The methods of pricing car insurance can be like a cloak and dagger operation at times. Each insurance company has their own statistical method for pricing their products. But many people widely believe that insurance companies use some of the methods below to determine premiums. However, you may be surprised to find out that these are simply myths and have no bearing on pricing at all.
Car Insurance Myth #1: The color of the car determines a portion of the premium.
Does the owner of a red Honda have to pay more than an owner of a white one? No. The color of an automobile is irrelevant. What does matter is the automobile’s year, make, model, body type and engine size.
Car Insurance Myth #2: My credit score has no bearing on my premium
Not true. Insurance companies are almost universally using one’s credit score as a factor in premium determination. Your ability to continue paying loyally will help reduce your insurance costs. However, late payments on your credit score can jack up your rates considerably.
Car Insurance Myth #3: No-Fault insurance only pays if I’m not at fault.
No-fault is widely misunderstood. Many people believe that no-fault insurance will only pay if they are not at fault in an accident. In actuality, no-fault is determined by state insurance laws, and means that the insurance will pay regardless of who is at fault in a no-fault state.
Car Insurance Myth #4: If my friend drives my car then his insurance is responsible in case of an accident.
Wrong. Your car is your responsibility no matter who drives. That means if your friend gets into an accident with another car and injures another person, your insurance company pays and your premium will be subsequently affected.
As you can see, there are many myths - most which need to be debunked. It is important to perform dilligent research to fully understand the elements of insurance, and it is our goal to aid you in this process.
Tags: auto insurance, car insurance, credit score, insurance myth, no-fault insurance, pricing car insurance