10 Costly and Troublesome Auto Insurance Myths

Here are some of the misconceptions about car insurance that may sound correct but don’t really do any favors to you. There is nothing wrong with wanting the best deal in whatever you want. This requires to be equipped 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 below myths may come from people who call themselves advisers.

automobile insurance myths

    1. It Is Cheaper to Buy Direct

You will come across advertisements suggesting that it would be cheaper to buy direct. 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 before you can go and compare quotes. Either on the phone or face to face, you probably come across those ones that will not leave you alone until you make a purchase.

They will not spend money for commission if you go direct to them and therefore can sell cheaper. This is a misconception that is easy to sell to unsuspecting motorists. Actually, they would have to spend a lot more 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 providers. First of all, they don’t spend much money to be listed in these highly active websites. So, comparison sites are great sources of new business for them and a good way of finding the best deal for you.

Most importantly, you can still get direct auto insurance quotes from whichever one you like but with full knowledge that there are several others with better or same price. Comparison websites like this one don’t hide where the quotes come from and they kindly link you to the actual official offer page.

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

  1. Loyal Customers Get the Best Deals

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

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

Motorists waste billions of dollars because they are loyal. This point has been highlighted by the Progressive recently. 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. This clearly tells insurers that they don’t need to break their back to keep a customer. Just give them the same deal as last year and they are happy.

The current provider may still be the most competitive at renewal. However, there is no harm in checking if this is true. Many people don’t actually switch because they save few bucks. They only switch when they realize that they can get the same coverage from a competitor that is as good or better than what they have.

  1. Liability Only Is Cheaper than Full Coverage

This makes perfect sense that liability only should be a lot cheaper since they only pay for the claims against you by third parties. However, there is a high chance you will be able to find full package that is cheaper than liability only. The fact is that most companies don’t need to try hard to sell state minimum car insurance 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 vehicle insurance. This means that the real competition is in this market. This is especially true when you take into account that about 15% of motorists in the USA are uninsured. People compare them carefully to make sure they get the best deal. And therefore, companies try hard to put together a decent package cheaply.

Next time you renew remember to get several quotes with liability only and comprehensive plan. You may see that at least one or two of them will come back with cheaper quotes for full coverage vs. 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 a basic plan because they are cheaper. This would mean that your car isn’t protected 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 spend twice more for a policy when you can get your parent buy it for you at half the price? You can be listed as the second driver and job is done. This is called fronting and it is an illegal practice. Cars should be insured for the person who is most likely to drive it most of the time.

You can get into serious trouble by getting the 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 person to your policy will probably save you some money and it is perfectly legal even if that person hardly uses it.

  1. My Personal Gadgets Left in my Car Are Covered

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 auto coverage will pay for the damages to the car and their stolen personal effects.

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

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

  1. Keep an Old Car If You Want Cheap Insurance

This is another myth that makes sense to think that older cars are cheaper. They are more economical to buy and companies will have to spend less if they are ever totaled. However, you shouldn’t be sticking with an old clunker just because you are worried the premium will go up if you buy a new car.

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. 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 the calculations.

  1. My Full Coverage Will Include Any Car I Drive

Standard policies normally provide protection for any car the policyholder drives with the permission of the owner. However, people think that they get the same coverage for these vehicles. This auto insurance misconception 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 it only kicks in when the owner’s limits are exhausted or not available. It doesn’t provide any damage protection for it. Generally policies go with the vehicles. So, you might want to check that the car is properly protected 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 carrier.

If you submit it to your own firm and get the repairs done with the collision coverage you will probably be required to meet the deductible. Then, yours will subrogate it through third party carriers and try to get the money they paid for the damages back. If they are successful you will get it back. Automobile 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, the carrier may have to do a quick deal with the third parties and settle for a lower amount that would mean you don’t get it back. Furthermore, you would be sharing part of the blame for an accident that was clearly someone else’s fault. This will result in price increase at renewal.

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

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

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

  1. Go for the Cheapest 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 as long as you have the same coverage and a reliable provider. You shouldn’t settle for it just because it is cheaper. You should make sure that you get what you need.

The market is highly competitive and people mind the price. Therefore some companies would strip a standard policy down 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 would be great in such circumstances.

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