Red cars ... and 5 other car insurance facts and myths

Aaron Crowe

As the owner of a red car, I heard the common myth about red cars immediately after buying it: Red cars get more speeding tickets and have higher insurance premiums.

After telling my insurance agent all of the details she needed about the new car so I could get insurance, I asked whether she needed to know what color it is. No, she told me, the insurer doesn't have a checkbox for car color and doesn't need to know the color. I was relieved.

“It’s not the car, it’s the type of person who buys a red car,” says Ryan Hanley, an agent with Murray Group Insurance Services in Albany, N.Y.

Red sports cars probably do attract people who drive fast, but a red car doesn’t stand out simply for its color, says Mike Coleman, a State Farm agent in Alabama. “It might make you more noticeable when you drive 20 miles per hour over the speed limit, but that’s about it,” Coleman says.

Here are five other car insurance myths or facts. Take our quiz to see whether you know the difference.

1. Having optional collision and comprehensive coverage will get me a new car if I get into a crash.

False. Having both is a good idea, but just because you’re paying more in premiums doesn’t mean your insurer will buy you a new car if yours crashes, Hanley says. The car’s value is based on how old it is and how much it has depreciated. Besides, insurers will try to have the car repaired if fixing it costs less than the value of the car.

“Most people don’t even see the money. It goes straight to the auto repair shop,” Hanley says.

2. Car insurance premiums can be paid late because there’s a grace period, so I’ll still have coverage.

If you’re late making an insurance payment, there's no grace period and the insurance coverage will lapse, Hanley says. Coverage is reinstated when payment arrives, so there will be a gap if your premium get to your insurer on time, Hanley says. “There’s no such thing as a grace period. That doesn’t exist at all,” he says.

3. Small cars get into fewer crashes because they’re more nimble and maneuverable.

False. They might be more nimble, but they also have higher collision losses. Small cars can’t take collisions as well as bigger cars, according to data from the Insurance Institute for Highway Safety. Small cars have higher losses than larger vehicles, which makes sense if you’ve ever seen a small car looking like an accordion after a crash while larger cars appear to be in better shape.

4. If my car is totaled, the car insurance company won’t pay off my loan.

True. Many people may think otherwise, but how much you paid for the car when it was new has no bearing on how much it's worth later. The loan could be for more than the value of the totaled car, leaving the owner “upside down” on the loan for a car that's now worth less to the insurance company, says Coleman, the State Farm agent.

“These days, many lending institutions will loan up to 125 percent of the value of the vehicle, but the insurance company is not going to pay for that total loss,” Coleman says.

5. No-fault auto insurance means it’s not your fault.

False. The laws vary by state, but states with no-fault car insurance generally require your insurance company to pay for medical expenses and lost wages for injuries regardless of who's at fault.

Both sides will decide together which insurer is going to pay for the accident after determining who's to blame for causing the accident. If you caused the crash, you’re at fault and your insurance company will pay for repairs and other damages. It kind of makes “no fault” sound like the wrong term to use, but that’s what it’s called.

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