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: Auto 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."