There are many factors that play an important role in deciding your
auto insurance premium amount. While most of the determinants are commonly considered by different insurance providers, some are different. However, in the process to understand these factors, you my often come across some common beliefs about auto insurance, which are nothing but myths.
At the time of buying an auto insurance, it is important to know about the things that decide the price of your car policy and it is equally important to differentiate between fact and fiction?
Below are some common myths about auto insurance -
Myth – 1: The colour of your vehicle decides the cost of auto insurance policy
One of the most common believes is that colour of your car is one of the deciding factor of your
car insurance premium. In addition, the notion that red cars cost more to insure. However, the fact remains that your insurance premium does not depend on what colour is your car.
Your car insurance premium is based on the make, model, body type, engine size, the age of the vehicle, but not the colour of your vehicle. Your auto insurance premium will also depend on the age, driving record and credit history of the driver. The other factors that decide the price of your car insurance policy are the repair cost of your car, its safety record and the anti-theft provisions for it. Almost all insurance providers offer car insurance discounts for features that lowers the risk of injuries or theft.
Myth – 2: Your car insurance rate is independent of your credit score
Your credit score gives an idea about your financial stability and management. Mostly insurance companies consider your credit score before offering you a car insurance policy.
Myth – 3: The minimum amount of liability auto insurance, mandatory by law, is sufficient
Nowadays having auto insurance is compulsory in most of the countries. Thereby, the myth states that having only the minimum amount of auto insurance, as mandated by law, is sufficient.
However, the fact states that as accidents cost more, you will require more liability insurance than what has been mandated by law. In case of accidents, it has been often observed that people with only minimum required amount of auto liability insurance, end up paying more out of their pocket. Therefore it is always preferable to have add ons like third party insurance, liability insurance and so on.
Myth – 4: If someone else is driving your car, will be covered under his/her auto insurance, in case of an accident
Many believe that your car insurance policy will cover only you and your car or a third party. However, even if your car is been driven by someone else, and he/she meets an accident. The losses incurred during this event by your vehicle will be covered by your car insurance policy. Therefore, do not let anyone drive your car if you are not familiar with his/her driving record. It is always advantageous to have to have car insurance add ons like liability insurance, third party insurance and so on.
Myth - 5: Private auto insurance policy covers both personal & business use of your car
Your private car insurance will cover your only for your personal usage and not business. If you use your car for business purpose, you will require a passenger carrying vehicle insurance or goods carrying vehicle insurance.