loyalty doesn’t always pay. In fact, J.D. Power found in a survey that customers who had been with their current insurer for 11 years or more saved an average of $426 AFTER switching insurers. Consumers should shop around for new car insurance regularly, instead of just relying on the same company their parents used, or the one they’ve been with for fifteen years. While the big insurance companies spend billions in advertising chasing consumers’ business, there are tons of car insurance companies out there that you’ve never heard of but that might offer you just the right combination of price and policy coverage.

4) “I can call an agent and ask for ‘full coverage’ and I’ll be set.”

Though it sounds like it should be, full coverage isn’t actually an insurance term agents use. So, what does “full coverage” actually mean? It is actually a combination of two other types of coverage: comprehensive and collision. Collision insurance covers just what it sounds like it might: any damage to your vehicle in the event of an accident, whether that’s a fender bender or losing a fight to an icy road. Comprehensive insurance, on the other hand, covers damage to your vehicle in the event of all kinds of unexpected, non-accident types of blunders, including—but not limited to—weather damage, theft, and fire. If you want the full auto insurance package (roadside assistance, personal injury protection, uninsured motorist coverage, etc.), you’ll have to specifically request those benefits from your agent.

5) “My car insurance policy expires tomorrow, so I should cancel my old policy today.”

Even if you’re uninsured for just a few hours, it can cause a serious hike in your rate when you sign up for new coverage. Unfortunately, insurance companies see any gap in coverage as a responsibility lapse, and penalize you accordingly. Remain without coverage for long enough, and you can be considered “high-risk.” So even if you’re poised to switch companies, make sure to keep your old policy active until your new policy has started. Then contact your old company; they should reimburse you any funds you’ve already paid toward the remaining period of your policy.

6) “My credit score doesn’t affect my car insurance.”

Unfortunately, car insurance companies have classified your credit score as what they call a “very powerful predictor” of the likelihood whether or not a driver will get in an accident or file a claim. Though certain states, like California, have passed laws making it illegal to allow a credit score to factor into a car insurance rate, in most states, it’s still fair game. Other surprising factors insurance companies use to determine your rate include your job, your level of education, and your gender.

7) “Car color affects my insurance premium. Owning a red one means I’ll pay more!”

While there are many factors that can affect your rates, the color of your car isn’t one of them. The Vehicle Identification Number (VIN) for your car tells your insurance company about your vehicle, including the color, where it was built, and the plant where the vehicle was made. While none of these have an impact on your insurance rate, they do make your vehicle unique so choose whatever color your heart desires!

These myths may seem like harmless rumors around the company water cooler, but the truth about car insurance is that it can get really confusing, really fast — especially if you don’t know what you’re paying for. Remember to always ask your insurance agent to explain the finer points of your policy and be sure to clarify anything that seems out of place.