Top 10 Car Insurance Myths Revealed

November 2, 2012

Car InsuranceWhen shopping around for car insurance, read below for the truths behind these myths.

  1. All Car Insurance Companies Rate the Same Way. This myth leads a lot of people to think that no matter what their situation is (be it a ticket, an accident, or status as a new driver), they can’t get a better rate anywhere else by shopping around. However, in reality, car insurance companies all have their own system of rating a policy, and each weighs the various factors that go into determining premiums differently. That means shopping around can benefit just about anyone.
  2. You Are Covered in Any Car You Drive. Unfortunately, this one is just not so. Whether you are in a rental car or driving a friend’s car, your insurance doesn’t follow you as a driver. In reality, insurance goes with the car, not the driver, so when you’re behind the wheel of a friend’s car, it’s typically their insurance that will be covering a claim in the event of an accident. As for rental cars, it is possible to add coverage for that to your policy – but unless you do, you may not be covered for any damage to the rental vehicle.
  3. Accident Forgiveness ensures you’ll never pay an Increase. Accident forgiveness is a great addition to your insurance policy that can protect you against insurance rate increase after your first accident. However, this additional coverage, like any other ones on your policy has its limitations. All insurance companies have situations that are excluded from the forgiveness program. As well, if you switch insurance companies, that forgiveness won’t come with you – the new insurance company may charge you for an at fault accident that is on your record.
  4. Random Rate Increases. Although it may seem that way, Insurance companies can’t increase your rates at any time for no reason. There is always a reason behind an increase in your rates. It may be an obvious one, such as an accident or a ticket. It may also be a change in the way your policy is rated due to new statistics that affect the risk level you represent. Sometimes rate increases are company-wide. Most of the time, increases happen on renewal of your policy – if you see a rate increase mid-term and haven’t made any changes to the policy, call your insurance professional to inquire.
  5. No-fault Insurance Means No One’s At Fault. This term is used to describe a type of insurance system in which your insurance company pays your end of the claim no matter who is at fault. However, someone may still be found at fault in the accident, and that person could potentially see a rate increase as a result.
  6. New Drivers Always Pay High Rates. Although it’s true that new drivers can face higher rates because of their status, there are a few ways that to lower insurance premiums. For example, there may be some discounts available to new drivers that will help them to get lower rates, including the good student discount and discounts for taking driver education courses.
  7. If the Police Say You’re Not at Fault, the Insurance Company Will Agree. The determination of fault on the part of the police doesn’t necessarily determine what the insurance company will decide. However, insurance companies may use police reports in their fault determination, in addition to using the Fault Determination Rules as outlined in the Insurance Act in Ontario.
  8. Your Insurance Covers You Everywhere. Canadian insurance policies will cover you everywhere in Canada as well as the United States, but if you cross the border into Mexico as many snowbirds and tourists do, you will need to purchase a separate policy to cover you. If you do not purchase one ahead of time, you may be able to buy one at the border. It’s also important to know that legal minimums vary across the provinces and in the States; therefore, it’s a good idea to make sure you meet the minimums in any place you plan to spend more than a day or two.
  9. In a Total Loss, You’ll Get Back What You Owe. When your car is written off as a total loss, your car insurance company is only required to pay the actual cash value of the car. That means that even if you owe more on the loan, they don’t have to pay the difference. This may be a significant amount, and you may want to consider the following two ways to get around this. One way is to purchase gap insurance, which may cover the difference. The other is adding a waiver of depreciation coverage to your policy, which allows drivers of new cars to be entitled to the brand new value of their car if it’s totaled in the first two years.
  10. A Ticket or Accident Comes off On the Anniversary of the Incident. Many people watch the calendar waiting for the day they got that ticket three years ago. Although it’s true that your insurance company will remove the charge after three years, they will only do so until the renewal following the date that the ticket comes off your record. Therefore, the ticket won’t automatically come off on the three-year anniversary to the day – the savings will be reflected in your next renewal.