6 Common Car Insurance Myths

Let us clear the air on these 6 common car insurance myths. You're welcome.

glass shattering

The following car 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. Where I live doesn’t affect my rate.

This isn’t exactly a myth, per say, but people don’t often realize just how much their zip code can affect their car insurance rate. For example, we ran a mock car insurance shopper through our real-time car insurance comparison platform, to see how different his rates might be within one state, keeping all other facts about him like credit score, age, gender, etc., the same. There are 2,080 counties in Texas, where The Zebra is headquartered. We kept all other information the same for a potential buyer, changing only his zip code. The difference between the most expensive zip code in the state and the least was $2,282 per year. That’s huge!

2. Thieves prefer to 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 2012 across the country was the 1996 Honda Accord. 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 planning on making money off of your catalytic converter. Another thing to remember is that liability coverage alone does not cover the theft of your vehicle—you need comprehensive coverage to do that.

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

Loyalty doesn’t always pay. In fact, J.D. Power just found in their most recent car insurance shopping 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 that they’ve been with for fifteen years. The big insurance companies spent $5.7 billion in advertising in 2012 chasing consumers’ business, but 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. You can compare estimates from more than 200 companies in seconds at thezebra.com.

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. What most people mean by “full coverage” is comprehensive and collision coverage. Collision insurance covers just what it sounds like: 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 package—roadside assistance, personal injury protection, which covers the cost of medical bills for you and your passengers in the event of an accident, or uninsured motorist coverage, you’ll have to spell that out for your agent.

5. I’m about to get new car insurance tomorrow, so I should cancel my old policy today.

Even if you’re uninsured for just a matter of hours, it can cause a serious hike in your rate. 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. They can’t use my credit score in determining my rate, can they?

Unfortunately, car insurance companies have learned that credit is what they call a “very powerful predictor” of the likelihood 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 fair game. Other surprising factors insurance companies use to determine your rate include your job (if you have a job/career that’s seen as more stable, you might get a better rate); your level of education (again, some companies have found that drivers with higher education file fewer claims); and your gender (not only do women drive less, but men are responsible for a full 4 out 5 DUIs.)