This article by Herb Weisbaum (the original article can be seen by clicking here)
No one likes to buy auto insurance. It’s complicated. It’s expensive. And who understands how the premiums are determined? Maybe that’s why there is so much misinformation about insurance coverage and pricing.
The non-profit Insurance Information Institute helped me tackle five common auto insurance myths:
Myth 1: Red cars cost more to insure
If you believe the owners of red cars drive more aggressively and get more speeding tickets, this would make sense. But there’s no data to back this up.
“Frankly, it doesn’t matter whether the car is red or green or purple,” said Loretta Worters, vice president of the Insurance Information Institute.
Insurers are not concerned about color and neither is law enforcement.
“We look at behavior, not appearance,” said Bob Calkins, a spokesman for the Washington State Patrol. “We don’t profile people, and we don’t profile cars.”
Insurance companies do care about the type of vehicle you drive, including the make, model, sticker price, engine size and year. Is it popular with thieves? Is it more costly to repair? Does it have a good safety record?
There does appear to be correlation between vehicle model and the likelihood of a traffic ticket. A recent study by Quality Planning (a San Francisco-based analytics company that works with auto insurers) found that drivers of flashy cars are often more aggressive and therefore a greater risk.
Based on this study, drivers of the Mercedes-Benz SL-Class convertible are four times more likely to be cited for a moving violation than the average driver. Quality Planning’s list of Top Ten “Spirited Vehicles” includes Toyota’s Camry Solara Coupe, Scion’s TC Coupe and the Hummer H2/H3 SUV.
Other factors that go into determining your premium: how many miles you drive each year, when you drive, where you drive and if you’ve had any previous accidents. These days your credit history is also considered. Insurance companies say their data show people with a good credit history are less likely to file a claim.
Myth 2: Older drivers pay more for car insurance
Life insurance goes up with age, but not necessarily auto insurance. In fact, it’s often just the opposite.
Many drivers who are 55 or older can get their rates reduced — by up to 10 percent for three years — if they successfully complete an accident prevention course.
“Insurance companies look at these mature driving courses and find them to be a good thing,” Loretta Worters told me. “It helps refresh an older driver and keeps them sharp and keeps them safer on the road.”
Check with your insurance agent to find defensive driving courses that are approved by your insurer. If you are retired or no longer working full time, see if you qualify for a discount based on driving less.
Myth 3: Your insurance policy covers any damage to your car
It doesn’t work that way. Liability insurance (required in some state) covers you if you hurt someone or damage their property. Comprehensive and collision coverage protect your vehicle. That is why this is always optional coverage. Note: It may be required by the lender if you have a lease or car loan.
If you want to fully protect your vehicle for all types of damage, you need to purchase both collision and comprehensive coverage. But many people with older cars sometimes drop these coverages in order to save money.
“If the vehicle is worth less than a thousand dollars or less than 10 times the insurance premium, purchasing this optional coverage may not be cost effective,” Worters said.
Myth 4: Soldiers pay more for insurance
In fact, it’s just the opposite. Members of the military (no matter what branch) qualify for a discount on their auto insurance. In most cases, you’ll need to document your rank and how long you’ll be serving.
“Many insurers also provide discounts for former members of the military and their families,” Worters said. “So it’s a good thing for military families to look into.”
Myth 5: Your policy covers you if you drive the car for business
Personal auto insurance does not protect you if you are self-employed and using your vehicle for business purposes.
A lot of young people who take pizza delivery jobs don’t know this, for example, so if you’re not an employee of the pizza restaurant, you’re not covered by the company’s insurance policy. If you have an accident while making a delivery and you’re on your own. Your personal insurance will most likely deny any claims.