There are many auto insurance myths & facts regarding auto insurance that, if dispelled, can help one better protect their future.
When most consumers think about auto insurance, they tend to concentrate on price rather than coverage and how it can help to prepare for unexpected incidents.
Being insured at the right rate for the right risk can assist consumers by protecting assets, such as avoiding property liens, seizing of your 401k benefits, financial investments, as well as preventing wage garnishments on future earnings.
While many drivers are cautious and drive defensively, an accident can happen in the blink of an eye.
Myth #1: “The color of my vehicle determines the rate of my insurance.”
Fact: It doesn’t matter if your vehicle is fire engine red or minion yellow, other variables are taken into consideration when your auto insurance rate is being calculated. The color of your vehicle only stimulates and draws attention to the eye.
The age of the vehicle, safety features, year, make, and model of the vehicle, engine size, cost to repair the vehicle, safety record, and the likelihood of theft are some of the 25 variables that are taken into account when calculating the rate for insurance.
Myth #2: “I only need the minimum amounts of coverage because I have full coverage.”
Fact: There is no such thing as “full coverage.” The term “full coverage” refers to comprehensive and collision coverage, which protects the body of the vehicle from events like an auto accident, theft, fire, hail damage, etc.
When most people are involved in an at-fault accident, they rarely think about the amount of coverage they carry for liability. The liability limits (Bodily Injury & Property Damage) determine the amount of money your policy will either pay to repair the personal property of the person you hit or the amount of money that will be paid if another person is injured.
If you’re involved in an accident and have state minimum liability limits, it is possible to exceed those limits in an auto accident and could possibly cause financial hardship.
Myth #3: “My credit does not affect my insurance premium.”
Fact: While insurance companies do not run a hard credit check, they do an insurance verification score, which is loosely based on your credit history and is considered a soft hit.
Insurance companies look at your credit to determine financial stability. Statistics show that people who have good credit history are more reliable, and insurance companies reward stability with better pricing and additional discounts.
Myth #4: “Insurance is more expensive for your vehicle as you get older.”
Fact: There’s only one significant period within the driving age that causes premiums to increase; 16-25. Studies show this demographic is more likely to be involved in an auto accident because of a lack of experience operating a vehicle.
If you are over the age of 25, your state may provide a Defensive Driver’s Discount or a Mature Driver’s Discount if you are over the age of 55.
Myth #5: “The accident wasn’t my fault, so my insurance will not go up.”
Fact: Insurance companies reserve the right to charge an insured for a not-at-fault accident. The most common occurrence happens involving hit-and-run accidents. When the insurance company pays on a claim the insured did not cause, it is a financial loss the insurance company incurs and must be recovered by surcharging the insured through premium.
It is always the best practice to ask your insurance agent the company’s policy regarding not-at-fault accidents.
Omari J. Faulkner is a Contributing Editor with the focus being insurance to include life, home, auto, and more. For more information regarding insurance protections and their myths & truths, contact O. Faulkner & Associates at www.InsuranceFaulkner.com.