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Car Insurance Myths Exposed

Reality check, many of us, still ask our not so expert friends and relatives on various decision-making matters, and that includes buying a CAR INSURANCE! Although they may have experience or knowledge, some that they may be sharing are their personal thoughts or pass on beliefs that are not necessarily true. Those will not help any get the auto insurance that fits their needs and budget. Its high time to expose those myths, learn facts, and get the best auto insurance quotes.

Myth 1: Red, white and black cars are more expensive to insure, are they?

Fact check: No, they are not! This is the most well-rooted myth known, and still many falls for it. Contrary to popular belief, vehicle colors have nothing to do with the computation of auto insurance premium rate. If you know the basics about auto insurance, you will understand why you need to get insurance. The cost will only come second. The make and model of the car, purchase price, the likelihood of theft, the overall safety, and the possible cost of repairs are all weighed in calculating premium rates. Simultaneously, car models that are prone to passenger damage or are frequent thieves target like sports cars cost more to insure.

Myth 2: My credit standing will not affect my car insurability, will it?

Fact check: Yes, it will! Gone are the days when insurance companies don’t include financial stability in the criterion. The insurance industry, the commerce that manages risks, now uses a credit-based insurance score system to determine risks of their potential policyholders. Drivers and car owners who have good credit standing are believed more responsible in meeting their premium dues and have the capability to keep themselves healthy physically and mentally. Their vehicles well maintained, thus fewer chances of meeting accidents. On the viewpoint of the insurance provider, managing their risks is tolerable. Subsequently, premium rates for these drivers and car owners are lesser. Insurance applicants who have a low credit standing most likely cannot avail of monthly payment terms, will get higher premium rates and approval may take longer.

Myth 3: Minimum auto liability coverage required by law is best, isn’t it?

Fact: No, it is not! Every country or state has its own vehicle insurance public policy, most require auto liability coverage but on a very minimal amount. This coverage is responsible for the after-accident expenses such as a third-party vehicle or property damages, bodily injury or death. Lawmakers understand the need for it but do not usually do the calculation on their recommended policies. It is possible that they arrived on the amount using the statistics or researches whereby not every incident was adequately accounted for. Thus, it is way below the entire amount involved when dealing with third party property repair, hospital and other medical bills and burial expenses. Therefore, if insured will only consider the coverage amount required by the state, they are facing the possibility of spending out of their pockets, losing the purpose of purchasing the insurance policy.

The insurance experts recommend a minimum of $300,000.00 per accident and $100,000.00 of bodily damage protection per person.

Myth 4: Staying in one insurance company means savings, does it?

Fact check: No, not necessarily. The only advantage one can get from staying in an insurance company is the ease of automatic annual renewal of the policy. If the insurance provider has other insurance products, then there is also bundle insurance premium discounts. As the saying goes, the only constant in this world is changing, and the same applies to car insurance commerce. This industry evolves according to how the need for protection and handling of risks changes, and an example of this is the scoring systems they apply in approving insurance applications.

Another example is the newly proposed behaviour based insurance system used to detect risky behaviour driving—a driver and car owners coverage level needs and capacity to pay changes also from time to time. For example, insurance holder loss his job and thus can no longer keep with higher premiums. So, shopping around annually, planning on a budget and knowing one’s needs are the key to getting the auto insurance that fits finest.

Myth 5: Monthly premium payment is cheapest, is it?

Fact check: No, it is not! The basis for premium fees is comprehensive, varies from state to state but meeting this financial obligation is another story. Many insurance providers offer monthly, quarterly, semi-annual and annual or one-time (the standard) payment terms. Although paying it monthly or quarterly allows the policyholder to spread the cost and manage their finances well, it is not a good option in the long run. The difference is that insurance companies impose upfront deposits (amount varies per company) and adds interest when policyholder opts to avail monthly as a payment option. It is designed like a loan. Thus, it is not the cheapest.

Myth 6: No claims in previous years means no increase in insurance premiums, right?

Fact check: Wrong, it only has an impact. Auto insurance is not all about driving records and tickets. Although policyholder is proving a sound driving track here, the basis for premium insurance costs includes so many other factors such as drivers age, gender, marital status, coverage levels, vehicle make and model, location, household and so on. But don’t fret, many, if not all insurance companies give discounts and promotions to good drivers (mechanics apply and varies). Also, applying to other auto insurance will be much easier if the driving record is clean. 

Myth 7: Personal auto insurance protects business car uses, too isn’t it?

Fact check: No, it isn’t. Although many self-employed professionals or employees can get away with it, it shouldn’t be that way. If a car is used mainly for business, a business auto insurance must be purchased primarily because personal auto insurance is designed to protect policyholders minimally. It has not enough coverage to protect a business. For example, a business owner used his private car to bring his team to a sales meeting, and while on their way, a van collided with them. He was sued and his company. The insurance provider can only cover the expenses up to the personal auto insurance limit. His business will not be protected.