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Are red cars more expensive to insure? Add to ...

If you are confused about what is or is not covered by insurance, it appears you are not alone.

Many people are making misinformed decisions about their insurance “based on hearsay and insurance urban legends,” according to a new report by TD Insurance.

TD, which commissioned Environics Research Group to do an online survey of 1,000 Canadians in March, 2011, tested Canadians’ knowledge of popular insurance products and found some common misconceptions. Here are a few of these industry myths:

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Myth No. 1: Red cars are more expensive to insure.

Twenty-nine per cent of those surveyed thought auto insurance premiums were more expensive for red cards while 54 per cent believe that to be the case for cars with two doors.

“Most people may not know it, but the insurance industry is colour-blind. It doesn't matter if your car is blue, red, striped or chequered, your insurance rate for that make, model, and age of the vehicle will be the same,” Henry Blumenthal, vice-president and chief underwriter at TD Insurance, said in the release.

There are other factors that will determine how much auto insurance you will pay, including how often you drive, your driving history and where you live.

Myth No. 2: If your stuff gets stolen or damaged, you will be reimbursed at today’s prices.

Sixty-three per cent of those surveyed said they believe someone filing a claim through home insurance for stolen or damaged items due to fire or water damage would be reimbursed for replacing the items in their home at today's prices.

According to Mr. Blumenthal, a standard home policy will only cover you for the value of your contents, less depreciation. So if you bought a TV five years ago for $500, you might only get $100 for it, even if it costs $600 to replace that same TV today. People can, however, choose to add for the replacement value option to their home insurance coverage, he said.

Myth No. 3: You only need travel insurance if you're vacationing outside of Canada.

More than a quarter of the people polled, 28 per cent, think that people only need travel insurance if they travel outside of Canada.

The folks at TD Insurance say that provincial medical coverage won't provide comprehensive coverage if you have a medical emergency outside of your home province, so it's important to get coverage even when travelling domestically.

Other myths the TD poll unveils include: you aren’t liable if a contractor is injured while working on your property, getting a parking ticket means your insurance rates will rise, and if you are in a car accident but don't file a claim your insurance premiums won't rise. To take TD's insurance myths quiz, click here.

TD’s list of insurance urban legends may have been written playfully, but the underlying point is a good one. Instead of relying on friends, family, colleagues or the Internet for advice, it is a good idea to find out what specifically your home, auto and travel insurance policies cover.

In many cases, insurance companies have separate additional coverage that they can attach to improve your policy - at a higher cost, of course. It may be worth the higher payments, but it is up to you to research the options and crunch the numbers. It also never hurts to shop around.

Your insurance provider will be able to clarify any insurance-related misconceptions you might have, which could end up saving you plenty of hassle in the event that something really does go wrong.

Follow on Twitter: @RomaLuciw

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