True or False: Auto Insurance Version

Many people aren’t aware of how auto insurance works, which means there can be some wild rumors repeated about coverage. Take the following true or false test to see how much you know about car coverage:

Insurers charge more for red automobiles.

False. Your provider cares about the year, make and model of your vehicle, but it doesn’t worry about the color. The type of car you drive, your driving and credit history, the number of miles you drive and other factors go into making a quote.

Older people pay more for car insurance.

False. Drivers younger than 25 are considered much worse risks for filing claims than mature drivers. Their rates generally are higher. Older drivers paying more than they think they should should consider taking safety courses.

Your credit score plays a role in setting your premium.

True. Insurance providers use information from your credit score to calculate your insurance score, which helps determine your likelihood of filing a claim. The lower your risk,  the less you’ll pay. Other factors include the type of vehicle you drive, where you live and your claims history.

Flooding isn’t covered by auto insurance.

True AND False. If you don’t have optional comprehensive coverage, you don’t have coverage for floods. However, if you’re still making payments on your vehicle, your lender likely will require you to have comprehensive coverage. If you do carry this protection, you’ll be covered. The confusion likely arises because standard homeowners insurance typically doesn’t cover flooding from rising waters such as rivers or lakes.

You need more than the minimum state auto insurance.

True. Many states only require liability coverage, which will help if you cause a wreck that injures another driver or damages his or her vehicle. That doesn’t give you any help if are the victim of a hit-and-run or theft, nor will it provide help in repairing your vehicle if you cause a wreck.

Your policy automatically covers business use of your car.

False. In fact, if you are self-employed – say as a caterer – and drive your van as part of the job, you likely aren’t protected by your personal auto policy. It gets even more sticky if you have employees who drive the vehicle.

Some states require collision and comprehensive auto insurance.

False. Those coverages always are optional at the state level, though your lender could require them. Collision helps cover you if you hit something else – another vehicle, a tree, etc. – other than an animal. Comprehensive helps for many other situations – fire, theft, vandalism and more.

Your policy covers your vehicle if you give a friend permission to drive it.

True. The key word is permission.

My neighbor and I should pay the same for coverage.

False. Premiums are determined by a number of factors, including some particular to a policyholder and some tied to the vehicle. Variances in those factors can make a difference in the amount each of you pays.

By: Peter Caldwell