Car Insurance Myths
Auto insurance can seem complicated, especially when there are a lot of misconceptions about how it works. These kinds of errors can often end up costing you in the end! Here are some of the most popular myths, and the reality behind each.
Myth: Red cars are more expensive to insure.
The colour of the car makes no difference. Regardless of whether it’s black, silver, taupe or beige, the same car in a different colour will have the same rate. What does affect your rate is the year, make, model, body type, engine size, age of the car, and the drivers on your policy.
Myth: If you’re under 25, shopping around for car insurance is a waste of time.
Shopping around can save you money. While insurance rates are generally higher for younger drivers, shopping around can make a huge difference in your monthly payment. Most insurance companies have different rates for drivers 25 and older, but your premium will depend on more factors than just your age. In general, if you have a good driving record, your rates can go down when you turn 25.
Myth: Your employer’s insurance covers you when you use your car for work.
Your auto insurance policy covers your personal use of your car, not any commercial use. So if you drive your own car for your delivery or courier job, your employer’s insurance won’t cover you. You may be getting mileage costs back from your boss, but you don't want to be surprised at the time of an accident that you don’t have coverage.
Myth: Your rate will go up if you get into an accident.
Not necessarily. If you cause an accident, it will directly affect your rate. However, keep in mind that if you do see a rate increase at any time, it may not have anything to do with your accident; insurance rates are adjusted periodically to keep up with the statistics that apply to your situation, including inflation, the number of claims in your neighbourhood, the accident statistics for people with the same car as you, and many other factors.
Myth: If your friend borrows your car and wrecks it, his insurance covers it.
Actually, you should consider your insurance as part of your car. When you loan someone your car, you’re loaning your insurance with it, so consider this and how your premium will be affected if they have an accident. You could also be held financially responsible if they cause an accident while driving your vehicle.
Myth: Auto insurance companies can charge what they want because auto insurance rates aren't regulated.
Insurance rates are actually regulated quite strictly. By law, insurers in all provinces must submit their rates to government agencies for approval. Regulators review how insurers calculate their rates and decide if their rates are fair. Once the rates have been filed, insurers cannot change them until their next filing.
Myth: My rates will be similar to my neighbour's rates.
Rates are determined based on the individual, so factors such as age, driving record, and type of vehicle are considered. Each person's situation is unique, and rates will vary because of this.
Myth: “Comprehensive” coverage protects drivers in all situations.
Comprehensive coverage is one type of protection available on an auto insurance policy (others being Collision, Uninsured Motorist, etc.). Comprehensive coverage pays only for damage caused by an event other than a collision.