Car insurance myths are more common than you might think, and they can lead to costly mistakes. From assuming higher premiums always mean better coverage to thinking anyone can drive your car, false beliefs about insurance are everywhere.
Relying on outdated information could leave you underinsured or paying for coverage you don’t need. In this post, we’ll debunk five widespread myths and set the record straight so you can make informed, confident decisions about your coverage.
Myth 1: Higher Premiums Always Mean Better Coverage
Many believe higher premiums automatically mean better protection, but that’s not the case. The price of car insurance depends on factors like age, location, and car model, not just coverage quality.
For example, two people with identical coverage may pay different premiums based on where they live or the type of car they drive.
That’s why it’s essential to look beyond the price tag and focus on what’s included in your policy. Always check the Product Disclosure Statement (PDS), which details the exact coverage and exclusions.
As an example, NRMA Insurance offers comprehensive CTP Green Slip coverage, ensuring NSW drivers meet legal requirements with confidence. However, not all providers offer the same level of protection, even within mandatory schemes. Understanding what you’re actually paying for ensures you’re not overpaying for unnecessary coverage.
Myth 2: All Modifications Void Your Insurance
Contrary to belief, not all car modifications will void your insurance, but failing to disclose or getting unapproved modifications can definitely cause issues. Cosmetic upgrades, like custom rims or new paint jobs, are often fine as long as they’re reported to your insurer. However, performance modifications, like turbo kits or engine upgrades, could change how your vehicle is covered.
For this reason, it’s always a good idea to inform your insurer about any modifications, even if they seem minor. Some insurers offer specific coverage for certain upgrades if they’re listed.
If you’re unsure of what to disclose or even if you should be making modifications to your vehicle, always double-check websites like the NSW government’s breakdown of modified vehicles to understand how vehicle modifications may impact your policy. Always double-check with your provider as a second port of call to ensure your coverage stays intact after any modifications.
Myth 3: Anyone Driving Your Car Is Covered
It’s a common belief that anyone behind the wheel of your car is automatically covered by your insurance, but this isn’t true. Most policies only cover “listed drivers,” meaning those specifically named in your policy. If an unlisted driver gets behind the wheel, you could be left with no coverage.
Additionally, age-based restrictions often apply. For example, drivers under 25 may face higher excess costs or even be excluded from coverage altogether.
To avoid any surprises, always check driver eligibility before handing over your keys. If someone else is driving your car regularly, make sure they’re listed on your policy. This simple step can save you from unnecessary financial risk and potential claims rejections.
Myth 4: Car Insurance Isn’t Necessary for Older Vehicles
Some believe that older or low-value cars don’t need insurance, but this can be a costly assumption. While third-party coverage may seem sufficient, it doesn’t cover your own vehicle in case of damage or theft.
Even for older cars, comprehensive coverage can be worthwhile. For example, your car could still be damaged by weather events or accidents, leaving you with hefty repair costs. While you may be able to reduce these by utilising auto repair comparison websites such as Auto Hero, these costs can stack up. Additionally, comprehensive insurance can protect you from liability for damage to others’ property in the event of an accident.
Accidents can happen regardless of your car’s value. Not having adequate coverage can result in unexpected expenses, which could be far more costly than simply maintaining insurance. Always evaluate the risks before deciding on the type of coverage your vehicle needs, no matter its age.
Myth 5: Personal Belongings Aren’t Covered in Your Car
Many drivers assume that personal belongings, like electronics or bags, are never covered by car insurance. However, some policies do offer coverage for personal items, but this usually comes with specific conditions. For example, items may be covered only if they are locked inside the vehicle or if the theft occurs under certain circumstances.
Keep in mind that personal belongings might not be covered under the car insurance policy itself. Instead, it could fall under contents insurance or be subject to limits or excess fees. For instance, if your laptop is stolen from a locked car, it might not be fully covered unless your policy explicitly includes it.
To ensure you’re adequately protected, check your policy or speak to your insurer about coverage for personal items.
Picking the right car insurance is about more than just finding the cheapest option. It’s crucial to understand what you’re actually paying for, as assuming you’re covered based on price alone can lead to underinsurance or rejected claims. Many factors affect coverage—what’s included, who’s covered, and what exclusions exist. That’s why it’s important to regularly review your policy, especially after significant lifestyle changes like buying a new car or moving to a different area. By staying informed and updating your policy as needed, you ensure that you’re always properly protected. Don’t let myths and assumptions guide your decisions. Armed with the right info, you’ll drive off with cover that’s got your back, giving you peace of mind no matter the road ahead.
Written By
Matt Banks
Matt is the founder of Autohero.com.au and has been hooked on cars ever since childhood.
A veteran in automotive since leaving school, Matt has completed his trade as a panel beater and is across all things with wheels.
His first car was a 1967 FORD XR Wagon followed by a string of collectable Holden’s.
Have a question for Matt? leave a comment below.