Insurance is a must-have accessory to your new or new-to-you car purchase. However, when buying a new policy or renewing your old one, there are a few things to consider. Several myths exist about buying insurance, here are a few of the most common that could impact your next buy:
Myth 1: The color of my vehicle affects my premiums.
Truth: Color usually plays no role in deciding how much your premium should be. Instead, insurance carriers look at the following:
- Age of vehicle
- Age of primary driver
- Engine size
- Credit history
So buy the red one if you want to!
Myth 2: Buy from a direct agent, it will save you money!
Truth: Shopping around will save you money. Whether or not you price premiums online or use a dedicated agent has no bearing on your premium. What will save you money is shopping around for several different premiums. If you want the lowest rate when shopping, use an independent agent or just do a comparison yourself.
Myth 3: Your insurance will pay off your entire loan if your car is totaled.
Truth: Your insurance pays off the fair market value of your car. Since cars depreciate in value, you will want to make sure that you buy the appropriate amount of coverage to cover any outstanding loan after insurance. A great supplement to purchase is gap insurance, which will cover the amount left after insurance pays the market value of your car.
Myth 4: Your credit score does not affect your premium.
Truth: Let’s just assume that your credit score affects everything, even insurance rates. Most states even allow insurance companies to give you a credit-based insurance rate which factors in your credit score and guides them to gauge how long it’ll take you to pay off your loan.
Myth 5: If you let someone borrow your vehicle and they have an accident, it is their fault, not yours.
Truth: Your car, your insurance. Your personal policy will follow your car. If your policy is maxed out, think about getting umbrella insurance.
Myth 6: Your policy can be cancelled at any time.
Truth: No, it cannot. Only under certain circumstances is your insurance company allowed to cancel your policy before it expires. Grounds for cancellation usually include fraud and/or non-payment of your policy.
Myth 7: An expensive car costs more to insure.
Truth: Not always. Insurance carriers usually factor in “loss history” on your vehicle, meaning if your car is a more inexpensive standard vehicle that is known to have a lot of issues, it will cost more to insure than a luxury vehicle with a seamless record among drivers. If they’ve paid more claims on that make and model, chances are your premiums will be higher. They will also factor in the cost of repairs or replacement.
Have you fallen for any of these myths before? Always do your research before purchasing a new vehicle and the insurance policy that goes with it. And, as always, before you sign on the dotted line, read the fine print!