Many drivers cruise through life thinking they’ve got their auto insurance all figured out. In fact, 86% of Americans report that they have a strong understanding of what their policies cover. But just like those tricky blind spots on the road, there are many common car insurance myths that leave drivers vulnerable.
As a dealer or lender, improving your customers’ insurance knowledge enables them to make smarter choices about their coverage. Let’s go over the top myths about auto insurance, why it matters, and what you can do to protect your customers and your business.
Table of Contents
Top Auto Insurance Myths (and Why They’re False)
1. “Full coverage” insurance covers everything
It makes sense that when drivers hear “full coverage,” they assume they’re protected against anything that could happen to their car. However, as many dealers know, this is far from the case. While full coverage is not an official industry term, it often refers to a plan that includes liability, comprehensive, and collision insurance.
This leaves out a lot of coverage types that dealerships may want to see, including gap insurance or MedPay. That’s why it’s important to be clear about what you require from drivers, particularly when leasing out or financing vehicles.
2. Your standard auto policy covers business activities
As many rideshare drivers learn the hard way, personal auto policies typically exclude coverage when the vehicle is used for commercial purposes. For that reason, most car insurance providers require delivery drivers or gig workers to buy additional rideshare coverage.
💡 55% of drivers are unaware that a standard auto policy does not cover vehicle business use
Some drivers also mistakenly rely on insurance from the Transportation Network Company (TNC), which only covers certain parts of the work day. Here’s a chart from a major insurance carrier that outlines which insurance kicks in at each point in time.
| Coverages while you're online | Waiting to match with a rider | Trip accepted & transporting rider |
|---|---|---|
|
Bodily injury & property damage liability |
Driver’s insurance/TNC
|
TNC |
|
Comprehensive |
Driver’s insurance
|
TNC |
|
Collision |
Driver’s insurance |
TNC |
|
Uninsured/underinsured motorist |
Driver’s insurance |
TNC |
|
Personal injury protection/medical payments |
Driver’s insurance |
- |
|
Roadside assistance and trip interruption |
Driver’s insurance |
Driver’s insurance |
|
Rental car reimbursement |
Driver’s insurance |
Driver’s insurance |
3. If your friend drives your car, they’re covered by their own insurance
In most cases, insurance follows the car, not the driver. Of course, there are several exceptions to this rule, such as when a vehicle owner rents out their car for money, or if someone else drives it without permission. However, in many cases of consensual car borrowing, the vehicle owner should know that their own insurance will go into effect if anything happens.
4. Getting a parking ticket can raise your premiums
As silly as it may sound, the idea that a parking ticket may increase your rates is more common than you might think. In reality, since parking tickets are not moving violations, they don’t have any impact on your driving record and therefore don’t impact your insurance premiums. However, unpaid tickets could lead to license suspension, which could affect your insurance.
💡 57% of drivers are unaware that a parking ticket won’t affect a driver’s auto insurance premiums
5. Your auto insurance covers items stolen from your car
When you purchase an auto insurance policy, you may expect that it covers any losses related to your car. However, that’s not quite the case. If your car is broken into, your insurance doesn’t cover the stolen items. Rather, you’d file a claim with your homeowners or renters insurance to seek reimbursement.
💡 44% of drivers believe that items stolen from their car are covered by a standard auto insurance policy
Why Dealerships Should Care About Insurance Myths
For many dealerships, auto insurance is little more than a step to check off during the car buying process. However, for those working in leasing or financing, your customers’ coverage is integral to your business protection.
To that end, customer misinformation can lead to risky behavior that directly increases your risk. For instance, let’s say your lessee neglects to buy rideshare coverage before driving for Uber Eats. One night when driving around waiting for their next order, they get into an accident that leaves their vehicle totaled. Because of when the incident occurred, the TNC coverage doesn’t cover anything.
Since the customer doesn’t want to make payments on a totaled vehicle, they drop it back off at the dealership. Now you have to figure out how to recoup money for both the damages and use of the vehicle.
And it’s not just drivers who can get tripped up by coverage exceptions. In some cases, dealerships can also face losses due to insurance gaps.
In a recent news story, a couple’s vehicle was stolen off the lot of a Massachusetts auto dealership after they’d dropped it off for repairs. The dealership’s insurance claim was denied, and while the customers’ insurance ended up covering it, it may have gone after the business to cover the losses through subrogation.
Why did this happen? The dealership may have assumed that they were covered under their liability insurance, which steps in to pay for incidents that take place on the site of the business.
However, this scenario likely fell outside of covered perils for their policy. Instead, they might have needed to have garage keepers insurance, a slightly less common add-on that covers the customer’s car while the business is in possession of it.
How to Protect Your Dealership
Eliminating auto insurance misinformation can have a significant impact on your business success. Setting clear requirements for customers and being proactive in clearing up misconceptions can go a long way in preventing issues.
But it’s also important to acknowledge that the insurance knowledge gap doesn’t just impact consumers. In some cases, it also includes more experienced parties, like F&I managers. While these individuals may undergo training and may not fall victim to the more basic misunderstandings, they’re often not prepared for many edge cases they’ll encounter when reviewing customers’ insurance.
Therein lies the trap of insurance in the modern age. Policies are so complicated and nuanced that even experienced professionals don’t get it right 100% of the time.
That’s why intelligent solutions are becoming key in identifying special cases and exceptions. Not only can they easily manage extensive amounts of data, but modern engines can also apply that information to a given scenario at lightning speed. By equipping your team with tools to conduct analysis, you can ensure that they’re acting efficiently to make informed decisions.
Leverage CheckMy Driver to protect your business
CheckMy Driver is an auto insurance solution that automates the entire insurance verification process end-to-end. Built on decades of industry experience, it enables dealerships and lenders to improve efficiency and eliminate risk by streamlining auto insurance verification and monitoring.
Unlike most applications in the space, CheckMy Driver doesn’t just surface the customer’s policy information. Rather, it handles everything from data retrieval to analysis with a system built on decades of insurance expertise. In as little as two minutes, its AI-powered adequacy engine reviews the driver’s coverage to ensure that the information is active, accurate, and adequate– then sends you the results in an easy-to-read format.
To learn more about CheckMy Driver and how it can fill knowledge gaps in your business, schedule some time to chat with our team.