5 Car Insurance Myths that Make Your Policy Experience Worse

car insurance

If you have car insurance, can you say that you truly understand the ins and outs of your policy? If the answer is no, you’re definitely not alone. A 2010 report from the National Association of Insurance Commissioners (NAIC) revealed that only 45 percent of Americans are confident that they understand their auto and health insurance policies.

It’s not the end of the world if you don’t fully understand every minor detail of your policy, but lack of basic insurance knowledge can lead to believing and perpetuating myths. If that’s the case, you’re not getting the most out of your insurance.

The Importance of Understanding Your Car Insurance Policy

You may be wondering how understanding your car insurance policy can make a difference in your experience, especially when much of it is usually summarized on the first page of your contract.

Well for some people, even understanding the first page, which usually includes information about liability limits, rental reimbursement and medical payments, can be difficult to grasp. This is why many people prefer to not read the pages to follow unless they concern payments.

However, if you do take time to translate the legalese within the pages of your policy, you’ll likely find information that gives you greater insight into your rights as a policyholder.

Further, you’ll be able make sense of some of the common misconceptions among policyholders. The more educated you are, the less likely you’ll fall victim to car insurance myths that could make your coverage experience worse.

Top 5 Car Insurance Myths

So what are some of these car insurance myths? There are numerous myths that exist, but here are the top five of the list:

1. You can’t cancel your policy any time.

One common auto insurance myth is that policyholders must honor their contracts until the term is over. The truth is car insurance companies allow customers to cancel at any time. However, some may charge an early cancellation fee.

Some customers often feel stuck with a company and pay for coverage they’re unhappy with when they could walk away and have a better experience elsewhere.

2. Sports car insurance rates are the highest.

While sports car insurance rates are believed to be the most expensive since drivers of these vehicles are said to receive more violations, luxury cars and SUVs also sport high rates. That’s because the type of car you drive is not the only factor in coverage costs–your driving record, insurance score, age and location all come into play as well.

So if you have avoided purchasing a sports car because you’re afraid it will come with the highest insurance price tag, you may be missing out on the car of your dreams unnecessarily.

3. All insurance policies cover vandalism and theft.

If you’ve heard the myth that any insurance you purchase covers vandalism, theft or damage caused by hail or fire, think again. You must carry comprehensive coverage to ensure this type of damage is paid for by your insurer.

4. Stay away from the most stolen vehicle.

Every year, the National Insurance Crime Bureau releases its list of the top 10 most stolen vehicles, which are often rumored to be more expensive to insure. While some of these vehicles may come with a higher insurance price tag, many won’t because they are actually used vehicles. So before buying into the most stolen vehicle myth, first shop around for affordable coverage and enjoy the vehicle you really want.

5. Your insurance company will pay off the loan if your car is totaled.

If you have purchased collision insurance, you may believe if you’re in an accident and total your car, your insurance company will pay off your loan amount. In actuality, your company will pay the depreciated value of your vehicle. So if you owe more on your car than what it’s worth, you’ll have to pay off the loan balance unless you purchase auto gap insurance, which covers the difference.

Improving your understanding of auto insurance is an important step in ensuring you make well-informed policy decisions. Take time to address the myths you’ve believed for so long so you don’t live with a policy, company or vehicle you’re not happy with.