The Most Common Car Insurance Myths Explained
Irrespective of where you live, myths are a part of the culture. Each culture has its myths. It is not a recent phenomenon. Ever since the first humans, myths are part and parcel of life. One can find these tales in all aspects of life, and the car insurance industry is no exception. Most recently, we had a customer who thought that her paying a higher insurance premium is because her car is expensive. What do our readers think? Does a vehicle's cost have anything to do with the premium, or is it just a myth? Well, we are going to address this myth and numerous others in this blog post. Let us start.
1. Expensive Car Means a Higher Premium
A vehicle's price tag does not significantly impact the premium, even though most people consider it true. In fact, it is a vehicle's repair cost that has a more prominent role to play when determining how much you will pay to the insurance company. After all, the insurance company only gets involved when there is an accident. Interestingly, some old lower-priced vehicles cause more to insure than modern luxury vehicles because they cost more to repair.
2. Vehicle Colour
Many car owners think that their car's colour will have an impact on the premium. For instance, if the colour is red, it will cost more when insuring than a white car. Well, we hate to break it to you, but a vehicle's colour has nothing to do with the premium. Instead, insurance companies rely on the vehicle's make and model along with other things when determining the premium. These are not the only factors. Please read our article on how external factors influence car insurance.
3. Credit Score Has No Impact on the Premium
This is an outright misconception. Nearly every insurance company in the world uses a credit score to determine the premium. What most people don't realize is that the credit score can be improved. Therefore, if you see someone with a poor credit score paying less for insurance, they have worked on improving their credit score. Also, companies only go back 5 to 7 years of credit history. Therefore, if you made a poor choice about 8,9 years ago, the insurance company will have no record of it.
4. Insurance Pays for Everything
The insurance company does not pay for everything. When buying car insurance in the UAE or anywhere, the company will ask you how much you will pay towards any claim. The amount you agree will be called the insurance excess. The rest of the amount is paid by insurance. For more information on insurance excess, please refer to this article. Therefore, in an accident, you will pay the excess amount while the insurance provider covers the rest.
5. Insurance Pays Full Amount for a Totalled or Stolen Car
Imagine that you bought a car for AED 30,000. A year later, it is totalled in an accident or stolen. Do you think that the insurance company will pay the car’s full amount? The answer is no. The insurance company considers depreciation, which is the decreased value of an item due to wear and tear. Thus, the insurance company will pay only after considering the depreciation amount.
6. Traffic Violations Increase the Premium
Does a single traffic violation ticket increase the premium? Well, no. Insurance companies realize that car owners are humans, after all. All of us can make a mistake. Therefore, they won't consider a one-off traffic violation when determining the premium. However, if the violations become too frequent, you can expect your insurance costs to increase.
7. Comprehensive Insurance Covers Everything
Again, it is a myth. Comprehensive insurance does not cover everything. It only covers the things mentioned in the insurance policy and nothing else. For instance, many insurance companies do not cover acts of God in the policy. For protection against events like hail, floods, and other acts of God, you will need to buy add-ons. Not all companies would offer such add-ons.
Wrap Up
This concludes our article. If you have any questions, feel free to ask us. Lastly, there might be several other myths associated with the car insurance industry. If you know them, send them to us, and we can update our list. Thank You.