Auto insurance is a complicated topic, and with such complexities comes much confusion. One of the biggest reasons auto insurance could be confusing is that it is different for everyone. Insurance companies consider multiple factors of each individual to put a price on the policy. So everyone has their idea of how auto insurance is priced. This article will highlight all the car insurance myths and debunk them. Some of these myths are harmless, but some can lead you to pay a lot more for auto insurance. Let's get started.

Your credit Does Not Affect Your Insurance Rates

Because of the extremely loose connection between credit scores and insurance rates, you'd believe that your credit score does not affect your insurance rates. But that's not the truth. In most states (except California and a few others), insurance companies look at your credit score to determine your auto insurance rates and premium prices.

Since auto insurance companies are risk-management companies, they need to take every risk factor involved with a client. If the policyholder has a poor credit score, this means that they might miss their premium payment, since they have missed their credit card bill payment and other debt payment. This is why insurance companies charge more to people with poor credit scores. They'll have to pay insurance premium rates to offset the risk of failing to pay the premium.

So make sure your credit score is good if you are looking for an auto insurance policy as it not only helps your credibility but also cuts some cost off of your auto insurance, letting you choose the best cheap insurance options on the market.

Minimum Liability Coverage is Enough

Every state has a minimum liability coverage limit, which means that your liability coverage should be able to pay out a minimum amount to the other driver in case of an accident that's your fault. It comes with three different sections, one of which covers bodily injury for an individual, one covers medical expenses for all the passengers, and the last part covers property damage. And here's the misconception.

Having just the minimum liability coverage limit is not a smart move. Accidents are ugly, and they can be very expensive. If your liability coverage is not enough to cover the total cost of medical bills and damages, the other person could sue you and you'll have to pay the rest from your pockets.

So don't believe in the myth that minimum liability coverage would be enough. Always have more coverage than what your state mandates and you could be saving yourself a lot of money and some lawsuits as well.

Older People Pay More

It is a common misconception that people over the age of fifty need to pay more for auto insurance. This could be attributed to the fact that as people grow old, their driving ability declines, making them more susceptible to accidents. But this is a misconception. Not only that, but it is the opposite of what's true.

Older people have to pay less for auto insurance as many companies offer great discounts. For example, if a person is over the age of fifty-five, he/she can complete an accident prevention course to get a great reduction in their insurance rates. This is because older people don't drive too much and hence are less likely to be in an accident and make a claim.

Apart from the driving experience and good financial stability (which makes them favorable to the insurance company), there are many great discount programs for older people. So if you are over the age of 55 or know someone who is, tell them not to worry about increased insurance rates.

Liability Coverage is Enough for You

Let's say that you get into an accident with another car, and it is the other driver's fault. You can make an insurance claim against the other driver's liability insurance. But what if the other driver does not have enough coverage to pay for all the damages or medical treatments? Sure you can sue him/her, but that will take a lot of time, effort, and hassle. Who's gonna pay for the medical bills?

This is why just being dependent on the liability insurance of the other driver is not a safe move. Considering how expensive medical treatments can be, it is very likely that the liability insurance coverage of the other driver would be insufficient.

To prevent situations like these, it is better to have uninsured/underinsured motorist coverage. UM/UIM coverage will pay for any lacking coverage amount. So you don't have to worry about someone else's liability coverage.

Parking Area Does not Matter

How would your parking area or the place where your car is kept for a longer period affect your auto insurance? It does, and it does by a lot. The place where you keep your car will determine the cost of your auto insurance coverage, mainly collision and comprehensive insurance. If the area has higher rates of crime, such as theft, carjacking, accidents, robbery, etc, you'll have to pay more for your auto insurance coverage.

Another associated myth regarding this is you can lie to the auto insurance company about the parking area to save some money. But this “seemingly” harmless act is considered insurance fraud for which you could be fined as much as $50,000! So don't try to lie about where you keep your car.

So these were some of the myths about car insurance. Make sure to know every detail about the relevant car insurance that you are getting as it makes a big difference. Save more and get a better insurance policy for yourself.