The American auto insurance industry dates back to the closing years of the 19th Century. In the time since, it has expanded into a billion-dollar enterprise. Nearly all drivers in the U.S., depending on the state they live in, are required to carry auto insurance coverage.
Because the industry is so large, you might not be surprised to learn that some car insurance myths have circulated over the years. You want to know the truth, though, so below we address these myths about car insurance, explain why they are myths and discuss what actually impacts the individual rate of auto insurance policies.
Car insurance myths
Car insurance myths start much like other myths. They are often rooted in truth but become distorted as the information spreads. Because car insurance is such a common expense, a lot of discussion circulates about the policies. Things that might be true for a small group of people or in a certain state spread, but the specific details may be changed in the retelling, resulting in the myth. This can impact your ability to understand the car insurance coverages that you need or how to get the best price for your policy.
Does car color affect insurance rates?
This long-standing myth claims that people with red cars like to drive fast. It could be because many sports cars come in red. Or perhaps it is because red is a flashy color that attracts fast drivers. Whatever the case, the myth contends that insurers think that people who drive red cars are more likely to exhibit high-risk behavior.
Luckily for owners of red cars, none of this is true. Color does not affect car insurance rates. In fact, your insurer likely does not know what color your car is.
When purchasing car insurance, your company will ask for the vehicle identification number (VIN), which gives information about the manufacturer, year built, engine size, engine type and which plant assembled the vehicle. The VIN does not include information about a vehicle’s color.
However, a car’s color could affect the price of insurance if it is a custom paint job.
Since customizations can add additional value to a vehicle, your insurance provider may increase your premium, since the carrier could have to pay out more to repair the paint if you file a claim.
Can you negotiate your insurance rates?
You may have heard that you can negotiate your auto insurance rates. This myth likely stems from two facts. First, you may be able to adjust your insurance rate by asking your insurance provider to apply specific discounts for which you qualify. Additionally, because insurance rates vary from company to company, many people think companies will lower rates to compete with other providers.
Ultimately, though, the negotiability of rates is nothing more than one more of the most popular car insurance myths.
Attempting to negotiate the rate of an auto insurance policy is like trying to negotiate with a utility company about the price of electricity — it simply will not work, and there is a good reason for this.
The auto insurance industry is heavily regulated by state and federal governments. The price points set by insurance companies must comply with the regulatory guidelines, which can change from state to state.
Beyond that, insurance providers calculate your rate using a proprietary algorithm. Your data — including the vehicle you drive, your annual mileage and your driving history — is filtered through that algorithm. The rate at which a company arrives is the rate it can offer you.
However, most auto insurers do offer a suite of discounts for various situations. Factors like having a clean driving record or a car with advanced safety features could bring down the cost of auto insurance considerably.
Do parking tickets affect insurance rates?
Many drivers believe that parking tickets affect insurance rates. This may seem logical, because some traffic tickets do affect your insurance premium. Specifically, moving violations like speeding tickets or a DUI can cause a rate increase. But will a parking ticket have the same effect?
Thankfully, this is not the case — it is just one of the most common myths about car insurance.
Parking tickets do not affect personal auto insurance rates, and car insurance companies will not likely review how many parking tickets a driver has received. When a car is ticketed for a parking violation, no one is driving, so it does not affect the cost of insurance.
When auto insurance underwriters evaluate the risk of insuring the vehicle, they will look into your driving history. Any citations for unsafe driving like running red lights or driving under the influence will likely affect your premium.
Many insurers offer discounts to drivers with clean records, so it could save you money if you are careful behind the wheel and avoid unnecessary risks on the road.
What does affect car insurance rates?
Now that we have gone over the myths about car insurance, we should discuss the factors that will have an effect on car insurance premiums.
Each state has different laws regarding insurance rates. Within those laws, each insurer has individual parameters to determine the risk of insuring a driver. The higher your risk, the more you may pay for your policy.
Which factors go into determining the rate of an auto insurance policy will differ by state and insurer. Here are a few of the common factors that affect car insurance rates:
- Age: People older than 25 usually find themselves in fewer accidents than those below the age of 25, so auto insurers usually offer lower rates to experienced drivers.
- Gender: Women are generally have fewer driving incidents than men. Every year, more men than women die in accidents, and men are also more likely to engage in risky behavior behind the wheel than women. Because of this, some insurers may charge men more for coverage.
- Driving record: People with clean driving records will generally get lower rates on auto insurance. Drivers with a history of tickets or accidents will usually pay more, but some insurers will reduce rates after a few years with no infractions or claims.
- Frequency of use: Occasional drivers usually receive lower rates than people who use their vehicle frequently. More time on the road means that the driver will be at a higher risk for accidents, and insurers account for this.
- Location: Every region in the U.S. has its own risks, such as crime rate, weather and the state of public roads. Insurers will use your specific location and its associated risks to help determine your rate.
- Car type: Your car’s year, make and model will affect the price of your auto insurance policy. Each vehicle has individual costs for repairs and replacement, and that is often a significant factor when rating an auto insurance policy. Other factors like the car’s safety and security features will also likely affect the rate of the policy.
These are all important factors in determining how much you will pay for your insurance premium, but these are not the only factors that insurance companies use. Providers also make decisions based on data they do not publicize. One of the most important things you can do to control the cost of your auto insurance is to drive as carefully as possible to avoid tickets and accidents, which often increase your premium.
Car insurance can seem overwhelming if you are not familiar with it, but it is not as complicated or arbitrary as it might seem at first glance. By being familiar with the truths of car insurance and knowing how to spot the myths, you could be better informed when you are looking for the best auto insurance for your needs.