Car Insurance Myths
How car insurance rates are determined is a complex topic that is not well understood by most consumers. As a result it is often difficult to filter all the information you hear about car insurance and separate fact from fiction. This article is meant to dispel the common myths about car insurance and help you better understand what actually impacts your premiums.
Myth: The colour of your car impacts your car insurance premium.
Fact: This couldn’t be further from the truth! The insurance rate on a car will be the same regardless of whether you choose a red or white colour. There are many factors that impact insurance rates but car colour is not one of them.
Myth: If you lend your car to someone, that person’s insurance will cover any claims that would arise.
Fact: This is not true. When you’re lending your car to someone you are also lending your insurance policy. This is true even if the person you’re lending your car to is covered under their own policy. If there is a claim resulting from someone else’s use of your car, your rate could be impacted. Therefore, always take this into account when someone asks to borrow your car.
Myth: A 2 door car is more expensive to ensure than a 4 door car.
Fact: This is not necessarily true. The number of doors on a car is not a factor used by insurance companies in setting rates. Factors such as the vehicle’s claims history, theft and accident frequency and repair costs play a role in determining the insurance rate.
Myth: New cars cost more to insure than older cars.
Fact: This is sometimes, but not always, true. New cars can have better safety and anti-theft features and may have cheaper replacement parts due to wider availability. These are some factors that may lower the cost of insuring a newer vehicle as opposed to an older car.
Myth: If you don’t make a claim when you’re involved in an accident your insurance premiums won’t go up.
Fact: Beware! Just because you don’t make a claim it doesn’t mean that your insurance rates won’t be affected. If another person who was involved in the same accident reports it, chances are that your insurance company will find out and may choose to raise your rates if they deem that you were at fault.
Myth: The police report determines who is at fault.
Fact: The insurance company will do their own assessment to determine who is at fault. While they are likely to use a police report (if police were called to the scene) as part of their assessment, there is no guarantee that they will agree with it.
Myth: Your insurance coverage is valid anywhere around the world.
Fact: Your insurance company will only provide coverage when you drive your vehicle in the U.S. and Canada. You will need to purchase a separate policy if you plan on driving your car anywhere else in the world.
Myth: Getting into an accident will increase your insurance rates.
Fact: Not necessarily. Only if you’re found at fault will your premiums likely increase. It is important to note that you can be found partially at fault, which would also result in increased premiums. However, if you are involved in a car accident and the driver of the other vehicle is found to be 100% at fault, your premiums will not be affected.
Myth: All belongings in a car are covered under your car insurance policy.
Fact: Car insurance only covers the vehicle. The belongings in the car would be covered under property insurance (homeowner’s or renter’s insurance)
Myth: Getting a ticket will always increase your insurance rates.
Fact: Not necessarily - it all depends on the offense. Some insurance companies will forgive your first minor offense (i.e. speeding ticket less than 50 km/h over the limit). Any major ticket (i.e. speeding ticket more than 50 km/h over the limit) will have a substantial effect on your premiums. It is important to check with your insurance provider to understand how minor and major tickets will impact your insurance rates.
Myth: Moving will not affect your insurance rates.
Fact: Wrong. Moving will affect your insurance premiums given that insurance companies assign a different risk profile to each postal code. Rates could also change due to a longer/shorter commute to school/work as a result of the move.