Friday, January 18, 2013

Five Common Car Insurance Fallacies

A car accident in Tokyo, Japan. EspaƱol: Un ac...
A car accident  (Photo credit: Wikipedia)
Car insurance, though very common, is still not fully understood by many people. Most people tend to focus on low-cost car insurance, but it is also important to understand the specifics, the fine print, of an auto policy. In the long run, only this thorough understanding will save car owners time and money. This post looks at five of the most common car insurance fallacies. 

Full Coverage

The coverage offered by car insurance policies vary according to a number of things. Most people, however, assume that when they take auto insurance, they are automatically eligible for low deductibles, comprehensive coverage, luggage protection and protection for expensive add-ons. Some people even think that any auto coverage protects their vehicles from theft and even damage. The reality is that all these are just insurance options that you may either opt for or not, depending on what your auto insurance policy entails. In fact, some state laws may even have a say on what options insurance companies may offer its customers. Therefore, you should be fully aware of this fact to prevent erroneous assumptions.

Driving a Friend's Car

You have probably driven a friend's car, or let a friend drive your car. Did you know that, in most states, you lend your friends your insurance coverage when you let them drive your car? This is something few people know, but it is the reality. If your friend has an accident while driving your car, it is your responsibility as the owner of the said vehicle to file a claim. As you know, filing claims can easily increase your auto insurance premiums by denying you your no-claims bonus. What is more, if your insurance limits are not adequate, your friend who borrowed the car may also be affected. In the no-fault states, you will be required to file a claim irrespective of who is deemed to have caused the accident.

Settlement Amounts

If your car is totaled in an accident, you may be surprised to learn that the amount of your claim settlement is not equal to what you paid for the car. Like most people, you expect to recoup the whole amount of your car's cost, but this is not always the case. You should note that your reimbursement fee will factor in things like market fluctuations and depreciation, everything that can affect your car's value. These are some of the reasons why your initial payment for the totaled car may not be fully reimbursed. The reimbursement only covers the full market value of your car.

Whose Fault Was It?

You might have a very clear opinion on who caused the accident, but the insurance companies will have to come up with their own ideas. The process of determining who was at fault in case of an accident is neither an arbitrary nor a rushed one, and all accidents have to be investigated first. An insurance adjuster is usually responsible for interview all the parties involved in an accident before deciding who was at fault.

Rental Car Reimbursement

In case you fall victim to an accident that makes your car non-drivable, you will need an alternative means of transport. If you are like most people, the convenience of rental cars will come to your mind. The problem is that most people assume that their car policies automatically provide coverage for replacement rental cars. What you should know is that, just like many other insurance benefits, this is an option that you must specifically purchase when buying your car insurance policy.

It is clear from the above discussions that making assumptions about your car insurance policy dangerous. When comparing car insurance rates found on, you should go a step further and research the options included. Think carefully before opting for ultra-low coverage that may preclude most of these useful options.

Sam Fenton is a car insurance consultant. His articles mainly appear on insurance and personal finance blogs where he shares his tips.


  1. Wow, If I didn't know about this, I might try to avoid auto insurance in Edmonton. Thanks to you though, I'll be driving safely on the roads, with some insurance.

  2. Thanks for the feedback and good luck with your posts about insurance! I’m so glad you found these ideas helpful and thanks for the information. Thank you for this inspiring post!

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