If you drive, you need car insurance to protect yourself and guard your vehicle against damage and theft. There’s plenty of information floating around about this necessity of modern life. Some of that info is important and some, such as the following, are myths.
Red Cars Are The Most Expensive To Insure
Go ahead and pick red as the exterior color of your vehicle. You can also choose yellow, white, black, blue, or any other shade that pleases you. The color of your car has no impact on your auto insurance rate. What’s more important are factors like the following:
- Make, model, year, body type, and engine size.
- Safety features and ratings by organizations such as the National Highway Traffic Safety Administration.
- Cost of repairing or replacing the vehicle after an accident.
- Likelihood that the car will be stolen.
If you have a custom paint job, repainting after an accident would not be covered unless you add a rider (additional insurance coverage) for customization to your policy.
Because Your Driving Skills Get Worse As You Age, Your Insurance Rates Go Up
According to the Auto Club, the crash, injury, and fatality rates of those in the 16-17 age group are the highest, followed by those aged 18-19, and then 20-24. In fact, those over 55 are considered safer drivers and can qualify for discounts on their auto insurance premiums if they complete an accident prevention course.
These courses are available through the Auto Club, AARP (American Association of Retired Persons), and state and local agencies. Those who are retired and who drive less may also receive additional discounts.
You Can Negotiate Auto Insurance Rates
You can no more negotiate your auto insurance rates than you can the rates for your electricity and water. The federal and state governments strictly regulate the insurance industry and insurers use proprietary algorithms to calculate your rate based on your driving history, mileage, and other factors.
However, you can find different rates from different insurers, which makes it important that your compare companies when you’re shopping for coverage. In addition, your insurer may offer discounts for passing a defensive driving course, having no accident, driving low miles, and being a good student or a senior citizen among others.
Going With The State Minimums Provides Enough Coverage
Going with the minimum insurance coverage mandated by your state can reduce your premiums to their lowest. However, you may end up paying more out-of-pocket if your car is stolen or if you get into an accident.
For example, if you go with a state minimum of $25,000 for property damage and you cause an accident that damages another person’s house and car for $45,000, you’ll be responsible for paying at least $20,000 or more if the other person decides to sue.
Your own vehicle will also be at risk because no state requires collision coverage, which pays to fix your vehicle if it is damaged in an accident, or comprehensive coverage, which pays if your vehicle is stolen or is damaged in an accident that is not a collision, such as a hailstorm.
Your Credit Doesn’t Matter With Insurance Rates
Most insurance companies use your credit to determine your auto insurance rates. The Federal Trade Commission discovered that credit-based insurance scores are an effective way to predict risk. These scores do not look at your income history, job, or other personal information. Instead, they focus on your history of payments and your total debt to determine your risk factor.
- People with high credit-based insurance scores tend to have fewer accidents and file fewer claims. If you have a high score and no claims on your insurance history, you’ll typically qualify for lower rates.
- Those with low scores are more likely to file a claim, costing insurance companies more.
Some states do not allow the use of credit scores to determine who to insure and what to charge for car insurance. These include California, Hawaii, Massachusetts, and Michigan. At these locations, your score will have no effect on your insurance.
Car Insurance Pays For A Rental Car After An Accident
If your car is damaged severely in an accident, you’ll most likely have to leave it at a service center for several days for a fix. In the meantime, you’re going to need a replacement car, so you can commute to work or run errands.
Your auto insurance will not automatically pay for your rental car in such situations. To cover the rental, you will need to include a rental car reimbursement coverage to your policy. That add-on covers your rental only up to a set amount, such as $50 a day for a total of $1,000.
If Your Car Is Totaled, Insurance Pays For A New Replacement
Auto insurance only pays for the depreciated value of your vehicle if it can no longer be repaired.
- This payment is rarely enough to buy a new replacement. If you want a new vehicle, you’ll need to pay out-of-pocket for the cost above the depreciated value.
- The payment, however, is enough to buy a used vehicle that is older.
- You can opt for new car replacement insurance, which promises to give you a brand-new version of the same make and model, instead of the depreciated value.