June 23, 2020

Two of the most common myths about insurance are that red cars cost more to insure and that houses should be insured for their real market value. However, red cars do not always cost more to insure, and houses should generally be insured based on how much it would cost to rebuild them. Because rebuilding costs can vary greatly from one area of the country to another, some homes may be significantly under-insured or even over-insured.

Researchers recently conducted a survey with 2,000 participants to test policyholders’ knowledge about common insurance myths. To do this, they read each participant several false statements about insurance. Their research showed that men were more likely to believe insurance myths. However, one exception was that women were more likely to believe the myth that red cars are more expensive to insure. 

One of the biggest disparities between men and women in believing a myth was the myth that speeding tickets do not follow a person home if they are received out of state. More than 65 percent of men believed this myth was true, while less than 35 percent of women believed it. 

The following are additional insurance myths, truths, and statistics gathered by the researchers:

Myth: Insurance coverage should be purchased for a home based on its real market value. As mentioned above, the cost to rebuild the home is the amount for which a home should generally be insured. This amount should include the cost of both materials and labor. Of those surveyed, 55 percent of men and 45 percent of women believed this myth. 

Myth: It is always cheaper to insure a small car. Both mid-size and small minivans or SUVs are usually cheaper to insure. However, the cost of insurance depends on several factors, and not just the size of the car. Because inexperienced drivers often select small cars, they are not always the cheapest to insure due to the higher risks associated with an individual’s lack of driving experience. About 40 percent of women believed this, and nearly 60 percent of men believed it.

Myth: Comprehensive auto coverage includes everything. There are generally limitations with this type of coverage, which are explained in each insurance policy. Based on the policy language, comprehensive auto coverage may only cover certain losses associated with theft, animal collisions, vandalism and storm damage, for example. About 30 percent of women and 60 percent of men believed this myth.

Myth: Thieves prefer stealing new vehicles. Thieves are more likely to steal older cars to sell for parts. About 40 percent of women and 60 percent of men believed this myth.

Myth: If a policyholder loans his or her car to a friend who crashes it, the friend’s insurance company will cover the damage. When someone else crashes a policyholder’s car, the policyholder and his or her insurer may be required to pay for the damage to the car, depending on the policy language and the facts and circumstances of the accident. Slightly less than 50 percent of women and slightly more than 50 percent of men believed this myth.

Experts say that all of these misconceptions can lead to financial losses. It is important to always ask questions. To learn more, discuss your concerns with an insurance agent.

This blog post provides general information only. Insurance coverage is subject to all policy terms, conditions, exclusions and limitations. Insurance coverage is determined on a claim-by-claim basis based on the specific facts and circumstances of the claim, the applicable policy language, and applicable statutory provisions.