Posted on: 6 March 2017
From the actual purchase and gasoline costs to cleaning and maintenance, owning and operating a car can be challenging. While it is legally required, auto insurance is another factor that most people do not pay much attention to. Considering that it is a large expense that will protect you, your family, and your vehicle in case of an accident, complete understanding of your car insurance is imperative. With this guide, you will understand the truth behind some common myths associated with your insurance.
You most likely already understand that a more expensive, luxury vehicle will cost more to insure. In addition, vehicles that are considered high risk, such as sports cars, are more expensive to insure. While surprising to hear, many people still believe the color of the car affects your insurance premiums.
Thankfully, this is not true.
Purchasing a bright-red car will not increase your premiums. Insurers may not place any emphasis on the color of your car, but they will take into account the make, model, engine size, age, and body type. A brand-new, bright-red, luxury sports coupe will be more expensive to insure than a used, bright-red, family sedan.
Not Reporting an Accident Will Save you Money
If you had a fender bender in the parking lot of your local grocery store, you may think that not reporting the accident will reduce your risk of costly insurance increases. However, this is a myth that causes many drivers to make expensive errors in judgment.
You may decide to not report the accident, but the other driver involved may report the accident to their insurance company. Once the other driver files a claim for damages or injuries, you will be automatically involved. Therefore, your insurer will find out about the accident whether you reported it or not.
Premiums Rise As your Age Rises
One other common myth associated with vehicle insurance is that premium costs rise as you age. This may seem true, since vision and reflexes suffer when you are older, but insurance companies do not increase premiums as you age.
Older drivers are considered experienced, so insurance companies feel they have a lower accident risk. As a matter of fact, many insurers will offer discounts on policies held by these experienced drivers.
New drivers, whether young or old, are inexperienced, so they are a higher accident risk and more costly to insure.
Credit Is Not a Factor
Living with bad credit is difficult. Not only will you be denied credit cards and other loans, but your bad credit can also affect your ability to afford car insurance.
In the past, states did not have the right to view your credit report before approving you for a policy. Today, that has changed. If you have bad credit, your insurance company has the right to increase rates if they feel you are not only an accident risk, but also a non-paying risk.
To ensure you receive the best rate possible, avoid tickets and accidents by following all traffic laws and driving safe. Also, make sure to clean up your credit. Pay off outstanding collections and pay down your debt. This will improve your credit score and help you get the most affordable insurance rates.
Insurance Companies Pay Off your Auto Loan
One of the hardest lessons drivers can learn is that their insurance company will not pay off their auto loan if the vehicle is totaled in an accident. Unless you have purchased extra gap coverage, your insurance company will only pay the fair market value of your car to the loan agency.
The fair market value is the cost of your car at the time of purchase minus depreciation. This value is often less than the balance on your auto loan, leaving you with an unpaid balance, even though the car is no longer in operation.
Kelly Blue Book and Nada are great resources to help you find the fair market value of your vehicle.
While overwhelming and expensive at times, owning and operating a vehicle is essential for most people. By debunking these common myths, you will have a better understanding of your car insurance policy.Share