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Debunking car insurance myths

There are many myths about car insurance in Canada, such as "red cars cost more in insurance," "more expensive cars have higher insurance rates" or "insurance rates go up and down like gas prices."

Despite repeated stories, news segments, blog posts and government reports that clarify the facts (such as this report from the Insurance Board of Canada), these myths persist.

As for why so many myths abound, John Bordignon, spokesperson for State Farm Insurance Canada, says that it takes times to understand the ins and outs of car insurance, and that many people get their information from friends and family rather than industry experts.

"People typically don't want to spend a sufficient amount of time with their agent or broker to discover their needs and the many solutions that are available to them with the right levels of insurance coverage," says Bordignon. "Some people will take what their friend, neighbour or family member tells them about their individual insurance situation verbatim without checking into it for themselves by factoring in their own unique situation or circumstances."

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Here are the three most common car insurance myths and the facts behind the fiction:

Myth #1: More expensive/red/newer cars will have higher premiums.
These myths are closely tied. The red car myth is an "urban legend," says Mark Klein, spokesperson for the Insurance Bureau of Canada, or IBC. "The perception is that there's something about the colour that appeals to a more reckless person but this is an urban myth. It's false," he says.

An IBC report on the most commonly stolen vehicles in 2010 identified the 2000 and 1999 Honda Civic SiR two-door models as the top ranking cars coveted by thieves. This kind of data, as opposed to car colour, is what impacts insurance rates.

People also commonly assume that more expensive cars will have higher premiums than less expensive cars; for example, a BMW will have more expensive insurance than a Honda, all other things being equal.

In fact, insurance rates are not based simply on the purchase cost. Rates "are developed from real world claim experience," says Bordignon. "In some cases, more expensive cars have better claim experience and earn a lower insurance rate than less expensive cars that typically cost more to repair, or are related with higher auto accident injury rates."

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-- Posted May 25, 2011
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