Beware applicants, don't fall for these car insurance myths

 Car insurance is mandatory for every car owner in the Philippines. This necessity is a burden to some because of the monthly premium. Still, the financial protection it offers in case of theft, accident, or other damages compensates all that expense.

However, after being one of the most sought-after things and with so much information available online, car insurance is surrounded by numerous myths and misconceptions. Thus leading to hus leading to confusion and poor decision-making on the part of the applicant.

Car insurance myths can easily influence how a car owner chooses insurance, what coverage he/she believes is needed, and how to handle claims. In the general interest of everyone looking to buy car insurance, it is time to debunk these myths and understand the realities of car insurance.

Importance of understanding car insurance myths

Believing in car insurance myths can result in -

• Unnecessary expenses
• Inadequate coverage
• False sense of security

By uncovering the truth, an applicant can make more informed decisions, ensuring they have the right coverage without overpaying.

Car insurance myths

#1 Car insurance is only necessary for new cars

It is quite a common misconception that car insurance is only essential for new cars. However, regardless of the car's age or condition, having insurance is crucial. Older cars may have lower market value, but they still face risks such as accidents, theft, or natural disasters. Insurance helps cover the cost of repairs or replacement, protecting your investment.

#2 It’s expensive to insure red cars

The myth that red cars are more expensive to insure is widespread. In reality, the colour of the car has no impact on your insurance rates. Insurers base premiums on factors like the car's make and model, age, engine size, and the driver's record. So, while a flashy red car might attract more attention, it doesn't affect your insurance costs.

#3 Minimum coverage is sufficient

Many drivers in the Philippines believe that minimum coverage is enough. However, minimum coverage often falls short of providing adequate financial protection. For example, in the case of a severe accident, medical expenses and property damage can quickly exceed the limits of basic coverage, leaving the owner responsible for the remaining costs.

#4 Comprehensive car insurance covers everything

Often comprehensive car insurance is misunderstood as a catch-all policy that covers every possible scenario. While it is true that comprehensive insurance does provide extensive protection, it doesn't cover everything. It typically includes damage from non-collision events like theft, vandalism, and natural disasters, but excludes regular maintenance, wear & tear, or mechanical breakdown.

#5 Credit score has no impact on insurance rates

Another common myth going around the auto insurance market is that an applicant's credit score has no impact on their insurance premiums. Almost all insurance providers consider credit scores when determining rates. A lower credit score can result in higher premiums, as insurers associate poor credit with increased risk. Therefore, it becomes essential for an applicant to maintain a good credit score to benefit from lower insurance rates.

#6 Personal items in the car are covered under insurance

Many people assume that their car insurance policy covers personal belongings inside the vehicle. However, car insurance generally doesn't cover personal items stolen from your car. Instead, such items are often covered under a homeowner's or renter's insurance policy. Note, that it is advisable to always check your policy details to understand what is and isn't covered.

#7 Old drivers end up paying high premiums

While it is true that very young and old drivers end up paying high premiums, the notion that all old drivers pay more is not accurate. The fact of the matter is that insurance companies evaluate risk based on driving history, claims history, and other factors, not just age. So, no matter how old a driver is, the ones with lots of driving experience and clean records may benefit from lower rates than less experienced, younger drivers.

#8 An applicant needs to insure the car for its market value

Insuring a car only for its current market value might seem logical, but it can leave a car owner underinsured. For instance, in the event of an accident, the cost of repairs or medical expenses can exceed the car's market value. When choosing coverage limits, the applicant must consider factors like replacement cost, liability, and personal injury protection.

#9 Insurance follows the driver, not the car

A prevalent car insurance myth is that car insurance follows the driver, not the car. However, in reality, it’s just the opposite, insurance typically follows the vehicle. Let us understand with the help of an example, say you lend your car to someone and they get into an accident; now the insurance policy will likely be responsible for covering the damages, regardless of who was driving.

#10 Filling a claim will increase premiums

Many drivers fear that filing a claim will automatically lead to higher premiums. While it's true that multiple claims or at-fault accidents can affect your rates, not all claims result in premium increases. Several car insurance providers in the Philippines offer accident forgiveness programs, where your first claim doesn't impact your premium.

#11 Car insurance is one-size-fits-all products

Another misconception is that car insurance policies are standardized and don't need to be customized. However, in reality, car insurance can be tailored to fit your specific needs and circumstances. Driving habits, vehicle type, and personal preferences are some of the factors that influence the type and amount of coverage you choose.

#12 Gender doesn’t affect insurance rates

Despite the push for gender equality, an applicant's gender can still influence car insurance rates. Statistics show that male drivers, particularly young ones, are more likely to be involved in accidents, which can result in higher premiums for men. However, with age and experience, the rate differences between genders typically decrease.

#13 Leased car doesn’t need insurance

It is widely believed that leased cars don't require insurance because the lessee doesn't own the vehicle. This, however, is a dangerous misconception. Often leased vehicles have strict insurance requirements set by the leasing company. To protect yourself and the leasing company, all that is needed is comprehensive & collision coverage, along with higher liability limits.

#14 Homwowner’s insurance covers the car in the garage

It must be noted that while homeowner’s insurance protects your home and its contents, it doesn't extend to your vehicle, even if it's parked in the garage. Any damage to the car whether from fire, theft, or natural disasters, is covered by your car insurance policy, not your homeowner’s insurance.

#15 Sports cars are more expensive to insure

It's commonly believed that sports cars have the highest insurance premiums. While high-performance sports cars can be costly to insure due to their speed and risk factors, they aren't always the most expensive. Note that luxury cars, high-end SUVs, and vehicles with costly parts and repairs have higher premiums than sports cars.

#16 Insurance rate does not get affected by the type of car

The make and model of your car significantly influence your insurance premiums. Factors like safety features, repair costs, theft rates, and the car's value play a role in determining your rates. For example, cars with high safety ratings and lower repair costs often have lower premiums.

#17 Insurance will pay off the loan for a totaled car

Many assume that the insurance provider will cover the entire loan amount for a financed car that is totaled (meaning the car is damaged beyond its market value). Note, that standard insurance policies only cover the car's actual cash value, which may be less than what you owe on your loan. Worry not there is gap insurance designed to cover this difference, ensuring you aren't left with a loan balance after a total loss.

Identify and avoid car insurance myths

The best way to avoid falling for car insurance myths is to educate and verify information with reliable sources. Here are some tips to help an applicant -

Always stay informed

It is important to keep up with changes in insurance laws and industry practices to ensure you have the most accurate information.

Ask questions

If an applicant is unsure about any aspect of the policy, it is best to ask the agent for clarification.

Research

It is advisable to research and compare different insurance policies and providers. Don't rely solely on the recommendations or reviews.

Thoroughly read the policy

Carefully read your insurance policy to understand what is covered and what isn't.

Role of an insurance agent

In addition to the above tips, an insurance agent also plays a crucial role in busting myths and providing accurate information. Here’s how -

Clarifying misconceptions
An insurance agent can bust common myths and provide factual information to an applicant.

Knowing coverage options
Agents can explain the various coverage options available and recommend what best suits an applicant’s needs.

Policy customization
Agents can tailor an applicant's policy to match their specific needs and requirements.

Bottom line

Understanding and busting car insurance myths is essential for an applicant to make informed decisions and ensure they have the right coverage. By recognizing these common misconceptions, you can avoid unnecessary expenses, ensure adequate protection, and make the most of your car insurance policy.

Also Read: Driving habits that insurance companies prefer