Survey Says: Myths About the Cost of Auto Insurance Persist

July 25, 2005

The color of a car influences how much it costs to insure it, Comprehensive coverage protects drivers in all situations because, after all, it’s “comprehensive,” and car insurance companies can charge whatever they want.

Turns out lots of people believe one or more of these statements to be true.

A recent online survey of 1,000 drivers conducted by Drive Insurance from Progressive, the largest writer of personal auto, motorcycle, recreational vehicle and boat insurance through independent insurance agencies in the U.S., finds many drivers accept common car insurance myths as true. Here’s a sampling of the survey findings along with the facts the insurer say are behind each:

— Myth: Car insurance companies consider vehicle color when
determining rates.
Survey Says: Twenty-five (25) percent of drivers surveyed
mistakenly believe that the color of their car affects their
auto insurance rate.
Fact: Color is not used to calculate auto insurance rates.
Information that is used includes the vehicle’s year, make,
model, body type and engine size, as well as information
about the driver.

— Myth: Car insurance rates are not regulated and car insurance
companies can charge whatever they want.
Survey Says: More than half of those surveyed (54 percent)
did not know that each state has a regulatory body that
oversees insurance companies operating within that state.
Fact: Each state has regulators who review the information
companies collect as well as the rates they charge; insurers
cannot deviate from those rates.

— Myth: Comprehensive coverage protects drivers in all
situations.
Survey Says: Almost half of drivers surveyed (48 percent)
wrongly believe their car insurance policy’s Comprehensive
coverage protects them in all situations because, after all,
it’s “comprehensive.”
Fact: Comprehensive coverage is one type of protection
available on an auto insurance policy (others being Collision,
Uninsured Motorist, etc.). Comprehensive coverage pays only
for damage caused by an event other than a collision, such as
fire, theft, or vandalism; it also covers weather-related
(e.g., hail, flood) damage, damage caused if a vehicle
collides with an animal and it provides a rental car if a
vehicle is stolen.

— Myth: Rental reimbursement coverage protects drivers who crash
their rental car while on vacation.
Survey Says: One out of three drivers surveyed (33 percent)
did not know what protection is provided through rental
reimbursement coverage.
Fact: Rental reimbursement coverage pays for the cost of a
rental car if a driver’s personal car is in the shop as a
result of an accident and he or she needs a replacement
vehicle.

— Myth: Bundling insurance coverages always results in a cheaper
car insurance rate.
Survey Says: The majority of drivers surveyed (51 percent) say
they’ll always get a better rate if they “bundle” their
insurance, i.e., buy their car insurance policy from the same
company that insures their home.
Fact: Just because a driver buys more than one product from
the same insurance company doesn’t always mean they are
getting the best rate available. In many cases there are
savings to be had by talking with an independent agent or
broker who can create a custom insurance package with
policies from competing insurance carriers.

— Myth: Car insurance rates go down dramatically when drivers
turn 25.
Survey Says: Sixty (60) percent of those surveyed mistakenly
think rates go down drastically when a driver turns 25.
Fact: Young and older drivers typically have the most car
crashes and different car insurance companies’ customers have
different claims experiences. At Drive Insurance, for
example, crash frequency starts to decline when a driver
reaches their mid to late twenties. However, when developing
an auto insurance rate, insurers generally consider a variety
of other information about the driver in addition to their
age, including information about their vehicle, their past
claims history and the claims experience for other customers
like them. One or more of these pieces of information could
lead to a driver getting a higher, lower or the same rate
when they turn 25.

“Car insurance is complicated stuff. Adding to the confusion are the myths floating around out there,” says Rick Crawley, product development general manager, Drive Insurance from Progressive. “It’s important for drivers to have accurate information so they can make more informed decisions. We hope that by debunking these myths, and by letting people know that independent agents and brokers can help separate fact from fiction, they’ll ultimately get the right coverage and services for their needs.”

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