Fallacy no.1: I don’t need car insurance because I’ve never been in an accident.
Having never been in a motor vehicle accident is definitely not a good reason for driving around uninsured. If you have been fortunate enough not to have ever been in an accident you still need to cover yourself for that eventuality. The purpose of insurance is to cover possible future losses and not to remedy past losses. In some countries some form of car insurance is obligatory if you own or drive a motor vehicle. Compulsory motor insurance is usually some form of third party or liability insurance and covers the damage you do to others with your vehicle.
Fallacy no.2: Insurance premiums are not affected by the color of the vehicle
You will find a lot self-appointed experts profusely denying that the color of a vehicle affects car insurance premiums. This is true… for some insurance companies. Other insurance companies do in fact use the color of a vehicle to quantify risk. This is because darker vehicles have a higher chance of being in accidents at dawn and dusk. White vehicles are favoured by car thieves as they are easier to re-spray, so they carry a higher risk of being stolen.
Fallacy no.3: If a friend crashes my car, his insurance will cover the damage
This is a complete myth because car insurance policies cover vehicles and not drivers. Not only will your friend’s insurance not cover the damage, there is also a good chance that your own insurance company will not cover the damage and you will need to pay for it out of your own pocket. Most car insurance policies are either for a ‘Nominated Driver’ or for ‘Multiple Drivers’. If you are the only nominated driver on the insurance policy then your claim will be rejected. Some multiple driver policies only cover the policy holder and their spouse, so this might also be insufficient to cover your friend’s accident in your vehicle. If your policy does cover your friend and the claim is successful then you can expect your insurance premium to go up. You will also lose your no-claim bonus if there is one.
Fallacy no.4: My credit rating has no effect on my insurance premiums
How could your credit rating possibly factor into your chances of crashing your car or having it stolen? Well the answer is that is does not, but it does indicate the likelihood of you missing payments, cancelling your policy or even committing insurance fraud. People with poor credit ratings and especially those who have declared bankruptcy are high risk to insurance companies due to financial reasons and not motor risk related reasons.
Fallacy no.5: The government sets insurance premiums
Insurance premiums are definitely not set by the government. The insurance industry is however regulated by the government and an ombudsman is assigned to handle disputes between policy holders and insurance companies. Insurance premiums are set based on a variety of factors including the make, model, value of your car and other factors like your claims history and credit score.