10 Costly and Troublesome Auto Insurance Myths

There is nothing wrong with wanting the best deal whatever you want. This requires you to equip yourself with the right information and actively search for it. If you are easily convinced and believe everything you hear you will limit your chances. Unfortunately, some of the myths may come from people who call themselves advisers. Here are some of the myths about car insurance that may sound correct but don’t really do any favors to you.

automobile insurance myths

    1. It Is Cheaper to Buy Direct

You will come across advertisements from some automobile insurers suggesting that it would be cheaper to buy direct from them. This is one of the biggest lies in the industry. They want you go direct to them so that their experienced and sticky sales force can corner you and sell you a policy before you can go and compare quotes.

Insurers will not pay sales commission if you go direct to them and therefore can sell policies cheaper. This is a misconception that is easy to sell to unsuspecting motorists. Actually, they would have to spend a lot more money to advertise and find customers who will come to them directly. And those advertisements are not cheap.

On the other hand, comparison websites are great sources for consumers and companies. First of all, companies don’t pay them much money to be listed in these highly active websites. So, comparison sites are great sources of new business for companies and a good way of finding the best deal for you.

Most importantly, you can still get direct auto insurance quotes from whichever company you like but with full knowledge that there are several other companies with better or same price. Car insurance comparison websites like this one don’t hide where the quotes come from and they kindly link you to the insurer.

Besides, intermediaries like brokers and agents play a very important role for policyholders and is still a cheap source of business for companies. Trying to take them out of equation is not a smart move for a company unless they have a different plan. Direct insurers would rather corner defenseless customers without their brokers to advice or a comparison website to show alternative prices.

  1. Loyal Customers Get the Best Deals

You are doomed if you believe this statement and forego shopping around when your renewal is due. While new customers are getting the best policies and prices from your current insurer you will be kept in your old rates. At times you may actually lose the initial discounts offered to you to lure you.

Motorists can mislead themselves due to lack of understanding as to how the vehicle insurance rates work. You get the renewal notice and see that there is no increase in your premium and you may think that it is great. However, you are in fact getting charged more if your premium isn’t coming down after another year of no claim and traffic incidents. Premiums should come down gradually as you keep clean driving records.

Motorists waste billions of dollars because they are loyal to their current insurers. This is a statement from top insurance companies like Progressive. They do more research than anyone else. They know that around 2/3 of policyholders don’t even bother to get an alternative quote and just renew with their current insurers. This clearly tells insurers that they don’t need to break their back to keep a policyholder. Just give them the same deal as last year and they are happy.

Your current insurer may still be the most competitive provider for you at renewal. However, there is no harm in checking if this is true. Many people don’t actually switch insurers because they save few bucks. They only switch when they realize that they can get the same coverage from another company that is as good or better than their current insurers.

  1. Liabilities Only Policies Are Cheaper than Full Coverage

This makes perfect sense that liabilities only policies should be a lot cheaper since they only cover the claims against you by third parties. However, there is a high chance you will be able to find full coverage policy that is cheaper than liabilities only. The fact is that most companies don’t need to try hard to sell state minimum car insurance coverage because legislations make sure that they are sold. It is a legal requirement for everybody who wants to drive or owns a car.

Another fact is that about 70% of motorists buy full coverage vehicle insurance policies. This means that the real competition is in the full coverage policy market. This is especially true when you take into account that about 15% of motorists in the USA aren’t insured. These are the policies that people compare carefully to make sure they get the best coverage and cheapest deal. And therefore, these are the policies companies try hard to put together cheaply.

Next time you renew your policy remember to get several quotes with liabilities only and full coverage. You may see that at least one or two companies will come back with cheaper quotes for full coverage policies than liabilities only. Or there will be not much difference between the two prices. Don’t make the mistake of thinking that you should only look for liabilities policies because they are cheaper. This would mean that your car isn’t insured if something happens to it and you paid more money for this inconvenience.

  1. It Is OK to Get a Parent Buy the Policy for You

This may sound like an innocent trick. Why should you pay twice more for auto insurance when you can get your parent buy it for you at half the price? You can be listed as the second driver in the policy and job is done. This is called fronting and it is an illegal practice. Cars should be insured by the person who is most likely to drive it most of the time.

You can get into serious trouble by getting your parents buy you the coverage. Companies can cancel a policy and refuse to pay a claim if they find out that someone else is fronting for a higher risk driver. On the other hand, adding a more experienced driver on to a policy that is in your name will probably save you some money and it is perfectly legal even if that person hardly drives your car.

  1. My Personal Gadgets Left in my Car Are Covered by Auto Insurance

Most people have a few valuable personal effects they carry around. It is common that thieves are breaking into automobiles to steal valuables like smartphones, laptops, SatNavs and cameras. Many people think that their auto insurer will pay for the damages to the car and their stolen personal effects.

Standard vehicle insurance policies don’t pay for your personal effects that were left in the vehicle. They are not considered part of the vehicle and therefore it is not included in its valuation. The policy that covers these items is your home or renters insurance. Even then, these policies usually come with an upper limit to what you can claim. If you want to cover more you need to talk to them and probably pay additional premium.

You shouldn’t have the false safety that your personal items left in the car will automatically be insured. And you should remember to take them with you regardless of them being insured or not. Besides it is not fun to report a crime to police, deal with claims and see that next year your premium will go up. It takes only few seconds for a thief or even a mischievous youngster to capitalize on your mistake and take your staff.

  1. Keep an Old Car If You Want Cheap Auto Insurance

Again it makes sense to think that older cars are cheaper to insure. They are cheaper to buy and insurers will have to pay less if they are ever totaled. However, you shouldn’t be sticking with your old clunker just because you are worried the premium will go up if you buy a new car.

New cars come with all sorts of additional security and safety features. They prevent injuries better and help motorists avoid accidents. In other words, value of a vehicle is only a small factor in premium calculations. The risks of having accidents, suffering serious injuries and material losses are more important. And if a car can reduce those risks it will be cheaper to insure it.

  1. My Full Automobile Insurance Coverage Will Cover Any Car I Drive

Standard auto insurance policies normally provide coverage for any car the policyholder drives with the permission of the owner. However, people think that they get the same coverage for these vehicles as the car insured under the policy. This is a misunderstanding that can cost you a lot of money if you wreck someone else’s car especially if it isn’t insured.

Your own policy covers only the liabilities when you are driving another car. And that cover only kicks in when the owners liabilities policy is exhausted or not available. It doesn’t provide full coverage for it. Generally policies go with the vehicles. So, you might want to check that the car you will drive is properly insured before driving it off.

  1. You Shouldn’t Pay Deductibles If You Aren’t at Fault

Unfortunately, fault in car accidents is hardly ever clear cut. If the third party driver accepts responsibility and his/her insurer pays your losses you are fine. You need to first find out how they will play and decide if you should submit a claim to their insurers.

If you submit a claim to your own insurer and get your repairs done with your collision coverage you will probably be required to pay the deductible. Then, your insurer will subrogate the claim through third party insurer and try to get the money they paid for your damages back. If they are successful you will get your deductibles back. Car insurance deductibles explained further there.

That is why you need to stay on top of the claim and make sure that you respond to correspondents and allegations attentively. If you don’t cooperate, your insurer may have to do a quick deal with the third party insurer and settle for a lower amount that would mean you don’t get your deductible back. Furthermore, you would be sharing part of the blame for an accident that was clearly someone else’s fault. This will result in premium increase at renewal.

  1. I Don’t Need to Keep up with Premium Payments If my Car Is Totaled

Your car may be totaled and your insurer paid you for it. Now that you don’t have a car you may think that you can stop premium payments. Once you make a claim you will have to pay the full premium regardless of how you pay. You cannot get a claim settlement and decide that you don’t want to keep the insurance anymore.

Insurance contracts are for a set term of 6 moths or 1 year. Most companies don’t mind you cancel the policy as long as you don’t have a claim already or intend to make one. Actually, premiums are considered due the moment you buy the policy. If you are allowed to spread the premium it means that the company is offering you credit. When you stop payment you would in fact be defaulting on a credit agreement and the company can come after you for the full payment.

  1. Go for the Cheapest Automobile Insurance Quote

Often you hear that you should find the cheapest quote. What an expert would mean by this statement is that you get the cheapest policy as long as you have the same coverage and a reliable insurer. You shouldn’t settle for a policy just because it is cheaper. You should make sure that you get the coverage you need.

Car insurance market is highly competitive and people mind the price. Therefore some companies would strip some of the coverage a standard policy offer and come up with a leaner and cheaper product. You should only accept such products as long as you are happy with what you are getting. Sometimes, you may not need or want all the extras and rather save some money. These policies would be great in such circumstances.

You should get fully informed about what your policy covers so that you can take the right decision each time. You shouldn’t believe in everything you hear but check if it is true. If you need answers you should get them from a reliable source. You can always call your insurer or broker to find out exactly where you stand with your policy in a specific situation. Remember that every policy is different and each policy comes with own specific terms, conditions and stipulations.

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