In a perfect world, automobile insurance would be uncomplicated and it could be easily understood by everyone. Let’s face it however; auto insurance can be confusing and difficult to understand. It doesn’t help that there are a number of misconceptions associated with obtaining car insurance. Let’s put the rumours to rest and discuss some of the most common myths. Please note: this article is for information purposes only and should not be taken as advice. Be sure you confirm details of your policy with your specific insurance provider.
Myth 1: The colour of my car affects my premium
Fact: Many people believe that if they purchase a red car instead of a silver car for example, their insurance will cost more. The truth is, the colour of your vehicle does not affect your insurance rate. Instead, your premium is based on the year, make and model of the vehicle. It is also based on the driver’s individual details (previous accidents, tickets, years licenced, years insured, etc) and also the use of your vehicle (commute distance, annual kilometres, etc).
Myth 2: If my friend borrows my car and is in an accident, it doesn’t affect my rate
Fact: You have to be very careful who you let borrow your vehicle. If you lend your car to a friend and they are involved in an at fault accident using your vehicle, this will likely affect your insurance. Even if your friend has their insurance policy in force, the accident can be tied to the vehicle and you will be left with this accident on your record. Remember: if you lend your vehicle, you lend your insurance.
Myth 3: My insurance company will cover damage if my car is stolen or the damage is caused by vandalism or fire
Fact: Unless you have purchased comprehensive coverage, these losses are not covered. Comprehensive coverage is not a mandatory coverage in Ontario and therefore, some people opt not to purchase it. In order to fully protect your vehicle from damage, be sure to purchase both collision and comprehensive coverages.
Myth 4: Automobile insurance companies can charge whatever they want
Fact: In Ontario, all auto insurance premiums are regulated by the Financial Services Commission of Ontario (FSCO). Companies have to submit their rules and rates to FSCO for approval. Any rating or premium changes must be approved before they are put in place.
Myth 5: Your parking tickets affect your insurance premium
Fact: While speeding tickets or other driving infractions tickets may affect your rate, a parking ticket does not have any impact on your insurance premium. While these tickets can often be expensive, you do not have to worry about them affecting your insurance. However, failure to pay parking tickets can result in a suspended license which may affect your rate.
Myth 6: My personal automobile policy will cover me for business use
Fact: Your personal automobile policy is in place to cover you for personal use, not necessarily for business use. Commuting back and forth to work, running errands and leisure use is what your personal automobile policy is designed for. If you are using your vehicle to drive clients, meet with customers, or for any other business operations, you may require a commercial vehicle policy, be sure to notify your insurance provider of any changes in the use of your vehicle. Read other common commercial insurance myths.
Myth 7: Auto insurance covers your personal property left in your vehicle
Fact: Many people believe that if they leave their valuable items left in their car, the items will be covered if they are stolen or damaged in an accident. This is not true. In the event of a loss, items such as golf clubs, cell phones or jewellery for example would instead be covered under a property insurance policy (home, condo, or renters insurance).
Myth 8: The cheaper the car, the cheaper the insurance
Fact: Believe it or not, sometimes cheaper cars cost more to insure than expensive cars. This is because all cars are rated based on the estimated frequency and severity of future claims. These can be determined by many factors including safety features, the likelihood of theft, whether it is prone to vandalism, the cost to repair it, etc. Taking these factors into consideration, sometimes it is cheaper to insure vehicles that cost more.
Myth 9: Your rates will remain the same when you move
Fact: Depending the distance, your rates may change significantly when you move from one city to another, or even just changing a postal code within a city. Your postal code has a say in your rate. The exact area you move to will affect whether you pay more or less for your insurance.
Myth 10: I will receive a rental car after an accident
Fact: In Ontario, unless you purchase rental car coverage and you are in an at fault accident, you will not be covered for a rental car while you are waiting for the repairs to be completed on your car. Many people depend on their car for commuting back and forth to work. If this is the case, be sure to add an endorsement called an OPCF 20 Loss of Use (rental car coverage) your policy. Read more about rental car coverage and if you need this coverage on your policy here.
There are many other automobile insurance myths around and each policy is different. It is important that you read the fine print and ask your agent or broker questions. If you are worried you do not have all of the facts, feel free to contact us as we would be happy to help!