There are lots of myths about auto insurance spinning around. If you hear them enough, they might start to sound true. But it’s important to know the facts, so you can buy the right auto coverage for you.

Let’s put some of common myths and misconceptions to rest:

 

Myth: Red cars are more expensive to insure.

Fact: Go ahead and embrace red! Your car’s color doesn’t have any impact on your auto coverage rate. (Your vehicle’s make and model, however, can impact your premium.)

 

Myth: If you have an accident and don’t file a claim, your insurance won’t go up.

Fact: If you have a collision with another vehicle, the other driver may file a claim. His or her insurance company may then file a claim with your insurer, who might raise your rate.

 

Myth: If your car is totaled, your insurance company will pay off your loan.

Fact: Your insurer will pay the fair market value of your car, which is your car’s original cost minus depreciation. If the fair market value is less than the amount that you still owe on the loan, you’ll be responsible for the difference.

If you’d rather not find yourself in that position, you can purchase Guaranteed Auto Protection (GAP) insurance, which covers the gap between the amount owed on the loan and your car’s fair market value.

 

Myth: If a friend drives your car, his or her insurance will kick in.

Fact: The insurance policy that covers the vehicle—for your car, that’s your policy—is considered the primary insurance in most states. That means your coverage would pay for any damages caused by an accident, whether you or someone else was behind the wheel.

 

Myth: Your personal auto policy covers you, whether you’re driving for pleasure or business.

Fact: If you’re self-employed and use your vehicle primarily for work, or if your vehicle is owned by the business, your personal policy will not provide coverage. So if you have an accident and have colleagues in the car, you’ll have to pay for any repairs to the vehicle and your passengers could sue you for any injuries. If you drive for your business, talk to an agent about whether you need business vehicle insurance.


 

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Disclaimer: This page is for educational purposes only and is intended to help answer the most common questions people ask about insurance. Information published here might not reflect the specific policies and products offered by AAA.