5 Things Consumers Don’t Know About Car Insurance
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The Fiscal Times
May 7, 2014

When Tim Rogers’ car was swallowed by a street collapse in a Baltimore landslide last week and then smashed by backhoes, the recent college grad told the local TV station that his insurance company wouldn’t cover the damage because it was an “act of God.”

Either Rogers was misinformed about his coverage – or he may have dropped the comprehensive portion of his policy to save on premiums. “As long as the car owners have comprehensive coverage as part of their car insurance policy, the landslide damage should be covered,” Loretta Worters, a spokeswoman for the Insurance Information Institute, a New York-based trade group, told Bankrate.

Car owners often aren’t fully aware of what exactly their car insurance contracts cover. In the same vein, they also often don’t know what factors affect or don’t affect their car insurance premiums.

Related: The Best Time to Buy Car Insurance

Here are five things Americans get wrong about car insurance premiums, based on two recent surveys conducted for InsuranceQuotes.com:

1) They think income affects their car insurance rates. The surveys found that 43 percent of Americans believe this to be true. But individual salaries do not influence insurance rates.

2) They think their employment status determines their car insurance rates. Not true, although 63 percent of American believe this or don’t know if their employment status is a factor.

3) They think that gender is not a factor in rates. Only about half of Americans know that gender actually does impact our car insurance premiums. A 20-year-old man, for example, typically pays about 25 percent more than a woman of the same age.

4) They think that homeownership doesn’t matter. Only 53 percent of Americans know that owning a home can lower how much they pay for car insurance.

5) They think that where they live isn’t important. Thirty-seven percent of Americans either are unsure about this, or don’t believe insurers take into account where they live when determining their insurance rates.

Related: Obamacare Could Drive Down Your Car Insurance Costs

Insurers use data of accidents and other driving violations based on data associated with the list below to set car insurance premiums:

  • Age
  • Gender
  • Credit history
  • Marital status
  • Where they live
  • What kind of car they drive

While we can’t change some of these factors, we can work on polishing our credit scores by paying down debt. We can also opt for a safer car to reduce our insurance premiums.

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Marine Cole has been covering finance and business for a decade and has written for publications that include The Wall Street Journal, Crain's New York Business, and AdvertisingAge.