Car insurance myths need explanation

Buying car insurance is complicated as it isn’t something that most people think about very often. Most of the time, you spend a few minutes picking out a company and a policy, you agree to the terms, and you write a check. For the vast majority of consumers, that’s the end of it. They never give their car insurance another thought for as long as they own their vehicle unless they happen to have an accident.

Because few people spend any amount of time thinking about car insurance, a lot of myths and misunderstandings persist. Here are a few things that people frequently misunderstand about car insurance:

Myth: The color of a car affects the amount of the premium

Fact: This one has been around for years; the rumor is that red cars cost more to insure than cars of other colors because the color is “sporty.” This is not true. The color of a car has no bearing on the amount of money you will pay to insure it.

Myth: Cheaper cars cost more to insure than more expensive models.

Fact: The price of the vehicle has little to do with the cost of insuring it. The costs of insurance are determined by a number of factors, particularly how much the car will cost to repair. The likelihood of the car being stolen can also factor into the equation. Ultimately, it boils down to this - how likely is it that a particular car will cost the insurance company money in the form of a payout?

Myth: Rates are set by the government, so there is no reason to shop around for the best price.

Fact: State governments do have some say in how pricing works in a particular state, but the figures are only guidelines. The state does not set the rates. The Federal government has no say whatsoever in how pricing is determined. Consumers can save money by shopping around for the best price, and smart shoppers will do so.

Myth: You don’t need any more coverage than the law requires.

Fact; The minimum amount of liability coverage may not protect you if you cause an accident with an expensive vehicle or if you cause extensive bodily harm to another party in an accident. You should consider carrying more coverage than the minimum required in most states. Otherwise, you face a potential lawsuit.

Myth: Lower deductibles are better, so you don’t have to “pay out” in event of an accident

Fact: Most people are rarely involved in accidents, so they rarely have to file a claim. That means that they are paying a lot of extra money in premiums for the benefit of having low deductibles. It makes much more sense to carry the highest deductible you can afford. You will save a lot of money on your premiums. Insurance isn’t designed to pay for every nickel and dime expense; it’s designed to cover big expenses that would be hard to pay out of pocket. Don’t pay extra for a low deductible; it isn’t worth it.

Some of these things listed above are obvious; the “red’ vehicle myth has been around for decades. Other items on this list may not be so obvious. A large number of people carry only the minimum amount of liability coverage mandated by the laws of their state. It isn’t smart to do that; getting in an accident with the wrong party could end up costing you everything you own in a lawsuit.  Make sure you have sufficient coverage.

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