Setting the Record Straight: Auto Insurance Myths

Everybody knows that people who drive red cars pay the highest auto insurance rates, right?

After all, red means sporty and fast, attracts attention, leads to speeding tickets...

Whoa! It’s time to debunk all those myths about auto insurance. Knowing the truth about auto insurance can save you time, money and hassle.

The top 10 auto insurance myths

1. My auto insurance will vary depending on the color of my car.

Car color has nothing to do with your auto insurance premium. Insurance companies don’t even ask for car color. Factors that do matter are the year, make, model, body type, engine size and age of your car, driving records and financial responsibility of drivers on your policy who will operate the car, and where the car is garaged.

2. As a guy under 25, I'm in the highest insurance rate bracket.

While it's true that males younger than 25 may pay more for auto insurance than their female counterparts, it is because accident rates tend to be higher for this group of drivers. Overall, teenagers and seniors generally pay higher rates because they’re at increased risk for accidents.

3. Sometimes I use my car for business. If I'm in an accident, my personal auto insurance will cover me.

If you deliver pizzas part-time, occasionally transport clients or drive to meetings, you may need to extend your auto insurance coverage to include business use. Have an accident while you’re on a business errand, and your personal policy may not cover you.

4. Yikes! I had one speeding ticket. My auto insurance rates will go through the roof.

Not necessarily. In many instances, your rate will not go up with just one ticket. Some states don’t allow insurance companies to raise premiums based on a single, minor moving violation. Other factors that affect your rate include the number of points that the state Department of Motor Vehicles assigned to the ticket, whether you’ve had prior tickets and how long you’ve been with your auto insurance company.

Being cited in an accident won’t necessarily bump up your premium, either.

5. My friend borrowed my car and was in an accident. His auto insurance will cover the damages.

If you allowed a friend to borrow your car, your insurance would typically pay for the damages caused in the accident. If that friend has their own insurance, their insurance may also be required to help pay for damages. And there’s a good chance that your auto insurance rates could go up, too.

6. My car is totaled. My auto insurance company will pay to replace it with a new one.

Check your coverage. Most auto insurance policies give you the "actual cash value" of your totaled car, not the replacement cost.

To cover the difference between the actual cash value and the amount you owe on the car, consider purchasing gap insurance. Gap coverage is particularly important if you lease your car, since the payoff on the vehicle is often more than the amount of the insurance settlement resulting from an accident.

7. I've moved, but I already paid my car insurance premium. If I get into an accident, I'll still be covered.

If you move, it’s important to inform your auto insurance company so that your policy can be accurately priced and updated. An insurance company, however, would not typically deny a claim simply because you moved. Wait too long and the company could refuse to pay any accident claim. This is especially important if you move out of state because your auto insurance company may not offer coverage there.

8. My auto insurance will always cover damage from vandalism, theft and random acts of nature.

Not necessarily. Collision insurance typically covers damage to your car due to a collision with another vehicle or standing object. But if you want protection from hail, theft, vandalism, deer accidents and other random acts of nature, add comprehensive coverage.

9. I mailed my car insurance payment late. I'll still be covered by the grace period if I'm in an accident.

Although auto insurance companies are not usually required to offer you a grace period for paying your premium, most auto insurance companies value your business and won't drop you if your payment is a few days late. Depending on your state, your policy can be canceled even if it's a day late, but the cancellation probably would not take effect immediately. Laws vary from state to state governing when an auto insurance company can cancel your policy and how quickly it can take effect.

It’s important to pay your premiums on time. Once you’ve been canceled for non-payment, it’s harder and more expensive to get coverage again.

10. My rates will be the same no matter which auto insurance company I choose.

Annual premiums can vary significantly depending on the auto insurance company because each sets rates based on its own experience, considers different factors in setting rates and provides different coverage. It pays to shop around

Learn the facts about auto insurance.

Learn more about car insurance coverages at Nationwide’s auto insurance resource center, or find out how much your auto insurance will cost with a free online auto insurance quote. If you’re self-employed or use your vehicle for business, you can also get a quote for small business auto insurance.