As an insurance advisor I often have to “un-teach” people the misconceptions they have before I can help them discover their true insurance needs.
This is not an exhaustive list, obviously, just a few I’ve come upon multiple times.
Myth #1: My car insurance should cost less to insure as it gets older.
The majority of an auto insurance premium pays for liability coverage—in other words, what it will cost to repair the other car you damage as well as the compensation to people you injure in an accident.
Also, older cars have fewer safety features, are made of heavier materials that cause more damage, and require unique skills to fix, or have parts that are harder to find. The cost of medical care seems to always increase! The value of your car is not the only thing your insurance pays for.
Myth #2: Insurance should cost less because cars have gotten safer.
The technology making cars safer also makes them much more expensive to repair. And it will be some time before autonomous driving systems are widespread enough to reduce injury and fatality rates that have risen as a greater number of cars are driven a greater number of miles. Unfortunately, distracted driving, specifically from cell phone use, has led to an increase in accidents.
Myth #3: Insurance companies only raise prices to make more money.
Insurance companies are in business to make a profit. But they set prices that closely match what they expect to spend in claims and expenses. In some areas where accident rates and claims costs have risen dramatically, many companies don’t make any profit from premiums and are raising rates to lose less money.
The fact that auto insurance is advertised so heavily on TV and radio should tell you it is a competitive business. Competition tends to favor the consumer in lower prices.
Myth #4: Insurance companies will raise my premium to recover money spent on my claim.
This is actually against the law. An insurance company cannot charge you for the money it spent to settle a claim. However, accident history is predictive of future accidents, which is why many insurance companies may surcharge your premium for a few years following a loss that you caused. The surcharge is the same regardless of how much the insurance company paid out on the claim.
The information contained in this page is provided for general informational purposes only. The information is not meant as professional or expert advice, and any reliance you place on such information is therefore strictly at your own risk.