You won't want to get your next auto insurance policy without reading this. It's a list of common auto insurance myths compiled by Mercury Insurance. The California-based insurer says there are a lot misconceptions out there, that if held on to, can wind up affecting your rates.
"There's a lot of misinformation out there when it comes to auto insurance," said Justin Yoshizawa, Director Product Management State for Mercury Insurance. "We want to help consumers separate fact from fiction so they can make smart, informed decisions when shopping for coverage."
Mercury Insurance dispels seven common auto insurance myths below:
7 Common Car Insurance Myths
Myth #1: Color determines the price of auto insurance
Not true. Mercury Insurance says it doesn't matter whether your car is "Arrest Me Red" or "Hide In Plain Sight White". The color doesn't actually factor into your auto insurance costs. Instead it's based on a lot of other factors, such as a car's make, model, its overall safety record and its likelihood of theft. Mercury adds that insurers also take into account the age, driving record and sometimes the credit history of the driver.
Myth #2: It costs more to insure your car when you get older
In general, Mercury says that insurance rates actually tend to go down as policyholders get older and have more experience behind the wheel, with those in their mid-50s typically paying the cheapest rates before rising again for seniors. However, older drivers may be eligible for special discounts. For example, those over 55 years of age can get a reduction in their auto insurance premium if they successfully complete an accident prevention course (available through local and state agencies as well as through the AAA and AARP). Retirees or those who aren't employed full time — and therefore, who are driving less — may also be eligible for a car insurance discount. So always check with your insurer.
Myth #3: Your credit does not affect your insurance rates
Your credit-based insurance score — which is derived from your credit history — may matter. Mercury says a good credit score demonstrates how well you manage your financial affairs - and it's also been shown to be a good predictor of whether someone is more likely to file an insurance claim. As a result, many insurance companies take it into consideration when you want to purchase, change or renew your auto insurance coverage. People with good credit — and, therefore good insurance scores — often end up paying less for insurance.
Myth #4: Your insurance will cover you if your car is stolen, vandalized or damaged by falling tree limbs, hail, flood or fire
Mercury says this is only true if you opt for comprehensive and collision coverage along with your standard policy. If a car is worth less than $1,000, or less than 10 times the insurance premium, purchasing these coverages may not be cost effective, but the insurer says you do need to have collision and comprehensive insurance to fully protect your vehicle from all types of damage.
Myth #5: You only need the minimum amount of auto liability insurance required by law
According to Mercury, almost every state requires you to buy a minimum amount of auto liability coverage, but buying only the minimum amount of liability means you are likely to pay out of pocket for losses incurred after an accident — and those costs may be steep. Mercury says the insurance industry and consumer groups generally recommend a minimum of $100,000 of bodily injury protection per person and $300,000 per accident. If you have substantial personal financial assets to protect in the event of a lawsuit, you may even want to consider an umbrella liability policy.
Myth #6: If another person drives your car, in the event of an accident, his or her auto insurance will cover the damages
In most cases, auto insurance follows the car, not the driver. This means that the car owner's insurance company must pay for damages caused by an accident, regardless of who is driving. However, Mercury says policies and laws differ by state, so it's critical to make sure you understand the rules before allowing another person to drive your car.
Myth #7: Personal auto insurance also covers business use of your car
If you are self-employed and use your vehicle for business purposes, personal auto insurance may not protect you, so it's important to purchase business vehicle insurance. If you have other people — such as employees — using your vehicle, Mercury suggests regularly check their driving records.
"Understanding what really affects your rates — and what doesn't — can save you money and help ensure you're properly protected," emphasized Yoshizawa.
If you'd like to check out average auto insurance rates by state, visit Bankrate here.