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.
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.
Next steps: Learn about how to save money on car insurance.
FAQs
Symbol 8 refers to “hired auto” coverage. This includes any autos hired, rented, leased, or borrowed for business purposes. It does not cover autos borrowed or leased from your employees or members of your household.
What is symbol 7 auto insurance? ›
The most common type of coverage purchased for Business Auto is “Symbol 7” Symbol 7 coverage refers to any “scheduled” or listed vehicles on your policy.
Is it true red cars have higher insurance? ›
The color of your car doesn't affect your insurance rate. Instead, your insurance company uses other information, like your car's age, location, usage, and your driving record, to help determine insurance rates.
What are 7 factors that will decide how much your auto insurance premium is? ›
Some factors that may affect your auto insurance premiums are your car, your driving habits, demographic factors and the coverages, limits and deductibles you choose. These factors may include things such as your age and your driving record.
What does the symbol 8 mean? ›
In mathematics the symbol of the infinity is represented by a 8 laid down. Symbol of the cosmic Christ. Number figuring the immutable eternity or the self-destruction. It represents also the final point of the manifestation. In China, the 8 expresses the totality of the universe.
What is the collision symbol 8? ›
8 = Hired “Autos” Only
This symbol covers only those “autos” that an insured leases, hires, rents, or borrows. HOWEVER, it does NOT include “autos” leased, hired, rented, or borrowed from an employee, partner, or member of an insured's household.
What is symbol 9 in auto insurance? ›
Response 1: The exposure described involving a dump truck company would be insured by an auto policy that included Coverage Symbol 9, “Non-Owned Autos." The exposure described would not be insured under Coverage Symbol 8, “Hired Auto Liability." Here are the definitions of Coverage Symbol 8 and 9 in an ISO CA 00 01.
What is symbol 10 on an auto policy? ›
Nonowned “Autos” Only: This covers vehicles not owned or rented by the policyholder but used for business purposes. Symbol 10. Certain Mobile Equipment: This applies to specific land vehicles considered mobile equipment under certain state laws.
What is symbol 31 auto insurance? ›
This symbol would be used to “trigger” the garagekeepers coverage. Symbol 31 covers dealers “autos” and “autos” held for sale by non-dealers or trailer dealers. This is used for physical damage coverage.
What is the safest color of car? ›
According to Kelley Blue Book, white is the most popular color choice for minivans, pickup trucks, sedans and luxury cars alike. White is also considered the safest color. In fact, in comparison to white vehicles, black cars are 12% more likely to be involved in an accident.
—the most expensive cars to insure, based on the national average of insurance coverage, are: Maserati Quattroporte: $5,024 a year (a luxury car) Audi R8: $4,568 a year (a luxury sports car) BMW i8: $4,372 a year (a hybrid sports car)
Are older cars cheaper to insure? ›
In general, auto insurance for older cars may be cheaper than insuring newer vehicles of the same make and model if the used car is cheaper to repair or replace.
Why is Allstate so expensive? ›
Allstate is so expensive because car insurance is expensive in general, due to rising costs for insurers. Allstate's premiums may also reflect how competitively Allstate agents are paid, but at $781 per year, the average Allstate car insurance policy is actually cheaper than coverage from most competitors.
Does credit score affect car insurance? ›
On average, drivers with poor credit pay 118 percent more for full coverage car insurance than those with excellent credit. California, Hawaii, Massachusetts and Michigan prohibit or limit the use of credit as a rating factor in determining auto insurance rates.
Why do men pay more for car insurance? ›
In general, car insurance companies charge male drivers more for coverage because they're more likely to get into accidents. But while most states allow insurers to consider gender when setting rates, your age, location, insurance provider and driving record usually make a bigger difference.
What is symbol 9 insurance? ›
Under ISO rules and forms, Symbol 8 applies to nonowned autos leased, hired, rented, or borrowed by the insured, while Symbol 9 applies to nonowned autos NOT leased, hired, rented, or borrowed by the insured.
What does symbol mean on car insurance? ›
Auto coverage symbols are Arabic numerals (1–9 and 19 for business auto, 21–31 for garage, 41–50 and 59 for truckers, and 61–71 and 79 for motor carrier) used to denote to what category of autos a commercial auto policy's various coverages will apply.
What do the numbers on insurance mean? ›
Each number represents the maximum amount your insurance company will pay for a specific part of your liability coverage, so a 100/300/100 policy means bodily injury liability limits of $100,000 per person and $300,000 per accident, and property damage liability limits of $100,000.
What is coverage symbol 6? ›
Symbol 6, used only for uninsured (and underinsured) motorists coverage, insures owned autos subject to a compulsory uninsured motorists law, including autos that the named insured acquires ownership of during the policy period that are also subject to a compulsory uninsured motorists law.
