Top 5 Insurance Myths You Shouldn't Believe

Car insurance is mandatory if you own a car. Theft protection and mechanical repairs are common misconceptions about what insurance covers.

Auto insurance is one of the most important components of car ownership. Auto insurance not only gives you the opportunity to save large sums of money, but is also required by law in all states except New Hampshire.

The purpose of auto insurance is to provide financial protection in the event of an accident or any other situation that could damage your vehicle. You pay a monthly amount to your insurance agent and they in turn cover the cost of any damage to your car (minus your deductible). Because many drivers don't have enough money to fix their car if they get into an accident (or if their car gets damaged by someone or something), insurance becomes a lifesaver for many.

Each insurance plan is different depending on your insurance agent and the plan you choose, but all insurance plans have the same basic rules. However, these rules are not always well understood and there are a large number of popular insurance myths: things that people think are true about their insurance but are actually inaccurate. If you believe these myths are true, they can change how you feel about car ownership and insurance, so it's important to know exactly what your plan actually covers. Here are five of the most common auto insurance myths you should never believe.

5. Your insurance only covers you if you're not at fault.

Many people believe that if you cause an accident, your insurance company will not help you. Reality is a little more complicated. Most drivers are collision insured, which means their vehicle is fully insured by their insurance company - no matter who is at fault for the accident. However, some people only have liability insurance. Liability insurance will cover any damage you cause to other vehicles, but not to your own.

Collision insurance is better to have than liability insurance, but it can be a bit more expensive. Make sure you know exactly what is included in your insurance plan so you know what is covered.

4. Bright red cars are more expensive to insure

It's fairly common that red cars (and other cars with bright colors) attract speeding tickets. The theory goes that if a car is more likely to attract the attention of the police or highway patrol, then that car is more likely to be pulled over. At some point, this belief transformed from the idea of ​​tickets to insurance, and many people believe that it costs more money to insure a bright red car.

In fact, both beliefs are false. Paint colors that catch your eye won't make you more likely to get a ticket, and they certainly won't affect your insurance rates. However, many luxury cars (such as sports cars) carry higher insurance rates - but that's only because they're expensive, fast, and potentially dangerous, not because of the color of their paint.

3. Auto insurance protects items stolen from your car.

While auto insurance covers many things, it doesn't cover things you leave in your car. However, if you have homeowner's or renter's insurance, they will cover your lost items if your car is broken into.

However, if a thief breaks into your car to steal your property and damages the car in the process (for example, if they break a window to get into the car), then your auto insurance will cover that damage. But insurance only covers the parts of the car, not the items that were stored in it.

2. When your insurance pays you for the entire car, it covers the cost after the accident.

A total loss of a car is one that is considered completely lost. This definition varies slightly depending on your insurance company, but in general it means that the car is either impossible to repair or the cost of the repair will exceed the value of the repaired car. When your car is considered broken, the insurance company will not pay for any repairs, but will instead write you a check to cover the assessed value of the car.

The confusion lies in whether the insurance company evaluates your car in normal condition or in post-accident condition. Many drivers believe that the insurance company will only pay you the cost of the damaged car. For example, if a car was worth $10,000 before the accident and $500 after the accident, many people think they will only be reimbursed $500. Fortunately, the opposite is true: the insurance company will pay you as much as the car was worth before the accident. The company would then sell the entire car for parts and the money made from it would stay with them (so in the previous example you would have received $10,000K and the insurance company would have kept $500).

1. Your insurance agent covers your mechanical repairs

The purpose of auto insurance is to cover unexpected damage to your car that you cannot predict or prepare for. This includes everything from accidents you caused, to someone hitting your parked car, to a tree falling on your windshield.

However, this does not include mechanical repairs to your vehicle, which is a standard part of car ownership. Even if you don't know exactly when you'll need mechanical repairs, when you buy a car, you're knowingly agreeing to a vehicle that will need tire replacement, shock absorber replacement, and engine overhaul. Your insurance company will not cover these costs (unless they are caused by an accident), so you will have to pay all of them out of your own pocket.

You should never drive (or own) a vehicle without insurance, both for legal reasons and to avoid being unprepared in the event of an accident. However, you should always know exactly what your insurance plan covers so you know what your protection is and so you don't fall for any of these popular insurance myths.