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Busting auto insurance myths

When purchasing car insurance, you probably already have a good idea about the factors that affect your car insurance premium rates and coverage. But how do you differentiate between truth and fiction? The Insurance Information Institute dispels common myths about auto insurance and shows you how you can save money. PRNewswire-USNewswire

Myth: Color determines price of auto insurance.

It doesn't matter if your car is red, green or purple. What does matter is the type of car you select. Before you buy a new or used car, check into insurance costs. Auto insurance premiums are based on make, model, body type, engine size, the age of the vehicle, age of the driver, driving record and credit history. They are also based, in part, on the car's sticker price, the cost to repair it, its overall safety record and the likelihood of theft. Many insurers offer discounts for features that reduce the risk of injuries or theft.

Myth: It costs more to insure your car when you get older.

Many drivers older than 55 can qualify for a reduction in auto insurance rates, typically for three years, if they have successfully completed an accident prevention course. Insurance companies will usually provide up to a 10 percent discount on car insurance, but check with your provider before you sign on. Mature driving courses are available through local and state agencies as well as through AAA and the AARP. If you are retired or are not employed full time, you may also be eligible for a discount of up to 5 percent off your car insurance.

Myth: Your credit has no effect on your insurance rate.

Your credit-based insurance score does matter. An insurance score is a measure of how well you manage your financial affairs, not your financial assets. Many insurance companies take your insurance score into consideration when you want to purchase, change or renew your coverage.

Myth: Your insurance will cover you if your car is stolen, vandalized or damaged by falling limbs, hail, flood or fire.

Comprehensive and collision coverage are optional coverages. Lenders frequently require drivers to buy comprehensive and collision coverage as a condition of a car loan agreement. Those driving older cars sometimes drop these coverages as a way of saving money. If a car is worth less than $1,000 or less than 10 times the insurance premium, purchasing the optional coverages may not be cost effective.

Myth: You only need the minimum amount of auto liability insurance required by law.

Almost every state requires you to buy a minimum amount of auto liability coverage. Chances are you need more liability insurance than the state requires because accidents often cost more than the minimum limits. The insurance industry and consumer groups generally recommend a minimum of $100,000 of bodily injury protection per person and $300,000 per accident.

Myth: If another person is driving your car, his or her auto insurance will cover them if they get in an accident.

In most states, the policy covering the vehicle is considered the primary insurance, which means that the auto insurance company for the vehicle must pay for damages caused by an accident.

Myth: Personal auto insurance covers both personal and business use of your car.

Personal auto insurance may not protect you. While auto insurance geared for businesses can be more costly than a personal policy, one of the best ways to keep your auto rates down is by having a good driving record. If there are others using your car they need to have good driving records too.

Busting auto insurance myths 03/24/11 [Last modified: Thursday, March 24, 2011 11:08am]
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