Why Auto Insurance Myths Are Expensive
Auto insurance is one of the largest recurring costs of vehicle ownership, yet it's also one of the most widely misunderstood. Persistent myths lead drivers to make coverage decisions based on bad information — sometimes paying for protection they don't need, and more often going without coverage that would genuinely shield them from financial harm.
The myths below are among the most common in circulation. Each one has a real cost attached to it, whether that's overpaying on premiums, being underinsured when it matters most, or mismanaging claims. Getting the facts straight is one of the most practical ways to manage what you spend on a car each year. See how insurance fits into the bigger picture in our article on keeping annual car costs under control.
Myth
Red cars cost more to insure because insurers consider them high-risk.
Fact
Vehicle color is not a factor in any U.S. auto insurance rating formula.
This myth has persisted for decades, but insurers simply do not ask for or record a vehicle's color when calculating your premium. What they do weigh includes the car's make, model, trim level, age, engine size, safety ratings, and repair cost history. A red sports car may cost more to insure than a red sedan — but it's the "sports car" part driving that difference, not the paint.
Myth
Your credit score has nothing to do with what you pay for car insurance.
Fact
In most states, insurers use a credit-based insurance score as a significant rating factor.
Only California, Hawaii, Massachusetts, and Michigan prohibit the use of credit information in auto insurance pricing. Everywhere else, a lower credit-based insurance score typically correlates with higher premiums. Insurers argue that credit history is statistically linked to the likelihood of filing a claim. This makes maintaining good credit relevant not just to loan rates, but to your monthly insurance bill as well. For a broader look at what moves the needle on your premium, see our guide on factors that quietly raise your car insurance premium.
Myth
State minimum coverage is enough — if you're legal, you're protected.
Fact
State minimums represent the floor of coverage, not adequate financial protection.
Every state sets minimum liability limits, but those limits are often modest — sometimes as low as $25,000 per person for bodily injury. A serious accident involving medical bills, lost wages, and legal action can far exceed those thresholds, leaving you personally responsible for the difference. Carrying only minimum coverage means the legal requirement is met, but your financial exposure in a worst-case scenario remains significant. Understanding what each coverage type actually does is essential — our Car Insurance Explained guide breaks it down clearly.
Myth
Comprehensive insurance covers damage from any accident or collision.
Fact
Comprehensive covers non-collision events; collision coverage handles crashes.
These two coverages are distinct, and confusing them can leave drivers surprised after a claim. Comprehensive pays for damage caused by theft, vandalism, fire, hail, flooding, falling objects, and animal strikes. Collision coverage handles damage when your vehicle strikes another car or object, or rolls over. You generally need both to be fully protected against the range of incidents that can damage a vehicle.
Myth
Filing a claim always makes sense — that's what insurance is for.
Fact
Small claims can trigger premium increases that cost more over time than the payout received.
Insurers track claims history, and even a single at-fault claim can raise your rate at renewal. If the repair cost is close to or below your deductible — or only modestly above it — paying out of pocket often makes more financial sense. Many insurers also offer a claims-free or accident-free discount that you'd forfeit by filing. The math is worth doing before you call your insurer for every minor incident.
Myth
Your insurance automatically covers a rental car or new vehicle purchase.
Fact
Neither rental reimbursement nor new-car replacement coverage is automatic on standard policies.
Rental reimbursement is an optional add-on; without it, you pay for a rental while your car is being repaired after a covered loss. Similarly, if you've just purchased a new vehicle, your existing policy may extend briefly to new vehicles, but you should notify your insurer promptly — grace periods vary by company and state. Assuming coverage exists without verifying it is a fast path to an unwelcome surprise. For a fuller picture of what car ownership actually costs, including insurance, see The Real Cost of Owning a Car.
What to Do With the Facts
Correcting these misconceptions isn't just useful trivia — it translates directly into smarter decisions at renewal time. Review your current policy against what you now know: check whether your liability limits reflect your actual financial exposure, confirm which optional coverages you carry, and understand how your credit profile may be affecting your rate.
Don't Assume Coverage — Verify It
Whether you've bought a new car, rented a vehicle, or made changes to your household, never assume your existing policy automatically extends to new situations. Coverage gaps are most costly when discovered after an incident. Call your insurer or review your declarations page any time your circumstances change.
If you've had a lapse in claims-free status, or recently changed vehicles or addresses, those events can shift your premium in ways that aren't always obvious. For a deeper look at what insurers factor in beyond your driving record, our piece on factors that quietly raise your car insurance premium covers the less-visible variables in detail.
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