While we are in the age of the “get a free quote in minutes” online shopping to get the best rates, studies show that many myths and fallacies still operate, and the vast majority of consumers are somewhat, or significantly confused by all the jargon and legal exceptions packed within policies.
Myth #1 You can expect to pay the same rate, nationwide
For example, most consumers believe in their heart of hearts that if you buy a brand-new Ford F150 with 2.3 litres, standard engine, that they should pay the same rates from the same auto insurance company, whether they live in Portland Oregon, Minneapolis Minnesota, or Boston Massachusets. But that’s dead.
Overall car insurance can be a confusing requirement to fill for many auto owners. Auto insurance companies base their rates on a number of factors, one of which is how much they have to pay out in claims in the local area you live in. Not only will you tend to pay less in a low-crime, low accident rate rural state like Vermont, as compared to living in Burroughs of New York or the suburbs of Los Angeles, as there is plenty of open roads in Vermont.
Another factor is what is the weather like? Lots of snow and ice translates into lots of skid claims. As do areas such as Oklahoma which experience a lot of tornadoes and hail.
Do you live in Sacramento, CA, Mobile Ala, Anchorage, Alaska, Salt Lake City or Las Vegas? Expect to open your wallet wide when buying insurance, because you live among the 40 top populations where your car is most likely to get stolen.
Myth Number 2. Your Credit Score Doesn’t Matter Regarding Auto Insurance
This may have been true in the 1990s but today, only California, Hawaii and Massachusets prohibit auto insurance companies to base their rates on credit scores.
With all the rest, credit scores make up a large portion of the rates, although insurers rarely advertise the fact. In Texas, for example, drivers with poor credit pay an average of $1500 per year more than drivers with good credit, and $1800 more than drivers with excellent credit. And the numbers are so skewed that drivers with poor credit pay on average $1100 more for auto insurance than drivers with excellent credit that even had a Driving Under the Influence Violation. Read this Credit Sesame review on how to check your credit score for free.
Myth #3 A more expensive vehicle is more expensive to insure
This would seem to make sense if the only factor was the price of the vehicle, ie that if your vehicle is stolen or crashed into, a $50,000 car would seem more expensive to replace than a $30,000 one. However, insurers look at the overall payout in claims for a vehicle, and if the total claims for mid-priced Hondas or Toyotas are higher than for Chevrolet Escalade, insurance rates may get higher for the medium level cars, and actually go lower for more expensive ones.
Myth #4 No-Fault Insurance Means I’m Off the Hook
Many states have no-fault insurance, which means that your personal insurance company pretty much sorts out payment of such things as medical bills. However, no-fault insurance is not the same as collision insurance. It simply covers medical bills. Collision insurance is a significant and costly add-on.
Myth #5 Your Insurer can Cancel You at any time
Insurance is regulated by the State Automotive Insurance Commissioner, and while an insurance company can raise rates due to accidents, tickets, DUIs, etc, and ultimately decide they don’t want to deal with you anymore. as long as you are paying your premiums, you need have little worry about a sudden cancellation. Whether they decide to renew your policy for the next year is another matter.
Myth #6 I got into an accident or got a ticket so my rates will skyrocket
Not necessarily. Particularly if this is your first ticket, many insurers are rather forgiving, and it’s entirely possible to obtain an insurance policy with accident insurance, which may be money well spent.
First, work with your insurance agent to carefully review your coverage each year.
Next, make sure you have adequate insurance. Buying only the state minimum required insurance may allow you to drive, but at the same time, you may woefully be underinsured in the case of a horrendous automobile accident. Most experts suggest you have at least $500,000 worth of auto insurance.
Then review with your agent the total extent of your policy so that you understand the deductibles you must pay, uninsured motorist damage, the replacement value of your vehicle if it is in a crash, Personal Injury Protection, and collision coverage.
You should walk out of your evaluation with your personal agent feeling knowledgeable and safe. If you don’t, it’s time to get a new agent and maybe a new insurance company.