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8 top car insurance myths to steer clear of in 2018

Car insurance can be complicated enough. Don’t let a flood of misinformation drown out the facts. Since misunderstandings can be costly, here are the most common car insurance myths debunked.

myth cartoonMyth: Red cars are the most expensive to insure

Fact: Red will not cost you more green. 

According to an Insure.com survey done a few years ago, 46 percent of 2,000 licensed drivers believed that red cars are more expensive to insure.

But the belief that drivers of red cars pay higher car insurance premiums is a myth. Insurance companies will likely not even ask the color of your car when they’re calculating your car insurance rates.

The notion that car color determines what you’ll pay for insurance is a longstanding myth. It may have come from the idea that people who drive red sports cars are reckless.

Car insurance companies are interested in the year, make, model, body type, engine size and age of your vehicle. The color may be important to you, but it really doesn’t matter to your auto insurance company.

Myth: Thieves prefer to steal new cars

Fact: It’s the other way around. Statistics show that thieves actually prefer to steal older cars. 

The reason older vehicles dominate the list is because they are easier targets for thieves. Because people are keeping their cars longer in the tight economy, there is a strong market for used parts that may come from stolen vehicles.

If you have an older vehicle and have dropped comprehensive coverage to save money, you are not covered for theft and do not qualify for rental car coverage. Even if you have an older car, comprehensive coverage isn't a budget-buster, the average yearly rate is just $192, according to Insure.com's rate analysis.

According to a 2018 National Insurance Crime Bureau (NICB) report, the top 10 most-stolen vehicles reported in 2017 were as follows, with the “most popular” model years noted and the total number stolen:

RankMake/ModelTotal Model TheftsModel Year Most StolenNumber of thefts for model year most-stolen
1Honda Civic45,06219986,707
2Honda Accord43,76419976,301
3Ford Pickup (Full Size)35,10520063,151
4Chevrolet Pickup (Full Size)30,05820021,970
5Toyota Camry17,27820171,100
6Nissan Altima13,35820161,450
7Toyota Corolla12,33720161,012
8Dodge Pickup (Full Size)12,00420011,242
9GMC Pickup (Full Size)10,8652017957
10Chevrolet Impala9,4872008991

Myth: My auto insurance will cover me if my car is stolen, vandalized or damaged from hail or fire.

Fact: Unless you have comprehensive coverage, you are not covered for any of these things. A bare-bones policy in most states only requires you to buy liability coverage. This pays only for damage you cause to others. You need to purchase both collision and comprehensive coverage in order to fully protect your vehicle from all types of damage situations.

Comprehensive coverage covers pays for most kinds of damages to your car that are not the result of a car accident. That includes theft, vandalism, hail, fires and accidents involving animals. Collision coverage pays for damage to your vehicle from a car accident.

Myth: Comprehensive auto insurance pays for damage to my car resulting from accidents.

Fact: Collision coverage pays for damage to your car, regardless of fault, if you're in an accident. However, an Insure.com survey fielded in April 2018 revealed that 63 percent of those surveyed incorrectly thought that comprehensive covers damage to your own car.

Myth: Comprehensive insurance pays for medical bills for those you injure in an accident.

Fact: Liability insurance pays for those injured in an accident you cause, but over half of people surveyed (56 percent) believe comprehensive covers expenses for injuries to those you harm in an at-fault accident.

Myth: If my car is totaled, my car insurance will pay off what I owe on my loan or lease.

Fact: When your car is totaled, your auto insurance policy does not promise to pay off what you owe. It will pay you the actual cash value of your car, minus your deductible. Actual cash value is the amount your car was worth before the accident, factoring in depreciation. You are still responsible for any amount outstanding on the loan or car lease.

The only way to cover the difference between the car's cash value and the amount you owe on a loan is to purchase gap insurance. Available to cover both auto leases and loans, gap insurance covers you if your car is totaled before you’ve paid off the loan, or before the lease term expires.

Your insurer will decide if your car is "totaled." Generally a total loss is declared when the repair costs exceed a certain threshold of the car’s value. It varies by insurer. Generally insurance companies will total your car if the repair costs exceed between 51 to 80 percent of the car’s value. At that point, the insurance company will tow the car to the salvage yard and offer you the actual cash value of your car.

Myth: My auto insurance company will pay for a rental car if my car is stolen or damaged in an accident.

Fact: Even if you have comprehensive and collision coverage, it may not include a rental car. Rental car reimbursement is not automatically included in most car insurance policies, but you can add it at an affordable cost. According to the Insurance Information Institute, rental reimbursement coverage is available for $1 to $2 a month with most insurers.

Even if you have this coverage, it won’t necessarily last until your stolen car is recovered or your damaged car is fixed. There’s a limit on how much your insurance company will reimburse you per day, plus a cap for a maximum amount per accident. For example, GEICO's standard charge is $20 per year for a maximum $750 in rental reimbursement, with no deductible to pay. In this case, GEICO would reimburse you up to $25 per day but no more than $750 per accident. In some states, you may be able to buy higher limits.

Myth: Drivers of sports cars always pay higher car insurance rates.

Fact: That's not always necessarily the case. Lots of risk factors determine car insurance rates, but one that’s often overlooked is the demographics – particularly the age -- of your fellow buyers. For instance, if the average age of the person buying a certain model car is 29, that may mean that vehicle make and model will have a higher rate of accidents because there are lots of less experienced motorists driving them. Car insurance companies take into account a car’s history of claims when setting your rate. So, if you buy a sports car and the average age of your fellow owners is, say, 51, even if it’s a sporty car, you may pay a lower insurance rate than if you had bought a generic sedan that is driven by mostly younger drivers.

Let’s look at how once scenario plays out, using Ford’s new-model Mustang. Granted, Mustangs don’t enthrall drivers and garner national attention the way they did in the 60s, but the current model is among the bargains of the automotive world, insurance-wise. This is likely because, to some degree, the average Mustang buyer is 51 years old, according to marketing research firms who say nostalgic Boomers are big buyers. Typically, drivers that age have fewer accidents than ones in their 30s.

A 2018 Mustang coupe costs an average of $1,585 a year to insure, according to data gathered by Quadrant Information Service for Insure.com. Comparing car insurance rates by car, the same 40-year-old driver would pay about the same – a bit more or less -- for a:

  • Kia Forte SX -- $1,688
  • Nissan Versa Note 1.6 SR -- $1,487
  • Mazda3 Sport Hatchback -- $1,505

Demographics only go so far, though. The wrong ZIP code, a bad driving record or even poor credit can make any car more expensive to insure.

And down the road, if the Mustang proves more expensive to repair or begins to attract a younger, more accident-prone buyer, you can expect higher rates.

 

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