Mastering the art of being properly insured is kind of like mastering multivariable calculus. Sure it can be done, but how many of us are actually doing it? That being said, we should take a few silent moments to thank the few who have because a world without their mathematical skillset would be a world without CGI, civil engineers, and the probability theory...
( Silently whispering "Thank you".)
Luckily, you don't have to be math major to find the right coverage. You just have to know where to look. The internet might be a great place to start but not everything you find is true and being able to separate fact from fiction is extremely important. Asking your peers about their experience could be helpful too. But some of them might be telling tall tales without even knowing it. Because they read it on the internet.
Here's some of the common misconceptions people have about auto insurance:
1. "You only need to purchase the state's minimum coverage"
Yes. It is true that purchasing the state's minimum coverage is enough to satisfy the law and keep you on the road but it will only provide coverage for accidents you cause. That's why it's called "liability" coverage. It pays other parties for damages YOU ARE LIABLE FOR up to your policy's limits. Any damage to you or your vehicle as well as costs that exceed your limits will be your responsibility.
2. "If you let someone borrow your car and they crash, they are financially responsible for the accident."
This would seem like the obvious answer. However, it's not true. In the event of an accident caused by someone who borrows your car, your insurance will pay out first up to your policy limits which mean YOU are responsible for the deductible. Only when the cost of the accident exceeds your limits will your friends insurance have to pay out.
3. "Men pay more than woman for car insurance."
Insurance companies use rating factors to determine your premiums. In the past, the law of large numbers was used to determine these factors and was based solely on statistical data that reflected driver trends. Today that is not the case. In California, auto insurance rates are determined by only a few factors: driving experience, annual mileage, driving record and claims history.
4. "I've got full coverage"
Whenever people start talk about auto insurance, the term "full coverage" gets tossed around as if it's supposed to mean something. But insurance companies have no "full coverage" button. Usually the term refers to the same set of coverages in a basic auto policy which include: liability, comprehensive, collision and uninsured/underinsured motorist. Additional coverages such as rental reimbursement and roadside assistance are not offered automatically and aren't part of the blanket "full coverage" term. That's why it's important to talk to a broker about what coverage options are right for you.
5. "My agent is getting me the best possible rate."
Agents work on behalf of the insurance company. They can only get you the best possible rate their company offers. An article posted on coverhound.com suggests hiring an insurance broker because brokers work on behalf of the customer and aren't restricted to just one company. They work with a multitude of companies which means they are able to compare rates and coverages to find you a policy tailored to suit your individual needs.
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