Common Auto Insurance Myths

Posted on: 30 October 2014

While automobile insurance isn't a new concept, it is still not fully understood by many drivers. In fact, many drivers believe long-standing myths about vehicle insurance that may be costing them money or leaving them with costly gaps in their coverage. The following list of common auto insurance myths still thrive in popular culture even though they have no basis in reality.

Myth 1: Red Cars Are More Expensive to Insure

This misconception has been around for years. The truth is that car insurance companies do not use a vehicle's color when determining your rates. If you drive a red car and have high insurance rates, it's because of other factors, such as a poor driving record, age, or where you live.

Myth 2: A Brand New Car Is a Higher Theft Risk

Not only is this untrue, it's actually the opposite of reality. In fact, older vehicles are far more likely to be stolen than brand new models. Newer cars have highly advanced theft-deterrent systems, making them difficult to steal. Older models are more easily stolen, and there is a much larger market to sell their parts.

Myth 3: Your Insurance Will Pay to Replace a Totaled Vehicle

Some drivers think that if they total their car, they will receive enough from the insurance company to replace it. However, that is not typically the case. Insurance companies base their reimbursement amounts on the fair market value of the vehicle, not on how much you owe or how much a new car will cost. If you still owe more than the fair market value, you will have to pay the remaining loan on the car even though you don't have it any more. Additionally, those with older vehicles may only receive a few thousand dollars, which is not enough to purchase a replacement.

Myth 4: Comprehensive Coverage Covers Everything

The term comprehensive really throws a lot of drivers, because it's not actually comprehensive. This coverage pays for damage caused by fire, theft, weather-related issues, vandalism, and hitting animals. It does not cover damaged cause by rolling a vehicle into a ditch, hitting a neighbor's mailbox, or sideswiping the fast food restaurant menu. There are other policies which do cover these instances, but you must purchase them separately.

Carefully think about these insurance myths to determine if you've fallen victim to their claims. If so, contact your vehicle insurance company to ensure that there aren't any gaps in your coverage that could result in large out-of-pocket expenses.

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