Auto Insurance: Common Myths & Misunderstandings

As an independent agent for multiple major auto insurers, I've noticed that there are a lot of misunderstandings about auto insurance. This is Part 1 of a series designed to educate the average consumer, so if you drive, please read on!

#1. Red car = Higher premium - Yes, it is true that if you trade in your white Camry for a red Corvette you will notice a higher premium; however, the color has nothing to do with it. This myth could be due to a higher rate of red cars being pulled over (more tickets would obviously lead to higher rates), or there could be a psychological connection between red cars causing "lead foot syndrome*." The fact is, cars are usually rated based on a variety of things like: engine size, safety features, weight, size, etc. Some auto features that will drive your rate up include: high horsepower, no airbags or anti-lock brakes, large-hulking body, higher end make, etc. Color generally means nothing to your agent, so if that's all that's holding you back, then go ahead and get that cherry red you've been eyeing.

* Not a real syndrome

#2. "I'll worry about insurance after I've bought the car." Beware of this trap!! Car salesmen will often steer you this direction so they get their sale (aka fat paycheck), but what they're not telling you is that your decision to sign on that dotted line will very likely have an impact on your insurance rate. I've encountered several new car owners who were startled to find out that they couldn't drive their newly financed cars home due to the inability to purchase the required insurance. If you plan on financing a car, you should know that most financing companies will require you to have full coverage on your vehicle before you can drive it off the lot. If you've had a liability only policy for a while, then the increased cost of adding comprehensive & collision coverages needs to be factored into your budget long before you make the auto purchase. Also, as I mentioned earlier, not all cars are created equal, therefore, not all cars are rated equally.

#3. "I don't have a car, so I don't need insurance." This is a very common faux pas. Pay close attention here: Auto insurance is insurance on the car and the driver! Yes, you may have a license and Aunt Marie may have an insured car that she lets you drive, but unless you're listed on Aunt Marie's auto insurance you're not covered! This is a quick way to loose your license and owe several hundred in fines! If you're living with someone that has a car, then see about getting added on to their insurance policy. If you live by yourself you can get what's called a non-owners or named operator policy. Keep in mind that if you drive without having any liability insurance and injure someone, then you are responsible for any medical expenses you caused. Having a simple liability policy can save you untold thousands if you get into an at-fault accident, so why take the risk of driving without any coverage?

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