There are a variety of factors that determine the cost of your car insurance—from your driving history and age to the year and model of your car. When asked, 44 percent of Americans believe that driving a red car is another factor that will raise your insurance rates according to a study by insuranceQuotes.com. The real question is if those 44 percent are right or wrong.
Loretta Worters, vice president of communications for the Insurance Information Institute said, “Color has nothing to do with rates. I guess that myth just keeps perpetuating.” Geico insists that color does not matter for your rates. “A red car won’t cost you more than a green, yellow, black or blue car. Insurers are interested in the year, make, model, body type, engine size and age of your vehicle. How you’re perceived based on the color of your car in another matter.”
Meanwhile, car insurance companies’ factors are still misunderstood by many populations. Amongst millennial drivers, for example, 53 percent believe the red car myth along with 45 percent of college graduates and 42 percent of American households with an annual income of $75,000 or more.
There are other misconceptions and myths about car insurance though too. Forty-four percent of American drivers incorrectly believe that their auto insurance will not cover damages for an at-fault driver. However, most car insurance companies will help pay for repairs even if the accident was your fault. The study by insuranceQuotes.com found that most millennials don’t know the extent of their own coverage. Most drivers also do not know that while color isn’t a cost factor, location can determine rates. Worters explained, “If you live in an urban area you will pay more money than if you are in a suburban area because it is likely more congested.”
Car insurance rates can also jump based on the cost and frequency of litigation, auto repairs, medical care costs, likelihood of insurance fraud and local weather patterns. Another fun fact is that 34 percent of drivers think items lost during a car break-in are covered by car insurance. That’s incorrect—the property would be protected by homeowners or renters insurance instead.
What can we learn about the red car insurance myth? Simply that sometimes we make assumptions and accept them without investigating the facts. There are numerous factors that affect your car insurance rates, and it is important to know which ones are legitimate and which ones are mythical. The same is true for investing—while there are tons of options and rationale for decisions, it is important to make sure you base your choices on facts and figures, not feelings and assumptions. If you’re looking for help making good, fact-based choices financially, contact an expert at Apex Financial Advisors today. We can help you make the best, informed choices for your financial health and wellbeing.