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By Andrew Wicken, general manager of

Almost everyone knows that the law requires all drivers to have car insurance, but when it comes to understanding how car insurance works, how insurance companies set their rates and what the average consumer can do to save money, myths and misunderstanding are commonplace.

Many of the most familiar myths are symptomatic of two realities. Firstly, car insurance is complicated: how rates are set, why they occasionally change (and often increase) for no apparent reason, where to get the best deal and who the various players are in the industry, are just a few of the questions most consumers struggle to answer. Secondly, for most people, car insurance remains a “necessary evil” and a nuisance that is best dealt with as quickly as possible – once a year when the renewal notice arrives in the mail.

Thankfully, things are not nearly as bad as they seem. By busting just a few of the longstanding myths around car insurance, average consumers can go from feeling helpless and confused, to empowered and informed. Plus, with just a small amount of time invested, they can be on their way to saving hundreds or even thousands of dollars on their car insurance.

Myth #1 – Red cars cost more to insure

Not true. Regardless of your insurance company, the colour of your car plays absolutely no role in the calculation of your premium. That said, there is a long list of factors related to your “driving profile,” which affect the rate a given insurance company will charge you – your age, your gender, the make and model of your car, where you live, the number of tickets and accidents on your driving record, how much you drive your car and how long you’ve been insured are just a few of the most well known.

Each insurance company uses its own loss experience and independently assesses the risk of insuring a given car and driver in order to set its rates. With so many insurance companies in the market, this means that the rates charged by one company to the next for a particular car and driver can vary significantly.

Myth #2 – All car insurance policies cost about the same

False. Unfortunately, this is a myth which causes many consumers to be complacent about shopping around for a better rate. Not only can the above factors create large discrepancies in the rates charged to a given consumer, but rates are also frequently changing, and that means there is a good possibility the average consumer is not paying the lowest rate available. The bottom line: it pays to shop around.

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