5 Myths About Car Insurance
- Myth 1 – Color determines the price of auto insurance. It doesn't matter whether your car is “Arrest Me Red” or “Hide In Plain Sight White”—the color doesn’t actually factor into your auto insurance costs. The price of your auto policy is based on many factors, such as car make, model, body type, engine size and the age of the vehicle, as well as the car’s sticker price, the cost to repair it, its overall safety record and the likelihood of theft. Insurers also take into account the age, driving record and sometimes the credit history of the driver.
- Myth 2 – Your credit has no effect on your insurance rate. Your credit-based insurance score—which is derived from your credit history—may matter. A good credit score demonstrates how well you manage your financial affairs and has been shown to be a good predictor of whether someone is more likely to file an insurance claim so many insurance companies take it into consideration when you want to purchase, change or renew your auto insurance coverage. People with good credit—and, therefore good insurance scores—often end up paying less for insurance.
- Myth 3 – You only need the minimum amount of auto liability insurance required by law. Almost every state requires you to buy a minimum amount of auto liability coverage but buying only the minimum amount of liability means you are likely to pay more out-of-pocket for losses incurred after an accident—and those costs may be steep. The insurance industry and consumer groups generally recommend a minimum of $100,000 of bodily injury protection per person and $300,000 per accident. If you have substantial personal financial assets to protect in the event of a lawsuit, you may even want to consider an umbrella liability policy.
- Myth 4 – If another person drives your car, in the event of accident, his or her auto insurance will cover the damages. In most states, the auto insurance policy covering the vehicle is considered the primary insurance. This means that the car owner’s insurance company must pay for damages caused by an accident, regardless of who is driving. Policies and laws differ by state, so make sure you understand the rules before allowing another person to drive your car.
- Myth 5 – Personal auto insurance also covers business use of your car. If you are self-employed and use your vehicle for business purposes, personal auto insurance may not protect you so it’s important to purchase business vehicle insurance. If you have other people—such as employees—using your vehicle, regularly check their driving records.
Presented by Tammy Farmer | Insurance Agent | Home Team Insurance
Email: tammy.farmer@hometeaminsurance.com
P. 469.589.4047 | F. 833.645.1775 | C. 802.591.0809A. | 5950 Berkshire Lane, Suite 100, Dallas, TX 75225