Top Ten Car Insurance Myths

Insurance myths abound. These myths can lead to costly mistakes. Find out the truth. Here are the facts.

1. “My friend said to me that I could use my car for my second job, delivering pizzas, and that my insurance policy would cover an accident.”
Your friend is wrong. Except if you have a commercial auto insurance, your personal auto policy excludes coverage if the vehicle is being used for business or commercial purposes.

2. “If someone steals my laptop and breaks into my car, my car insurance will cover it. I purchased full coverage insurance.”
Full coverage is not possible. This means that nothing is covered. You can be very specific in what coverage you have and how much. There is no policy that covers everything. If your lap top is stolen, you must file a claim through your Renters or Homeowners insurance policy. You will also have to pay the deductible.

3. “I got a ticket, and my insurance premium will likely triple!”
Wrong. Depending on the type of ticket, you may still be eligible for the Good Driver Discount even if you have one ticket on your driving record. Insurance companies have their own point systems that can adjust the risk associated with a ticket.

4. “My car’s color is red, and I was told that it will increase my monthly payment!”
Your age, gender, zip code, driving record, coverage type, make, and model of the vehicle, as well as the car’s safety record, will determine the cost of your car insurance.

5. “My credit history does not have any bearing on my car insurance rate.”
When quoting car insurance, some insurance companies consider drivers’ credit history. A low credit score will make it more likely that you will not pay your car insurance payments. Most people will end up paying a lower rate once their credit score has been taken into account.

6. “I only require the minimum coverage.”
Each state sets the minimum insurance coverage required. In California, it is $15,000 for each person injured and $30,000 per accident. There is also $5,000 property damage liability. These limits are extremely low. In an emergency, medical services can be very costly and damage up to $5,000 can be covered by emergency medical services. This is a grave mistake. If you are under-insured, you could be in serious financial trouble. If another driver sues you for an accident, being under-insured can make it more difficult.

7. “Insurance companies set their own prices and charge what they like.”
The insurance companies must explain how they calculate rates and file rates for review. All increases and decreases in rates must be reported to the California Department of Insurance. The rate will then be accepted or rejected.

8. “My insurance covers all cars I drive.”
Broad coverage policies are insurance policies that transfer coverage to vehicles that you have made available on an incidental basis. Each policy is unique. Different policies are different. Some only transfer minimum state liability requirements, while others provide broad coverage that transfers your entire liability limit. Many insurance policies only cover named drivers. All other drivers are excluded from coverage and insurance policies with restricted policies do not provide coverage.

9. My insurance company will cover the loan if my car is stolen.
This applies if you purchased GAP Insurance at the time you bought your car. If you have comprehensive insurance, and your vehicle is stolen or damaged in an accident, the insurance company can determine the fair market value and pay you cash. This estimate does not include finance charges, interest rates or licensing fees.

10. “My insurance company will cover my car rental.”
Your insurance company won’t pay for the rental car unless you have paid for it. This coverage is usually sold in conjunction with collision and comprehensive coverage.
It is crucial to understand and read your insurance policy. Ask questions and voice your concerns to your agent.