There are many myths about car insurance that have been floating around for years, and some of them may affect your buying decision. Educate yourself or un-educate yourself, in this case–and you can make the smartest decision about your car insurance.
Myth: The day you turn 25 (or 18, or 35,) your car insurance rates go down.
It is true that most insurance companies lower rates as drivers get more experience, often at age 25. But it won’t do any good to call your car insurance company on your twenty-fifth birthday, because you won’t be re-rated that day. An insurance company generally is commiting itself to a rate when it sends you your renewal bill, and unless you make a change in the middle of your policy period, you won’t be rated again until your next insurance renewal.
The good news about this is that accidents and tickets work the same way. If you get a ticket after you have already received your renewal, you normally won’t be charged any points on your car insurance until it renews again or until you make a change to your policy.
Myth: Red cars cost more to insure.
This is a common misconception, probably started somewhere as a car insurance urban legend. Your full coverage insurance cost is decided by the VIN (Vehicle Identification Number) of your car, and there is no indicator in the VIN as to what color your car is. Incidentally, though, red auto paint does cost more to repair facilities, so a car insurance company could have to pay out more in the case of an accident.
Myth: One claim can get you canceled.
It is certainly possible to have your car insurance canceled after only what claim. But car insurance companies have an underwriting process that takes a lot of factors into consideration. They will look at the number–and the dollar amount–of claims you have had over a period of time. The amount of time you have been with that insurance company is also a factor. Frivolous claims entered repeatedly by customers could be a reason for cancellation or non-renewal, but there is no reason to avoid turning in claims on your car insurance policy if you stand to suffer significant financial loss.
Myth: As my car gets older, my insurance should go down every year.
It is true that the newest of cars cost the most to insure, but often the fact that your car is a year older doesn’t mean your car insurance rate will go down. If the vehicle is old enough so that you don’t feel like you need to carry full coverage on it anymore, that will lower your rate significantly. But as long as you carry full coverage on a car–even an older one–you probably won’t see your rate decrease.
This is because the majority of accidents are not “total losses”–when the vehicle is damaged beyond repair and the insurance company pays out the value of the car to replace it. Most claims involve the repair of a vehicle, and the cost of car parts does not decrease significantly just because the car is older. In addition, labor costs for repair do not change at all, no matter how old the car is. The insurance company risks losing as much money on repairing an older car as they do a newer one.
When you are shopping online to buy your new insurance policy, it is important that you educate yourself as much as possible. Don’t fall victim to myths that could affect your buying decision!