Don’t Fall For These 4 Misleading Car Insurance Myths

liability coveragePurchasing a new vehicle is always exciting, but what’s not so exciting is signing up for liability coverage. Navigating through all of your car insurance options can certainly be a hassle. There’s so much you need to understand in order to make the best decision for your finances and safety. It doesn’t help that there are a ton of misconceptions about car insurance that can cloud your judgment and waste your money. Before you sign on the dotted line, here are just a few misleading myths about car insurance.

Your credit rating doesn’t determine your premium
Many drivers mistakenly believe that their credit score has no effect on their premiums. After all, what does your credit score have to do with your driving? Unfortunately for drivers with bad credit scores, this really can lead to higher premiums. In fact, most states (including North Dakota) have made it legal for auto insurance companies to look at your credit history as a factor when setting your rates.

The Federal Fair Credit Reporting Act (FCRA) lets insurance companies research your credit information before setting your rates; however, the must inform you within three days of looking up your credit history.

“Most states allow insurance companies to use your credit history to set your rates…Your insurance company will give you a credit-based insurance score, which serves as an indicator of how likely you are to pay off a loan on time. Some insurance companies believe your credit-based insurance score is also a good indicator of your accident risk. Those with better scores are often seen as less likely to get into an accident,” says

You can prevent your rates from increasing after an accident as long as you don’t report it
This may sound logical, but it has a number of flaws. First, if the accident injured another driver, they could then file a claim for injuries and damages. Then, it won’t be long until the other driver’s insurance company files the claim and your insurance company discovers as well, potentially increasing your premiums.

Red cars cost more to insure
Finally, this outdated myth still has a few believers, but it’s not true at all. While your car’s make, model, age, body type, and engine size all factor into your automobile insurance rates, the color itself does not.

Even if I am at fault for an accident, my insurance will cover any expenses.
This is a myth we hope to bust before you buy car insurance. While most states require drivers to maintain some type of liability coverage, others do not. There are many types of auto insurance, but not all of them cover all types of damages. Without the proper liability coverage and collision coverage, you could find yourself financially on the hook if you are at fault for another driver’s injuries.

There are approximately 6 million car accidents in the U.S. each year. Knowing the truth behind these myths can help you make the best decisions for your vehicle and personal safety.

Whether you’re looking for renters insurance, auto insurance, or liability coverage in North Dakota, contact Farmers Union Insurance to protect yourself.