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Car Insurance Lies

An insurance agent once said: "There are lies, damn lies, then there is car insurance"

Falsehood: My car insurance company pays for a rental when while my is repaired.
Truth: Even if you have full coverage (comprehensive and collision), it may not cover rental car reimbursement. It's now seperate in most insurance policies, but available for several $2 per month usually.

There's also limit on how much your insurance company will reimburse you per day, plus a cap for a maximum amount or days per accident. Geico charges $20 per year with a max of $750 for rental reimbursement, with no deductible.

Falsehood: Car Insurance is higher for seniors.
Truth: Drivers over 55 years of age can qualify for a reduction in auto insurance rates, typically for three years, if they have successfully completed an accident prevention course.  Insurance companies will usually provide up to a 10 percent discount on car insurance, but check with your provider before you sign on. Mature driving courses are available through local and state agencies as well as through the AAA and AARP. You can also check with your insurance agent to find out which defensive driving courses are approved by your insurer. If you are retired or are not employed full time, you may also be eligible for a discount of up to 5 percent off your car insurance. Age requirements for this type of discount vary by state and insurance carrier.

Falsehood: If my car is totaled, my insurance will pay off the balance of the loan.
Truth: If your car is a total loss, your policy will only pay the actual cash value the car, minus a deductible. Actual cash value is the amount your car is really worth pre-accident, including depreciation. You are responsible for the difference of what's owed on the loan and actual cash value.

To cover the difference between the car's cash value and the loan balance, consider gap insurance. You usually have to buy gap insurance within 30 days of leases or buying a new car. Gap insurance pays the car loan balance if your car is totaled before you've paid you’re your loan or your lease expires.

Your insurance adjuster calculates if your car is totaled, usually when repair costs exceed 70% of the car's value. The car insurance company will sell your car to a wreaking yard and pay you the actual cash value.

Falsehood: Your credit effects on your insurance rate.
Truth: Your credit-based insurance score may not matter if your state does not allow insurers to do it. An insurance score is a measure of how well you manage your financial affairs, not your financial assets. Many insurance companies take your insurance score into consideration when you want to purchase, change or renew your auto insurance coverage. Because the majority of people have good credit, and insurance scores are derived from a person's credit history, most people pay less for insurance when insurance scores used.

Falsehood: Your car insurance policy covers you if your car is stolen, vandalized or damaged by trees, hail, flood or fire.
Truth: Comprehensive and collision coverage are optional coverages, meaning you pay extra for them. If your can is financed, your lenders will require you to carry comprehensive and collision coverage as part of the car loan agreement. If you drive an older car, drop compand and collision to save money. If a car is worth less than $3,000, buying extra coverage may not pay off. But comprehensive and collision coverage protects your car from all types of damage.

Falsehood: You only need the minimum amount of auto liability insurance required by law.
Truth: Every state now requires a minimum amount of auto liability insurance. Accidents can cost much more than the minimums. With only the minimum of liability coverage, you will pay more out-of-pocket for losses in an at fault accident.

Falsehood: Thieves like new cars.
Truth: Thieves tend to steal older cars because they are easier. According to a National Insurance Crime Bureau report, the top 10 most-stolen vehicles in 2007: 1995 Honda Civic, 1991 Honda Accord, 1989 Toyota Camry, 1997 Ford F-150 pickup, 1994 Chevrolet C/K 1500 pickup, 1994 Acura Integra, 2004 Dodge Ram pickup, 1994 Nissan Sentra, 1988 Toyota pickup and 2007 Toyota Corolla.

Since people are keeping their cars longer, there's a thriving market for used parts. Most times, they are stripped right after they are stolen.

Thefts even vary from state to state. In California and Florida Hondas, Toyotas and other imports are likely targets. In Texas they steal primarily pickups. In Illinois, Indiana and Michigan they steal domestics, like Dodges and Fords.

Falsehood: If you have an older vehicle and drop comprehensive coverage, you can still be covered for theft
Truth: It depends on the insurance carrier. Not only does comprehensive include theft, you also must have it to qualify for other riders, like rental car coverage or towing.

Falsehood: If you loan someone else your car to drive, their auto insurance will cover them.
Truth: In most states, the car insurance policy on the vehicle is the primary insurance, so the auto insurance company for the vehicle must pay for damages caused in an accident.

Falsehood: Drivers of sports cars have more violations and pay higher car insurance.
Truth: They might pay for the repair cost, but not for tickets. In a 2009 study by Quality Planning, the most violations were Hummer drivers which have five times the average number of violations. Drivers of three Scion models (tC, XB Station, XA) also made the top 10 list. Others on the list include drivers of two Mercedes-Benz models (CLK63 AMG, CLS63 AMG), two Toyotas (Solara, Matrix), the Subaru Outback station wagon and the Audi A4.

Falsehood: Personal auto insurance will cover your business trips.
Truth: If you have your own business and drive for business purposes, your personal car insurance policy may not cover you. While auto insurance geared for businesses can be more costly than a personal policy, one of the best ways to keep your auto rates down is by having a good driving record.  If there are others using your car they need to have good driving records too. Check the records of your employee drivers at least twice a year to ensure they maintain a clean driving record.

Written by Craig J. Casey

Financial Writer helping people with their insurance problems on the net since 1998.

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