Not many Americans are experts on automobile insurance; it just isn’t one of those subjects that holds one’s attention. In fact, according to a recent survey of 1,000 adults conducted by Princeton Survey Research Associates International, most Americans have only a basic understanding of how automobile insurance works. And, to add to the problem, many drivers have bought into many of the myths that float around. In this article, we will look at five of the more common myths and dig into what the real story is behind them.
Myth 1: Red cars cost more to insure
This is sort of a funny one but a lot of people believe it to be true. According to a study executed by the Princeton Survey, almost half (44 percent) of study respondents thought that the color of a car affects the cost of insurance. The worst, of course, being bright red cars!
Reality: The color of the car you drive doesn’t affect what your insurance costs. Yes, your insurance agent will ask you the color of your car but that is just for documentation purposes. One characteristic that does affect the cost of your insurance, however, is the kind of car you drive. For instance, an expensive, high-end sports car is likely to cost more to insure than a low-cost compact car.
Myth 2: Your car insurance doesn’t cover you if you caused a crash
This is a common misconception. 37 percent of respondents thought that they wouldn’t be covered if they had caused an accident. The answer to the issue: it depends if you have liability coverage only or comprehensive coverage.
Reality: Liability insurance, required for driving in nearly every state, covers damage you cause to someone else’s car (or other property) when you’re at fault in an accident. Full collision insurance, which is optional, covers damage to your own car too, even if the accident was your fault.
Myth 3: If your car is totaled, your Insurer pays you for the value of your car after the crash
Believe it or not, the survey says its 50-50. About half of the respondents thought that their insurer pays you what your car was worth before the crash. The others believe their insurer pays only the post-crash value of the car.
Reality: Auto insurers pay the market value of your car before the crash. Note that some policies now offer new-car replacement, which means the insurance company would pay the amount the totalled car would cost when new.
Myth 4: Your auto insurer pays for mechanical repairs
According to the folks at Mr. Ed, a large automobile financing company in Phoenix, Az, many of the people they deal with don’t know that auto insurance doesn’t cover mechanical problems. The reality is that mechanical damage related to an accident will be covered but not ordinary repairs (that’s what extended warranties are for).
Reality: Car insurance doesn’t cover any mechanical problems with your car, unless they’re directly related to an accident.
Myth 5: Car insurance covers belongings stolen from a car
Reality: Your car insurance doesn’t cover the contents of your car against theft. This coverage comes from your renters or home owners insurance as long as whatever is stolen is worth more than the deductible. Example, if you had a covered $800 laptop stolen and your homeowners insurance has a deductible of $500, you’d get a check for $300.