8 car insurance myths that are way off track

Myth #1: Are red cars more expensive to insure?

One of the most persistent myths about car insurance is that red vehicles cost more to insure. It's just not true.

In fact, none of the information you give your insurer — such as your car’s make, model, year and vehicle identification number (VIN) — tells them the colour of your car.

However, your car's make, model and year definitely impact your insurance rates, as does the price paid for the vehicle (or the Blue Book value), along with the vehicle's overall safety record. Believe it or not, the cost to repair the car after an accident also impacts your rate, so it pays to learn a thing or two about a vehicle before committing to driving it home.

Another factor that heavily influences your car insurance rate is your personal driving record, along with how you use your car and where you park it on a regular basis.

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Myth #2: Will my credit score impact my insurance rate?

Most insurers use a credit-based insurance score to calculate your premiums, so your credit score can play a role in how much you’ll pay. This varies by province, but Newfoundland and Labrador and Ontario have banned insurance companies from using an individual’s credit score as a factor in the calculation of an auto insurance policy. That said, if you have poor credit and live in any of the other provinces or territories, expect your premium to reflect your credit score.

Myth #3: Is insurance cheaper on newer cars?

Is it less expensive to insure new vehicles? It's actually the opposite, since these cars cost more to repair and have higher replacement values than used cars. Since it will cost the auto insurance provider more money to buy a part for a new car or replace a newer damaged or stolen vehicle, the insurance on newer vehicles tends to be cost more.

How much will my insurance go up with a new car?

On average, insurance on a newer vehicle will cost you between $100 to $200 more, per year, than on a used counterpart. However, the exact insurance cost will vary with each insurance provider, so it is helpful to compare rates before making a decision.

One way to reduce the premium is by choosing a new car with a high safety rating. Another good strategy is to equip the vehicle with anti-theft devices, such as security systems.

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Myth #4: Do older drivers cost more to insure?

It’s actually the opposite. Because drivers over the age of 55 tend to drive less and are generally safer drivers, many insurance companies will offer them discounted rates on auto insurance. They also tend to drive vehicles with better safety records such as sedans, minivans and SUVs.

And, once you retire and are presumably using your car less, so insurance providers often give discounts to retirees. If you’re a safe driver approaching your golden years, talk to your insurer about how they can help you stretch out your retirement income with a lower car insurance rate.

Myth #5: Are couples more expensive to insure?

Premiums can be lower for those in committed relationships that are living under the same roof. Insurers tend to think that this cohort is less risky than a single person. Why? Because those in long-term relationships and part of family households typically participate in less risky behaviour, like speeding or driving drunk. In theory, the more committed you are to other people — like caring for children — the less risk you take in all areas of your life, and this translates into lower car insurance premiums. Another reason why couples often find cheaper car insurance is because of their age. Statistically speaking, as we age we tend to reduce risky behaviour. Since the average age to get married in Canada is between the ages of 30 and 31, this means that couples are typically older and less prone to risky behaviour — the biggest factor in higher car insurance premiums. (It's also why teen boys are slapped with some of the highest car insurance premiums. Statistically speaking, this age and gender cohort is most likely to pursue risky behaviour behind the wheel of a car.)

Myth #6: Accidents and tickets affect my car insurance rate forever

You may be relieved to know that tickets only stay on your driving record for three years and accidents for six years. If you keep a clean record for the rest of that period, you should be back to more affordable premiums in no time. However, if you get a ticket or end up in an accident, your rates will probably rise until the third of sixth year anniversary of the event. For this reason, it's a good idea to minimize any behaviour that could lead to a ticket, moving violation infraction or fine.

To minimize the impact of an unforseen accident, you can opt for accident forgiveness on your policy. This benefit means that your first at-fault accident won’t impact your premium in the short-term, as long as there are no injuries.

Myth #7: Are two-door cars more expensive to insure?

Two-door cars do not factor into how a premium is decided by insurance providers. What does factor into calculating insurance premiums is a vehicle's:

• claims history
• likelihood of the vehicle being stolen
• the vehicle's accident frequency
• as well as repair and replacement costs

Myth #8: Do all car insurance companies have similar rates?

While most carriers may offer very similar types of coverage, the premiums they charge vary from company to company.

This is because insurers group similar risk characteristics with similar risk groups. Some risk group members may never file an actual claim, while others may make many claims.

If your risk group was responsible for multiple claims with a particular carrier, that company’s premiums may be higher than one with a different experience.

Experts recommend you review at least three different companies’ quotes before selecting an insurance policy. You’ll find there’s actually a whole range of different policies at varying price points, and can lead you to finding better rates on your car insurance.

The best way to save is to shop around before you settle on the right policy for your needs and budget. There are plenty of sites that provide price comparisons to understand what options are available from a variety of carriers. You can also bundle auto and home insurance for extra savings.

Bottom line

Insurance can be difficult to understand, especially for people seeking out a policy for the first time. However, it is important to know that insurance is not a one-size-fits-all solution. Customization is crucial to get the perfect coverage that suits your individual needs and will protect you when life throws unexpected hurdles. Lastly, make sure to weigh your available options to make sure you’re not overpaying on car insurance.

— with files from Sigrid Forberg