True or False: Urban Insurance Myths

As an insurance producer, I’ve heard it all. There is a never-ending supply of gossip and speculation about insurance rates and coverage. And it seems there are a few rules that hang around long after they are changed by insurance carriers or the state insurance department. Here are a few of the most common urban myths and legends I hear every day, and whether they are true or false.

1)      The color of my car influences how much I pay for insurance. This is false. A long, long time ago (like in the 1950’s), it was said that red cars were more likely to be involved in an accident because the red color makes people want to drive fast, so carriers charged more for vehicles sporting that snazzy, racy-red paint. Today, it doesn’t matter what color the car is as far as liability goes. Color is not a factor in rating on any policy. However, if you wish to carry full coverage on your vehicle and insure that custom paint job, you can endorse the cost of the paint job on as a custom part or accessory for an additional price. That’s the only time the paint color or motif will matter.

2)      My car accident was “no fault” because I slid on ice. This is usually false. There really is no such thing as a “no-fault” accident anymore, and more and more insurance companies are using the terms “chargeable” or “non-chargeable” when referring to accidents instead of “no-fault.”  If there is one vehicle involved, regardless of why the accident happened, chances are it will be chargeable. In a one-car accident, it is the one-car driver’s fault. Chargeability doesn’t just look at fault, either. Many insurance companies will not charge extra for accidents where the payout was under a certain threshold, or covered under a certain coverage, like comprehensive. It depends, however, on the coverage used and the dollar amount of the claim, and all companies have their own chargeability guidelines. It’s important to know what you have on your own policy, so ask your agent to explain.

Further, the only true “no-fault” coverage that exists today in New York State is PIP, aka Personal Injury Protection. PIP covers medical expenses and loss of wages for the driver of the vehicle and his or her passengers, regardless of fault. There are reasons for that, of course, and one of the biggest ones is to ensure that even if the person who strikes you doesn’t have his or her own insurance, you will still be able to receive, and pay for, medical care. Determining liability can be a time-consuming, difficult process, and PIP streamlines the medical portion of the claim.

3)      If my policy cancels, I have a thirty-day grace period to get it back. This is usually false. There is no industry-standard as far as reinstatements go, or grace periods for making payments. Each carrier has the right to set its own terms on how long they will allow a customer to have to reinstate after a cancel. Some companies don’t even offer a reinstatement option, and still others only give a small window of time, such as a day or two. Don’t ever assume you’ll be able to get coverage back easily if a policy cancels. And usually, any reinstatements are subject to certain terms and conditions, such as signing a statement of no losses. If a customer has an accident after a cancel date, any reinstatement options will usually be null and void and the customer will not be covered for the claim. Further, it is wise to learn whether your carrier accepts the postmark date on your envelope as the payment date. Some carriers will reinstate as long as the payment was postmarked prior to the cancellation date. Others don’t, so ask your agent for clarification. And some companies will only reinstate with a lapse, so that could mean fines from the DMV.

 4)      My payment was due on the weekend, and you weren’t open, so it’s not late.  False. We hear that one a lot.  The insurance companies send bills in advance of the due date, so the insured technically should know when the payment is due and plan accordingly if their preferred method of payment is not available on the payment due date. The insurance company expects to be paid on or before the due date. You can look at it like you’d look at your paycheck. If you get paid the 15^th of each month, but that date happens to fall on a Sunday, you’d expect to be paid the prior Friday, right? So do insurance carriers. Always pay on or before the due date to avoid late fees or potential cancels.

 5)      My cancel date is August 15. As long as I come in on August 15^th, I’m OK, right?  Not really. Keep in mind that almost all companies use a 12:01 am cancel time-frame. That policy that is set to cancel on August 15 will actually be cancelled at one minute after midnight the night of the 14^th. So by the time you go to your agent’s office at 10:00 a.m. on August 15^th, your policy has already been cancelled for 9 hours and 59 minutes. Some carriers will allow you to make the payment the day of cancellation to reinstate, but others don’t, so before you assume you’ll be OK to pay on or after the cancel date, check with your agent and get there the day before cancel if possible.

 6)      I’ve had insurance for a while now, and it’s not going down. Isn’t it supposed to go down? Why isn’t it going down? This one is another common one we hear, and to some extent, we see your point. We can sometimes expect that a person who has been insured for a while without any lapses will see some decreases in premium over time. It is common knowledge that someone who has had continuous prior insurance will pay a cheaper rate than someone who has not had prior insurance coverage. Insurance companies reward customers for stability.

There’s no guarantee your rates will ever go down. It has a lot to do with rates the carriers file, claims or ticket activity, vehicle changes, driver changes, and even credit scoring Insurance carriers will raise rates for a lot of reasons, such as an increase in claims activity and payout in a certain region or within a certain demographic, coverage changes, vehicle changes, newly-developed technology, and other outside expenses they have to cover. Remember, insurance carriers are a business too, and they have expenses to pay the same as any other business does. Rate increases happen, and while we don’t like them, we have to understand that there’s not much we can do about them, except of course avoid getting tickets or having accidents, which as you know, would likely make rates increase. Taking a state-approved Defensive Driving course will help reduce premiums as well. And some carriers are making paperless options available to their customers, offering a discount to have all paperwork electronically delivered. Electronic funds transfer, where a payment comes directly out of a bank account monthly, can also be a less expensive option. There are even devices that plug into vehicles and analyze drivers’ driving habits, giving price-breaks to those who operate their vehicles safely.

And of course, it never hurts to ask your agent or broker to shop around to make sure you’re paying as little as possible for your insurance and also to ask them to recommend some money-saving options for your policy. Your producer should be able to analyze your policy and make sure the coverage you have is appropriate for your particular situation, and tell you where you can cut back a little on coverage that isn’t appropriate or needed.

7)      If I cancel my policy and I want to come back, I’m not allowed. False! We welcome any of our customers to come back to us no matter why they left. We have multiple carriers to write our clients with and we’re confident we can place you with the appropriate carrier to meet your every insurance need. Our doors are always open to our clients and we look forward to serving you.