Top Car Insurance Myths: How many have YOU fallen for?

by Ron Haynes

A few weeks back, I was at my parent’s home, helping them declutter their office when I ran across an old copy of Wealth Without Risk (1988) by Charles Givens. Givens was the financial guru of his day and one of the ways he advocated cutting expenses was by thoroughly examining your car insurance — the amount and type of coverage anyone carried. I’m sure as Mr Givens wrote his book back in the late 80′s, he never realized how easy it would eventually become 25 years later to get multiple car insurance quotes simply by typing in some information into a computer. I’m also pretty certain he never thought that car insurance would become so inexpensive or that the proliferation of knowledge about car insurance would also perpetuate some incredible myths.

Top Car Insurance Myths

How many of these myths have you fallen for?

1. My credit score has no bearing on my car insurance rates.

Wrong! All insurance companies use credit scoring to determine if you will qualify for auto insurance and what your premium rate will be. Rates can differ by up to 50% between someone with excellent credit and someone with poor credit. Know your credit score before you apply and if your score isn’t that good, take steps to fix your credit using a company like GoLookOnline.com. Companies consider a good credit sore to be a way to see if you are responsible with the timeliness of paying your bills … including your auto insurance bills.

Click HERE to find out your credit score … all three of them for FREE!

2. Driving a red car will raise my auto insurance rates.

Wrong! Car insurance companies are interested in the year, make, model, body type, and engine size of your vehicle. The color may be highly important to you, but your car insurance company doesn’t care if your car is red, blue, black, silver, gold, green, or sunshine yellow.

3. I just backed over my 2,000lb brick mailbox. My homeowners insurance will cover that, right?

Wrong! Your homeowner’s coverage has nothing to do with your auto insurance. In this scenario the only way your car will be covered is if you maintain comprehensive insurance coverage on your car. Even then, it only pays AFTER you pay your deductible.

4. My car insurance will pay if my $1,500 Macbook Air gets stolen from my car.

Wrong! Generally speaking, your car insurance will only pay for items that are attached to the vehicle. It doesn’t cover your personal belongings you leave inside the car. You’ll probably have to file a claim on your homeowners insurance or renters insurance policy to be compensated for personal belongings.

5. If I have a wreck and total my car, my auto insurance will pay off my car loan (or lease).

Wrong! If your car is totaled, your car insurance will pay the actual cash value of your car. The company adjuster will try to find a similar car to yours via Craigslist or the classifieds and THAT will be what you are compensated AFTER your deductible is paid. If your car is worth (in the classifieds) only $5,000 yet you owe $6,000 on it, the insurance company will subtract your deductible from the $5,000 and pay your lender the rest. You have to make up the balance. The only way to avoid this situation is to maintain GAP insurance to pay for this GAP in coverage.

Where to buy car insurance online?

There are a myriad of companies that can provide you with the car insurance you need. Most of them simply need you to fill out a few fields in a simple form to initiate the quote process. And remember, it’s just a quote! You can’t start saving money until you take that first step.

The Hartford (through AARP) has great rates for ANYONE but especially the over 50 crowd. If you’re not that old, don’t worry about it, they can insure you with a great rate even if you’re less than 50 years old and the Hartford is a well respected name in the insurance industry.

InsureMe.com has the best rates from companies such as State Farm, Liberty Mutual, Progressive, AllState and Nationwide. You just can’t beat these guys.Insureme works a lot like LendingTree, shopping your information to a select group of insurers who then give you a quote.

Geico, who doesn’t love the little green lizard … I mean, Gecko?

USInsuranceOnline.com has been coming on strong for the past few years as a significant leader in the online car insurance world.

About the author

Ron Haynes has written 1000 articles on The Wisdom Journal.


The founder and editor of The Wisdom Journal in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a Human Resources and Management consultant, helping companies know how employees will behave in varying situations and what motivates them to action, assisting firms in identifying top talent, and coaching managers and employees on how to better communicate and make the workplace MUCH more enjoyable. If you'd like help in these areas, contact Ron using the contact form at the top of this page or at 870-761-7881.


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{ 4 comments }

Cherleen @ yesiamcheap

These are great points. I remember when I was planning to buy my first car, my parent’s friend told me to choose red so that I can get better insurance rates. I wondered how the car’s color is related to its insurance value.

Lurve

No if you have insurance coaervge that meets your home state’s requirements, it won’t cost you any more to take the trip for insurance. If you have an accident in another state, your insurance will automatically adjust for another state’s higher limits or for no-fault coverage. For good coverage, though, you should carry at least 100/300/50 limits. Ask your agent about this.Even if your company doesn’t usually write in all states, you’re still covered. Just be sure to have the insurance ID card with you at all times, and be sure the license for anyone who might drive is current. Also, be sure your policy is paid up for at least the length of the trip. We did the same thing in the summer of 1988 a 31-day, 7000-mile trip out west, including several states where our regular company doesn’t normally write insurance, and had no problems at all.Enjoy!

martin

some very good points in there never knew that my credit score would affect my insurance costs maybe that is why my insurance costs keep going up each year

Joe Morgan

I had heard the “pay more if your car is red” myth growing up… I think it may have been rooted in the belief that red attractive the eye of the police better than other colors, back before radar. We used to call it “arrest-me red” :-D

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