January 8, 2010

Strange Stories About Auto Insurance Companies

Over the years, many strange stories about auto insurance companies have surfaced. These stories spread misconceptions regarding the auto insurance industry – how they determine coverage and rates, what different policies cover and how drivers should go about obtaining auto insurance. This article aims to put some of those stories to rest.

One common misconception involves what information is used to calculate auto insurance quotes. In truth, almost all insurance companies use the same basic information to quote insurance premiums. The most necessary information includes information about the vehicle – such as year, make, model, body type, engine size and mileage usage. Additionally, information about the driver is obtained, such as accident and moving violation history, credit reports, age, marital status and where you live and work. Many people believe that other things, such as a car’s color or a driver’s smoking habits will lead to higher premiums. Auto insurance myths regarding car color and smoking habits are indeed false. Simply driving a red car will not have an effect on auto insurance quotes. It is true however that a driver with a red sports car who collects many speeding tickets will have a much higher insurance rate then a driver of a blue minivan who has a clean driving record. This is based on safety factors and an increased risk of accident and not on car color.

Auto insurance coverage is often misunderstood and carries common misconceptions that can lead drivers to underinsure their vehicles. The biggest misconceptions about coverage relate to the different types of coverage. A friend who borrows your car and is then involved in an accident may be partially covered by his or her own insurance, however the accident is viewed as your responsibility and will affect your insurance coverage. Additionally, a car insured for personal use is not covered for business use, especially when transporting clients or making deliveries, even if only occasionally.

The most common coverage myths are in relation to auto theft and natural disasters. Comprehensive coverage is essential for damage due to hail, fire, windstorms, animals and vandalism, as these are not covered by collision coverage. However, it is often thought that insurance will pay off the amount owed on a vehicle in the event of theft or if the car is totaled. The truth is that insurance will only pay out the depreciated cash value of the vehicle minus deductibles.

The biggest and most dangerous myth of all is I’m a safe driver, have never been in an accident or had a ticket; therefore I do not need auto insurance coverage.’Accidents can happen any time to any one. It is always best to consult a reputable insurance company for accurate information.