Car Insurance Myths Exposed

There are a lot of information sources and perceptions regarding car insurance, some of which are considered fundamental truths; but, closer investigation reveals that what we think to be true is simply urban legend - word of mouth gone awry. The trouble with insurance myths is that they can cost us money in higher premiums if we don't know how to properly assess our coverage and current rates. Read on to find out some common misperceptions and how to make sure you don't fall victim to overpayment. 

1. Red cars are more expensive to insure than any other colour.

This is false.  The make, model and year of your vehicle will ultimately affect your insurance rates.  Rates charged, contrary to popular belief, do not stem from car colour; but, rather the claims history and average repair cost of the vehicle - not to mention its popularity with thieves. In fact, insurance companies don't even ask for car colour when providing quotes or building a policy.

2. My loyalty discount offsets any savings I would get by changing insurance companies

This is also false.  Switching insurance companies may cause you to lose your loyalty discount (if in fact you receive one from your current provider); but, that doesn’t necessarily mean you’ll pay more for car insurance in the end. The fact is, some insurance companies may provide a small discount on your premium if you’ve been with them for a long time, but that small discount can quickly become irrelevant if another company has a rate for you that is significantly less than what you’re currently paying. After all, what good is 5% off of an annual rate of $1,500 (a $75 savings) if you could pay $1,100 (a $400 savings) with another company? 

3. Higher rates mean more coverage

False again.  The rates charged by different insurance companies to insure the same driver, with the same car, for the same exact coverage, can vary by hundreds and even thousands of dollars. And with so many insurance companies providing car insurance, odds are you may not be currently insured with the company that offers the best rate for your driving profile. The reason for the discrepancy in rates is that each provider uses their claims experience to determine premiums charged and each company will have a different history with each driving profile and car combination. 


4. No fault insurance means "It's not my fault"

True? False. There’s always fault assigned in an accident. Whether it is all assigned to one person or it is shared between the parties involved, depending on the situation. No Fault only means your insurance company pays for your damages regardless who is at fault for the accident. This was introduced so that claims will be processed much faster as everyone would deal with their own insurance company directly, versus having to deal with another company. Even though fault is assigned in a car accident which can impact your rate, insurance companies treat situations and how they affect your insurance premiums differently;

5. Males pay more than females for car insurance

This too is false to an extent. Males under 25 years old can pay from $1,500 to $10,500 more than females drivers. At 25 years old gender is usually no longer a rating category; hence males and females over 25 with the same car and driving history may receive the same rate. However, one thing to always remember is that regardless of your age rates can vary by hundreds or even thousands of dollars from one insurance company to the next for the same driving profile. If you're wondering about your rates and if they're too high, 

6. All car insurance policies are created equal

False. The rates charged by different car insurance companies to insure the same car and driver, for the exact same policy, can vary by hundreds and even thousands of dollars, so it pays to shop around.

7. If I have tickets and accidents I will always pay a lot for car insurance

This isn’t entirely true. While you may pay more on insurance than someone who has no tickets or accidents, insurance companies offer different rates for the same driving records, therefore the chances that you are paying the lowest rate for your particular driving profile aren’t very likely. Shop your driving profile around and you might be surprised to find another insurance company that will offer you the same coverage for your profile at a lower rate. Also, tickets usually affect your insurance rate for three years and accidents usually have an impact for six years. By driving better today you’ll be investing in lower premiums for the future.

8. If a friend drives my car and causes an accident, it won’t show up on my insurance record

False. Insurance coverage is tied to the vehicle and not the person driving the vehicle. Therefore, if your vehicle is involved in an accident it will be the policy that covers said vehicle that will be affected.

Source: Insurance Hotline