Biggest Auto Insurance Myths: Part 2

Is it possible that, in 2022, auto insurance companies can discriminate on the basis of sex when determining premiums?

The Belief

Companies can’t discriminate on the basis of gender while determining auto insurance prices. In other words, the rumor that men pay more for auto insurance than women is false.

 

The Verdict

False. Insurance companies can legally charge men more except in these states:

• California
• Hawaii
• Massachusetts
• Michigan
• Montana
• North Carolina
• Pennsylvania

In these seven states, companies can’t discriminate against men when it comes to auto insurance pricing, but it’s legal in every other state. The myth is that men pay more for auto insurance in every state where this is legal; owing to various other factors, women pay more than men in 21 states and Washington, D.C.¹

The Details

“Most states allow insurance companies to consider gender as a rating factor on insurance policies,” said Kevin Hamill, co-owner and insurance agent at Quantum Assurance International in Delaware. Age is a factor as well, with higher costs for younger drivers who have less experience. “Typically, younger male drivers pay more compared with females of the same age. This gender disparity tends to become less significant as the drivers get older.”

Why do men pay more for insurance? Auto insurance providers calculate risk when determining premiums, and men are riskier drivers than women, with more DUIs, traffic accidents, and police stops. Take a look at the following statistics.

• More traffic fatalities: Statistically, men are 30 percent more likely to die in traffic fatalities than women.^{2 3}

• More DUI arrests: In 2019, 206 percent more men were arrested for DUIs than women. For people ages 65 and older, the gender divide was even more pronounced, with men 341 percent more likely to have DUI arrests than women, according to the most recent FBI data.⁴

• More police-initiated contact: Men are 32 percent more likely to have been stopped by the police. In 2018, 1 in 4 men were stopped by the police, compared with only 1 in 5 women.⁵

People with DUIs, multiple tickets, and multiple at-fault accidents pay more for insurance than people with clean driving histories. Men tend to have more claims, and auto insurance companies take this increased risk into account when it comes to premiums. Learn about other factors that affect the cost of car insurance aside from how likely you are to file a claim.

And what is the difference between rental car coverage and what you’re offered at the rental car counter?

The Belief

When you rent a car, you must buy insurance for it, even if you already have personal auto insurance.

The Verdict

False. If you already have car insurance, you don’t need to buy any more insurance when you’re renting a car, though it would provide additional coverage.

The Details

“When you rent a vehicle, the rented vehicle is covered with the same liability limits and physical damage deductibles as the vehicles on your personally owned insurance policy,” said Brian Bruce, an insurance agent at Farm Bureau Financial Services in Olathe, Kansas.

“That being said, we always advise clients to purchase the additional coverage through the rental car company as well — the reason being [that] if a claim occurs, that claim will be through that additional policy, not on your personally owned policy. If it were to go on your personally owned policy, then what happened in the rental car will affect your overall auto insurance rates. Having the additional policy through the rental car company avoids that scenario completely.”

In other words, buying additional coverage at the rental car company could save you from increased premiums due to claims. And yes, your premiums will go up with any claim, particularly with at-fault accidents. Learn more about the cost of auto insurance with accidents.

“Even if your policy extends, you should still consider the extra coverage, as it often pays for extra fees rental car companies can assess, such as restocking and the time the vehicle is out of the rental fleet,” Hamill added.

Here are some additional insurance types you might want.

• Rental car liability insurance: Liability coverage includes both bodily injury coverage and property damage coverage, which cover the other party in an accident you cause.
• Collision/loss damage waiver (CDW/LDW): This waiver isn’t technically insurance, but it could cover the cost of the rental car repairs if you damage it. If you already have collision or comprehensive insurance, a damage waiver could be redundant. However, unlike a damage waiver, neither collision or comprehensive coverage covers “loss of use,” the loss of income while the rental car is being repaired.
• Personal effects coverage: Even if you have comprehensive coverage, which includes car theft, it doesn’t cover personal property stolen from your car, just stolen cars or car parts like catalytic converters. Personal effects coverage would cover items stolen from your car, like laptops or clothes.

If you’re buying car insurance for the first time, you’re probably wondering, “How much car insurance do I need?” The answer depends on what state you’re in.

The Belief

No matter where in the U.S. you live, if you drive on public roads, you need car insurance.

The Verdict

This isn’t quite true; not every state requires auto insurance, but most do. The only exceptions are New Hampshire and Virginia.

The Details

While Virginia and New Hampshire don’t require auto insurance, “every state requires motor vehicle operations to provide proof of financial responsibility,” Hamill said.

For example, in Virginia, drivers without insurance must pay a $500 “uninsured motor vehicle fee” to the DMV⁷. In New Hampshire, you must demonstrate that you can meet these “motor vehicle financial responsibility requirements.”

• Bodily injury liability per person: $25,000
• Bodily injury liability per accident: $50,000
• Property damage liability per accident: $25,000

You’ll have to deposit this money or securities and then give a receipt to the state treasurer or, for securities, purchase them from a savings bank or from your trust fund, if you have one.⁸ But for most people, this isn’t an option, and buying auto insurance will be more affordable.

Even though not paying auto insurance premiums is appealing, keep in mind that you’ll still be responsible for bodily injuries and property damage, both to your vehicle and to the other parties, in accidents in which you are at fault. You’ll also be responsible for any damages outside of your control, from natural disasters to vandalism.

You may not get in legal trouble for driving without insurance in these two states, but it’s a good idea to get insurance anyway and avoid financial obligations you can’t afford.

If you enjoyed busting these common auto insurance myths, read the first installment of our auto insurance myths series, where we discussed if red cars cost more to insure, if expensive cars cost more to insure, and how your credit history and driving record (traffic tickets and accidents) affect your auto insurance premiums. For more original data, check out the rest of our auto insurance research.

The research on AutoInsurance.com comes from our network of local agents as well as third-party sources. We also conducted interviews in January 2022 with two insurance agents: Brian Bruce from Farm Bureau Financial Services in Olathe, Kansas, and Kevin Hamill of Quantum Assurance International in Delaware.

We supplemented our original research with third-party data from the following organizations:

• Bureau of Justice Statistics
• CNBC
• Enterprise
• FBI
• National Highway Traffic Safety Administration
• New Hampshire General Court
• U.S. Department of Transportation’s Federal Highway Administration
• Virginia Department of Motor Vehicles