There are many different perceptions and misconceptions about car insurance. Some are the base fundamental truths and some are myths. The insurance myths can be expensive sometimes and involve a lot of decision making. Here in this article, we list a few car insurance myths that you have been hearing so far.
- Costly Insurance policy package means higher benefits
- All car insurance policies prices are same
- Collision coverage is included in insurance
- No fault insurance means its not policyholder fault
- Red color cars have more insurance premium
- Used Cars have less insurance premium
- Switching Insurers will make you lose your discounts
- If your car is driven by others and meets with accidents, it will not show on your insurance
- Old cars do not need insurance
- If you transfer car insurance you will lose no claim discount
1. Costly Insurance policy package means higher benefits
The assumption of the costly insurance policy’s providing higher benefits is not true. People generally assume costly insurance policies will provide higher benefits but that’s not true. Each insurance company’s coverage to safeguard the same car and the driver can vary in hundreds or in thousands of dirhams. Each company charges premiums depending on the car combination and the driving history of a particular driver, the suppliers use their claims to determine the premiums charged by these companies. On the whole you can make sure that you are with the “Right Insurance Company” and shop your rates, annually.
The add on services you select will increase the premium and there is no guarantee that you will use all the add on services which you purchased. In the event of happening any event these add on services may be beneficial.
2. All car insurance policies prices are the same
This is incorrect because the prices which are charged by the different car insurance companies doing insurance for the same car are different. Insurance companies are specialised in providing the best services to policyholders. Insurance companies charge a premium based on the services they provide. Each Insurance company has its own features, add on services, special services to customers and based on that insurance policies are priced. This is the reason all car insurance policies are not the same.
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3. Collision coverage is included in insurance
In insurance coverage, there is an add on services provided by the insurance companies. This add on services is the collision cover. Collision cover is about paying for vehicle damages which occurred because of the fault of the driver either partially or totally. Only if the policyholder has purchased this add on service it will provide protection against collision. Collision coverage is an optional cover for the policyholder. The insurance company conducts the inspection of the accident site and determines the loss. If there is no 100% fault of the car driver due to collision and there is no add-on cover then a default coverage will be provided under the policy.
4. No fault insurance means its not policyholder fault
In an accident, there is a fault by either of the parties. It can be the fault of one person or an opposite person or it depends on the collision circumstances. According to No-fault insurance, the reimbursements will be paid for the damages. If the policyholder is responsible for the car accident then the prices for insurance will increase. If the policyholder is not at fault in an accident then the insurance prices will not increase.
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5. Red color cars have more insurance premium
The color of the car has nothing to do with the insurance premium. The premiums will depend on the vehicle claim history, repairs costs, car types and other factors. The premium will depend on the type of cars, the high end cars will require more maintenance and so the insurance premium will also be higher.
6. Used Cars have less insurance premium
According to the UAE RTA Law, it is mandatory to have car insurance. Irrespective of the car which is old or new insurance should be purchased. If you cannot have comprehensive car insurance, it is mandated to have at least third party insurance. There is nothing like used cars that have less premium, it depends on the policyholder which add-on services are selected and what is covered in the insurance. To reduce insurance premium burden, generally, on used cars or old second hand cars, basic third party insurance is purchased which is less compared to other plans.
7. Switching Insurers will make you lose your discounts
When you choose the insurance from the Insurance company it is not compulsory that you have to continue with the same company. You can switch from one insurance company to another. For continuing with the same insurance company the policyholder will get some discount. If the policyholder switches to a new insurance company then the discount provided may or may not be higher than the former company but a discount may be offered.
8. If your car is driven by others and meets with accidents, it will not show on your insurance
This is incorrect because the car insurance is related to the car and it is not tied with the car driver. When you lend your car to others you also lend your insurance to them. If the car meets with an accident while it is driven by others then insurance is covered on the car and it shows on the insurance.
9. Old Cars do not need insurance
Old cars do need insurance and it is mandatory to have car insurance if you are driving a car. The age of the car is a factor that insurance companies consider before providing insurance. Whether you are driving an old car or new car both of these cars need insurance.
10. If you transfer car insurance you will lose no claim discount
If you transfer your car insurance you will not lose the No-claim discount. No claim discount is a reward which is offered by the insurance company for not making any insurance claims. It is a recognition for good driving services. This discount will keep on increasing year after year and if you transfer car insurance it will continue with the new car insurance company. No claim bonus will also get transferred to the other insurance company. The only condition is that you have to apply within the certain stipulated time before the insurance expiry.
About the author
Vinay Kumar Goguru is a finance professional with more than 8 years of diverse experience as a researcher, instructor and Industry work experience with both public and private entities. Prior to MyMoneySouq, he spent 6 years in Berkadia, It's a commercial mortgage banking company. He has a "Doctoral Degree in Commerce" and two master's degrees with a specialization in Finance, one as Master of Commerce and other as Master of Business Administration. He has written several articles on personal finance, published by different International journals. He loves traveling, reading and writing is his passion. He has a dream of writing a book on his favorite finance topics.
