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Common Insurance Myths and the Truth Behind Them

November 5, 2012

Car Insurance MythsThe insurance world seems to be full of myths that remain persistent in spite of attempts to clear them up. Getting a good insurance policy that suits your needs and meets your budget as well as getting the most out of that policy relies on knowing as much as you can about your car insurance. Clearing up some common insurance myths can help make certain you are covered the way you should be.

Myth: Once you have a ticket or accident, you can’t get a better rate.

While your rates may go up after you have received a ticket or been involved in an at-fault accident that does not mean you can’t get a better deal on your car insurance premiums. In fact, shopping around can save you plenty – you might even pay less than you were paying prior to the ticket or accident. That’s because every insurance company rates things differently. So while your ticket might cost you dearly at your current company, another company might not charge you as much for it. Also, their rates might be lower to begin with, which means the extra cost of the ticket doesn’t have as much impact on your wallet.

Some companies even specialize in people with less than perfect driving records. So even if it’s not your first ticket or accident, you can still shop around. Getting some car insurance quotes is the best way to find out if you could be paying less.

Myth: You have no say in how your claim is processed.

You have rights when it comes to your insurance claim. You may challenge it on a variety of points including the fault determination and the value the insurance company places on your vehicle. You may not have to accept a determination with which you don’t agree. Speak with your insurance broker. They are there to help you navigate through the claims process.

Every insurance company has an appeals process you can use in order to challenge their decisions. If you disagree with something about your claim, ask what that process is and use it. Insurance companies solve disputes using objective third-party moderators who can help make sure that everyone’s interests are taken care of. Remember that your insurance policy is a contract on both ends – you have rights!

Myth: Discounts are automatically added to your policy.

Some discounts may be added automatically, such as multi-policy discounts, but that doesn’t mean every discount for which you are eligible will be added automatically. In some cases you may need to notify the insurance company that you do qualify and provide them with documentation. Some examples of discounts that require documentation are good student discounts and security system discounts.

Some discounts may also require ongoing evidence – good student, for example, may require that you provide a new transcript each year. In order to find out which discounts are available and which you should be receiving, ask your insurance professional for a list of their discounts and how to qualify for each.

Myth: Insurance companies can charge whatever they want.

Insurance companies must have their rules and rates approved by the governing body in the province. Insurance companies also use a rating system to determine premiums, the charges are not random.

Moreover, to be competitive in a public insurance market, insurance companies are not well served by charging overly high rates. Drivers have other choices and can shop elsewhere for insurance quotes, which leads to competition and keeps rates lower.

Myth: Insurance policies follow the driver.

Unfortunately, this myth can cause some problems. Insurance policies usually follow the car, not the driver. This means that just because you have insurance on one car doesn’t mean you can drive any car and be covered. It also means that if someone else drives your car, it’s your insurance that would cover them.

You need to have a policy on each car you own, and be aware that anyone you allow to drive your vehicle could wind up with a claim that your insurance company will pay out, potentially leading to an increase in premiums. Lend your car with caution.

These insurance myths can cause plenty of problems for drivers, but fortunately the truth makes it easier to navigate the world of insurance. You don’t have to be an insurance professional to shop for coverage and make use of that coverage like a pro. Knowing the truth behind insurance myths is often helpful.

  • Vic

    You claim the insurance rates are fair, how come when car have a winter tires there is no discount.
    It have been proved that the breaking distance reduced to half when you have winter tires.

    This year my insurnce gone up by 16% for no reason. thier explanation is that particular car(Honda CRV 1999) rated high this year.

    Are these thinks make any sence to you ?

  • Nick – InsuranceHotline.com

    Hello Vic,

    Some insurance companies offer a discount when you have 4 winter tires installed. Shop around for car insurance quotes to get the best rate.

    Thank you.

  • Rob Iveson

    It appears that I have always misunderstood the rules governing the deductible on car insurance. Certainly no insurance company has ever advised me that the deductible does not apply on 0% At Fault cases.
    How do I make use of the Direct Compensation coverage in order to get my deducted payment back? With my current insurance company, I just closed a claim and have had another 0% At Fault claim closed a few years ago, both with the deductible applied.
    Please advise.

  • Nick – InsuranceHotline.com

    Hello Rob,

    Direct Compensation is an Ontario coverage so I don’t know if that’s where the issue is. It may also be that the 0% at fault was due to a hit and run claim where you could not identify the third party. In the case of a hit and run, the claim would have been paid out under the collision section of your policy which might be subject to a deductible. If your question is still not answered, you can take your issue up with your insurance company’s ombudsperson.

    Thank you

  • gloria

    why would some companies allow for buy back of a car which was totaled and others not. I have been told when asking to buy back my vehicle that ‘it is not for sale’. I have not been offerred a replacement amount for my vehicle (the car was worth much more than what was deemed by the insurance company as being worth based on year and mileage) and so I would like to purchase a similar car and use the old car for parts. Also if I still hold the ownership and haven’t accepted their offer can they do as they say and demand we turn over ownership?