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https://www.iii.org/article/8-auto-insurance-myths

When purchasing an auto policy, it’s important to understand the factors that affect your policy costs and coverage. Unfortunately, there’s a lot of bad information that passes for “common wisdom”—here, we separate myth from facts about car insurance.

Myth 1 – Color determines the price of auto insurance

It doesn’t matter whether your car is “Arrest Me Red” or “Hide In Plain Sight White”—the color doesn’t actually factor into your auto insurance costs. The price of your auto policy is based on many factors, such as car make, model, body type, engine size and the age of the vehicle, as well as the car’s sticker price, the cost to repair it, its overall safety record and the likelihood of theft. Insurers also take into account the age, driving record and sometimes the credit history of the driver.

Myth 2 – It costs more to insure your car when you get older

Quite the opposite, in fact—older drivers may be eligible for special discounts. For example, those over 55 years of age can get a reduction in their auto insurance premium if they successfully complete an accident prevention course (available through local and state agencies as well as through the AAA and AARP). Retirees or those who aren’t employed full time—and therefore, who are driving less—may also be eligible for a car insurance discount. Older driver programs and discounts vary by state and insurance carrier and driver age, so if you think you may qualify, check with your insurance professional.

Myth 3 – Your credit has no effect on your insurance rate

Your credit-based insurance score—which is derived from your credit history—may matter. A good credit score demonstrates how well you manage your financial affairs and has been shown to be a good predictor of whether someone is more likely to file an insurance claim so many insurance companies take it into consideration when you want to purchase, change or renew your auto insurance coverage. People with good credit—and, therefore good insurance scores—often end up paying less for insurance.

Myth 4 – Your insurance will cover you if your car is stolen, vandalized or damaged by falling tree limbs, hail, flood or fire

This is only true if you opt for comprehensive and collision coverage along with your standard policy. If a car is worth less than $1,000, or less than 10 times the insurance premium, purchasing these coverages may not be cost effective—but you do need to have collision and comprehensive insurance to fully protect your vehicle from all types of damage.

Myth 5 – 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 but buying only the minimum amount of liability means you are likely to pay more out-of-pocket for losses incurred after an accident—and those costs may be steep. The insurance industry and consumer groups generally recommend a minimum of $100,000 of bodily injury protection per person and $300,000 per accident. If you have substantial personal financial assets to protect in the event of a lawsuit, you may even want to consider an umbrella liability policy.

Myth 6 – If another person drives your car, in the event of accident, his or her auto insurance will cover the damages

In most states, the auto insurance policy covering the vehicle is considered the primary insurance. This means that the car owner’s insurance company must pay for damages caused by an accident, regardless of who is driving. Policies and laws differ by state, so make sure you understand the rules before allowing another person to drive your car.

Myth 7 – Soldiers pay more for insurance than civilians

If you are in the military—regardless of which branch—you actually qualify for a discount on auto insurance. You’ll need to supply documentation that lists your name, rank and the time that you will be enlisted in the service (in some situations, you might be able to have your commanding officer make a phone call on your behalf). Shop around—some auto insurance companies provide discounts for former members of the military, as well as their families.

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Myth 8 – Personal auto insurance also covers business use of your car

If you are self-employed and use your vehicle for business purposes, personal auto insurance may not protect you so it’s important to purchase business vehicle insurance. If you have other people—such as employees—using your vehicle, regularly check their driving records.

Courtesy of iii.org

With burglaries constituting approximately 50 percent of all on-campus crimes, it’s important for college students and their parents take steps to prevent theft, adhere to safety measures—and review their insurance coverage.

Campus coverage basics

It’s best to consult your insurance professional for the details of your family’s specific coverage and where you might need additional protections, but here are some general guidelines:

• Students who live in a dorm are covered under their parents’ standard homeowners insurance policies – That is, their possessions are protected by “off premise” coverage. However, some homeowners policies may limit this amount of insurance, so make sure you understand your own policy.

• Students who live off campus are likely not covered by their parents’ homeowners policy – Your insurance professional can tell you whether your homeowners or renters policy extends to off-campus living situations. If it does not, to protect student belongings, those living off campus may need to purchase their own renters insurance policy.

• Computers and smartphones may carry stand-alone insurance – If you’re getting these items new, at the time of purchase you may be offered insurance or other protections against theft or loss. Also, check the credit card used for the purchase, to see what protections might be available.

• Consider a stand-alone policy specifically designed for students living away at college – This can be an economical way to provide additional insurance coverage for a variety of disasters.

• If your college-bound student is leaving the car at home, make sure to tell your insurance agent – Depending on how far he or she is going away to school, you might be eligible for a premium discount.

It’s better to prevent a loss than to deal with the aftermath. To help prevent loss:

• Leave valuables at home, if possible – While it may be necessary to take a computer or sports equipment to campus, other expensive items—such as valuable jewelry, luxury watches or costly electronics—should be left behind or kept in a local safety deposit box. These items may also be subject to coverage limits under a standard homeowners policy, so if they must be brought to campus, consider purchasing a special floater or endorsement to the homeowners policy to cover them.

• Create a “dorm inventory” – Before leaving home, students should make a detailed inventory of all the items they are taking with them, and revise it every year. Having an up-to-date inventory will help get insurance claims settled faster in the event of theft, fire or other types of disasters.

• Engrave electronics with IDs – Permanently engraving a name and other identifying information on computers, televisions, smart phones and other electronic devices can help police track stolen articles.

Guard against theft or damage of personal belongings while on campus

According to the National Center for Education Statistics, burglaries constitute more than 50 percent of all on-campus crimes. In addition, carelessness can cause other types of damage. To help prevent losses, students should:

• Always lock dorm room doors, and keep the keys with you at all times – Know that most dorm thefts occur during the day, and even if you leave briefly, lock up. Share the theft statistics with your roommates, and get agreement that they’ll do the same.

• Don’t leave belongings unattended on campus – Classrooms, the library, the dining hall or other public areas are the primary places where property theft occurs, so keep book bags, purses and laptops with you at all times.

• Buy a laptop security cable and use it – A combination lock that needs decoding may be just enough to dissuade a thief.

• Be aware of fire hazards – Most campus fires are cooking related so be careful about the types of hot plates or microwaves you to bring to school, and how you use them.

Courtesy of iii.org

How gap insurance works

When you buy or lease a new car or truck, the vehicle starts to depreciate in value the moment it leaves the car lot. In fact, most cars lose 20 percent of their value within a year. Standard auto insurance policies cover the depreciated value of a car—in other words, a standard policy pays the current market value of the vehicle at the time of a claim.

If, when you finance the purchase of a new car and put down only a small deposit, in the early years of the vehicle’s ownership the amount of the loan may exceed the market value of the vehicle itself.

In the event of an accident in which you’ve badly damaged or totaled your car, gap insurance covers the difference between what a vehicle is currently worth (which your standard insurance will pay) and the amount you actually owe on it.

When you might need gap insurance

It’s a good idea to consider buying gap insurance for your new car or truck purchase if you:

• Made less than a 20 percent down payment
• Financed for 60 months or longer
• Leased the vehicle (carrying gap insurance is generally required for a lease)
• Purchased a vehicle that depreciates faster than the average
• Rolled over negative equity from an old car loan into the new loan

Where you can get gap insurance

Your car dealer may offer to sell you gap insurance on your new vehicle. However, most car insurers also offer it, and they typically charge less than the dealer. On most auto insurance policies, including gap insurance with collision and comprehensive coverage adds only about $20 a year to the annual premium.