Insurance contracts can be very complex and there is often a great deal of fine print involved. It’s no wonder that many people end up learning what they know about car insurance from other consumers. Unfortunately a lot of the information that gets passed around about car insurance is actually incorrect. This article will highlight some of the most common misapprehensions about car insurance!
Having a bad driving record is the only factor insurance companies consider
There are actually a number of variables that go into determining how much your insurance premium will be, in addition to your driving record. Your age, how many years you have been driving, the age of your vehicle, the place you live and even your credit history can go into determining your insurance premium.
Every insurance company has their own formula for calculating risk and that is one of the reasons why it is always a good idea to shop around for car insurance.
Having a good driving record will bring down my premium
You might have 20 years of good driving under your belt and expect your premiums to go down. However if you continued to drive the same model car that you did 20 years ago, your premiums might go up despite the good driving record.
The color of your car influences insurance costs
Many people incorrectly believe that a red car will cost less to insure because it is very easy to see on the road or that a black/grey car will cost more to insure because it blends in with the road. The reality is car insurance costs are not affected by the colour of the car.
Little cars are cheaper to insure
Smaller vehicles tend to take more damage in crashes, so are easier to write off. For that reason small cars are not always cheaper to insure. Some cheap smaller cars might not have the safety equipment of larger vehicles either, for example, ABS braking systems.
If I still owe money on my car loan, the insurance will pay for it
Some people incorrectly believe that if a car is written off after an accident, the insurance company will give you cash equivalent to the amount you still owe on the car. Unfortunately this is not true, and the insurance company will only pay you what the car was worth.
Because my car is old it is less likely to be stolen
On the surface it seems logical that car thieves would try to steal more valuable newer cars. However older cars tend to be targeted because there is a market for parts for those cars and the security on older cars is typically weaker than a new car.
Insurance companies can cancel your insurance at any time
Without a compelling reason (for example fraud), insurance companies must fulfil their end of the insurance contract.
If your car is stolen, the contents are covered
Unfortunately anything inside the car when it is stolen are not covered by insurance. However if you have a good home and contents insurance policy they might provide coverage if one of your personal items is lost when the car is stolen.
Drivers of fast and expensive sports cars pay more for insurance
This is not always the case because there are various factors at play when determining the cost of your insurance premium. A 40 year old person who drives a sporty Mercedes coupe but has an impeccable driving record might end up with cheaper premiums than someone under 25 who has had a few crashes and drives a Subaru WRX.
So we have checked out some of the most common car insurance myths. Just remember, any time you are shopping for car insurance, it always pays to look around for the best deal!