"Advertorial"
The more you know, the better decisions you'll be able to make. This is certainly the case with auto insurance. While simple at first glance, there are myriad details that can be confusing to policyholders. Making matters worse, several insurance myths needlessly complicate the process of buying coverage and taking steps to minimize rates.
Below, we'll expose seven of the biggest car insurance fallacies that continue to distract people. Along the way, we'll clarify several important points that will help you choose the coverage you need, while keeping your premiums as low as possible.
No. 1 - All Traffic Violations Will Cause Your Rates To Rise
Not necessarily: Much depends on the type of infraction and its severity. For example, a parking ticket will have no effect on your premiums. Your insurer cares little about parking violations since they are not predictive of risk. By contrast, breaking the speed limit suggests reckless driving behaviour. Thus, a ticket for speeding is more likely to result in a rate increase.
Also worth noting, the severity of the speeding -- or any traffic violation -- is taken into account by your insurance company. Driving 40 km/hr above the posted limit is much worse than driving 5 km/hr above the limit. Any rise in your premiums will reflect as much.
No. 2 - Red Vehicles Cost More To insure
Insurers do not care about the colour of their policyholder’s vehicle. Car colour is not predictive of risk, so it is ignored.
A lot of people mistakenly believe those who drive red cars are reckless behind the wheel, and thus pay more for insurance. However, there is no data to suggest such reckless driving is associated with the colour of an individual's vehicle. It is a nonissue.
No. 3 - Expensive Cars Are More Expensive To Insure
Although this fallacy seems intuitive, it is incorrect. Insurance companies do not rely on sticker prices (ie, MSRPs) when calculating premiums. Instead, they consider other factors that better reflect the insurer's risk down the road. For example, the likelihood that a car will be stolen; how much repairs cost; and how safe it is for its occupants; are taken into account. Insurers also check whether a particular make, model, and year is associated with a high number of expensive claims.
An inexpensive car that is unsafe and routinely targeted by thieves can cost more to insure than an expensive car that is both safe and unappealing to thieves.
No. 4 - New Vehicles Are More Susceptible To Auto Theft
This is a common misconception based on the way car thieves are believed to operate. Most people assume new vehicles are the most common target for thieves. In reality, older cars are stolen much more often. Consider the most recent "Top 10 Most Stolen Cars" list from the Insurance Bureau of Canada (IBC). It includes a 1999 Honda Civic, 2001 Pontiac Aztek, and 1998 Acura Integra. The latest model on the list is a 2009 Toyota Venza.
New cars are equipped with advanced auto-theft features. Older vehicles are easier to steal, and therefore targeted more often by thieves. If you dropped your comprehensive coverage because your car is older, keep this in mind.
No. 5 - Seniors Pay More For Insurance Coverage
A lot of people presume older drivers represent a bigger risk. The reasons given include less-than-perfect vision, slow reaction times, and even driving too slowly. It follows that their premiums would be higher than those of their younger counterparts.
In fact, the opposite is true. Insurers consider older drivers to represent a lower risk, and reward them with lower rates. They drive fewer miles, on average, each year. Because they are on the road less, they are less exposed to accidents. Insurance companies often give discounts to drivers when they reach the age of 65.
No. 6 - All Damage To Your Vehicle Is Covered
Having insurance coverage does not necessarily mean every type of damage that occurs to your car is covered. A lot depends on the coverage included on your policy.
For example, damage stemming from an accident would be covered by your collision coverage. Damage caused by a fallen tree would be covered by your comprehensive coverage. However, realize that both are optional. You can decide whether or not to purchase them. If you decide against carrying collision and comprehensive, you would be responsible for damage they would have otherwise covered.
No. 7 - Most Insurers Charge Similar Premiums
Here again, the opposite is true: Most insurance companies charge wildly different rates for the same package of coverage and deductibles. Unless you compare quotes from multiple insurers, there is no way to know whether you're paying too much.
It is a good idea to shop around at least once a year, a month or two before your policy is scheduled to expire. At Kanetix.ca you can compare the rate you're paying your current insurer with those offered by other companies. You may be surprised to find you could enjoy the same coverage while paying lower premiums elsewhere.
The more you know, the better decisions you'll be able to make. This is certainly the case with auto insurance. While simple at first glance, there are myriad details that can be confusing to policyholders. Making matters worse, several insurance myths needlessly complicate the process of buying coverage and taking steps to minimize rates.
Below, we'll expose seven of the biggest car insurance fallacies that continue to distract people. Along the way, we'll clarify several important points that will help you choose the coverage you need, while keeping your premiums as low as possible.
No. 1 - All Traffic Violations Will Cause Your Rates To Rise
Not necessarily: Much depends on the type of infraction and its severity. For example, a parking ticket will have no effect on your premiums. Your insurer cares little about parking violations since they are not predictive of risk. By contrast, breaking the speed limit suggests reckless driving behaviour. Thus, a ticket for speeding is more likely to result in a rate increase.
Also worth noting, the severity of the speeding -- or any traffic violation -- is taken into account by your insurance company. Driving 40 km/hr above the posted limit is much worse than driving 5 km/hr above the limit. Any rise in your premiums will reflect as much.
No. 2 - Red Vehicles Cost More To insure
Insurers do not care about the colour of their policyholder’s vehicle. Car colour is not predictive of risk, so it is ignored.
A lot of people mistakenly believe those who drive red cars are reckless behind the wheel, and thus pay more for insurance. However, there is no data to suggest such reckless driving is associated with the colour of an individual's vehicle. It is a nonissue.
No. 3 - Expensive Cars Are More Expensive To Insure
Although this fallacy seems intuitive, it is incorrect. Insurance companies do not rely on sticker prices (ie, MSRPs) when calculating premiums. Instead, they consider other factors that better reflect the insurer's risk down the road. For example, the likelihood that a car will be stolen; how much repairs cost; and how safe it is for its occupants; are taken into account. Insurers also check whether a particular make, model, and year is associated with a high number of expensive claims.
An inexpensive car that is unsafe and routinely targeted by thieves can cost more to insure than an expensive car that is both safe and unappealing to thieves.
No. 4 - New Vehicles Are More Susceptible To Auto Theft
This is a common misconception based on the way car thieves are believed to operate. Most people assume new vehicles are the most common target for thieves. In reality, older cars are stolen much more often. Consider the most recent "Top 10 Most Stolen Cars" list from the Insurance Bureau of Canada (IBC). It includes a 1999 Honda Civic, 2001 Pontiac Aztek, and 1998 Acura Integra. The latest model on the list is a 2009 Toyota Venza.
New cars are equipped with advanced auto-theft features. Older vehicles are easier to steal, and therefore targeted more often by thieves. If you dropped your comprehensive coverage because your car is older, keep this in mind.
No. 5 - Seniors Pay More For Insurance Coverage
A lot of people presume older drivers represent a bigger risk. The reasons given include less-than-perfect vision, slow reaction times, and even driving too slowly. It follows that their premiums would be higher than those of their younger counterparts.
In fact, the opposite is true. Insurers consider older drivers to represent a lower risk, and reward them with lower rates. They drive fewer miles, on average, each year. Because they are on the road less, they are less exposed to accidents. Insurance companies often give discounts to drivers when they reach the age of 65.
No. 6 - All Damage To Your Vehicle Is Covered
Having insurance coverage does not necessarily mean every type of damage that occurs to your car is covered. A lot depends on the coverage included on your policy.
For example, damage stemming from an accident would be covered by your collision coverage. Damage caused by a fallen tree would be covered by your comprehensive coverage. However, realize that both are optional. You can decide whether or not to purchase them. If you decide against carrying collision and comprehensive, you would be responsible for damage they would have otherwise covered.
No. 7 - Most Insurers Charge Similar Premiums
Here again, the opposite is true: Most insurance companies charge wildly different rates for the same package of coverage and deductibles. Unless you compare quotes from multiple insurers, there is no way to know whether you're paying too much.
It is a good idea to shop around at least once a year, a month or two before your policy is scheduled to expire. At Kanetix.ca you can compare the rate you're paying your current insurer with those offered by other companies. You may be surprised to find you could enjoy the same coverage while paying lower premiums elsewhere.