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5 Costly Auto Insurance Myths Debunked

Updated October 26, 2016

A recent survey of Americans found that many believe myths about what car insurance covers and what it doesn’t. How many of these 5 myths can you get right?

In fact, many Americans are misinformed about the basics of auto insurance, from how premiums are set to what a policy typically does and doesn’t cover, according to a recent survey of 1,000 adults conducted by Princeton Survey Research Associates International.

While many consumers do understand how auto insurance works, others are mistaken in some pretty surprising ways. Here are five common myths about auto insurance revealed by the survey.

Myth 1: Red Cars Cost More to Insure

red-ferrari

Almost half (44 percent) of respondents mistakenly think driving a bright red car changes the cost of auto insurance. Drivers 18 to 29 years old were most likely to buy into this myth. A slightly higher number of consumers (46 percent) correctly stated car color has no effect on what you pay.

Reality: The color of the car you drive doesn’t affect your insurance premiums, but the kind of car does.  For instance,  a high-end sports car is likely to cost more to insure than a compact car.

Myth 2: Your Car Insurance Doesn’t Cover You if You Caused a Crash.

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Slightly more than half (56 percent) of respondents correctly stated that auto insurance covers you when an accident is your fault. But 37 percent of respondents overall (and 52 percent of those aged 18 to 29) incorrectly stated they wouldn’t be covered if they caused a collision.

The confusion might stem from the fact that some consumers carry only liability insurance, which covers damage they cause to others if they’re at fault in a crash, but doesn’t pay to repair or replace their own car.

Reality: Liability insurance, required for driving in nearly every state, covers damage you cause to someone else’s car (or other property) plus medical costs for injuries when you’re at fault in an accident. Collision insurance, which is optional, covers damage to your own car, even if the accident was your fault.

Myth 3: If Your Car is Totaled, Your Insurer Cuts a Check for the Amount the Mangled Metal is Worth After the Crash.

Car crushing at Wingfield - back on after the courts overturned an appeal to have it stopped.

Half of consumers know that if your car is totaled, the insurer pays you what your car was worth before the crash. But 28 percent mistakenly believe their insurer pays only the post-crash value of the car, and another 12 percent just don’t know.

Many drivers aren’t sure what happens when a car is totaled simply because it’s a rare event, says Jack Hungelmann, author of “Insurance for Dummies.” He adds: “It might happen once in a lifetime.”

Reality: Auto insurance pays the market value of your car before the crash, Hungelmann says. Some policies now offer new-car replacement, which means the insurance company would pay the amount the totalled car would cost new rather than the depreciated value.

Myth 4: Your Auto Insurer Pays for Mechanical Repairs

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Overall, only 14 percent of respondents mistakenly believe that auto insurance covers car breakdowns and other mechanical problems. But younger respondents (23 percent of those aged 18 to 29) and those who make less money (23 percent of those who make less than $30,000 a year) were more likely to believe insurance covers routine car repairs.

Reality: Car insurance doesn’t cover mechanical problems with your car, unless they’re directly related to an accident.

Myth 5: Car Insurance Covers Belongings Stolen from Your Car.

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About one-third of respondents (34 percent) incorrectly believe auto insurance covers items stolen from your car. Older consumers (47 percent of those 65 and over) were more likely to believe they’d be reimbursed by their auto insurer if a thief snagged their smartphone, laptop or other item of value off the front seat.

Reality: Your car insurance doesn’t cover the contents against theft. Your renters or home insurance covers items swiped from your car, as long as whatever is stolen is worth more than the deductible. So, if you had a covered $2,000 laptop stolen and your homeowners insurance has a deductible of $500, you’d get a check for $1,500.

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Chris Riley
About Chris Riley

I have been wrecking cars for as long as I've been driving them but I keep coming back for more. Two wheels or four, I'm all in. GearHeads.org gives me a chance to give something back to the automobile community.

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