Why Auto Insurance Myths Are So Persistent
Auto insurance touches nearly every licensed driver in America, yet it remains one of the most misunderstood financial products people carry. Misconceptions spread easily — through word of mouth, online forums, and casual assumptions — and they stick because insurance policies are genuinely complex documents few people read cover to cover.
Acting on bad information can lead to gaps in coverage, unexpected out-of-pocket costs, or premiums that don't reflect what you actually need. The myth-and-fact pairs below address the most common errors drivers make when thinking about how their insurance works. For a broader grounding in coverage basics, see our plain-language guide to how car insurance works.
Myth
Red cars cost more to insure because insurers flag them as high-risk.
Fact
Insurers do not factor vehicle color into premium calculations — period.
This is perhaps the most durable auto insurance myth in circulation. The origin is unclear, but no major U.S. insurer uses paint color as a rating variable. What actually influences your premium includes the vehicle's make, model, trim level, engine size, age, safety ratings, and repair cost history. A red sports car may cost more to insure than a red sedan, but that's because of what the car is, not what color it is.
Myth
The minimum coverage required by your state is enough protection.
Fact
State minimums set a legal floor, not an adequate financial safety net.
Every state sets minimum liability limits — for example, requiring $25,000 in bodily injury coverage per person — but those figures were often established years ago and may not reflect today's medical and legal costs. If you cause an accident that injures another driver and their bills exceed your policy limit, you may be personally responsible for the difference. State minimums also typically don't include collision or comprehensive coverage, leaving your own vehicle unprotected.
Myth
Your credit score has nothing to do with your car insurance rate.
Fact
In most U.S. states, insurers are permitted to use credit-based insurance scores as a rating factor.
A credit-based insurance score is not identical to a FICO score, but it draws on similar credit data. Insurers use it as one indicator of the likelihood a policyholder will file a claim. California, Hawaii, Massachusetts, and Michigan are among the states that restrict or prohibit this practice. If you live elsewhere and have a lower credit score, you may be paying more than a driver with similar risk characteristics but stronger credit history — something worth understanding when shopping for coverage.
Myth
Older cars don't need comprehensive or collision coverage.
Fact
Whether to drop coverage on an older vehicle depends on its actual value and your financial situation — not its age alone.
A common rule of thumb suggests dropping collision and comprehensive once a car reaches a certain age, but this oversimplifies the decision. The relevant question is whether you could afford to repair or replace the vehicle out of pocket if it were totaled or stolen. A 12-year-old vehicle worth $6,000 to $8,000 in good condition may still warrant comprehensive coverage, especially in regions prone to hail, flooding, or vehicle theft. Evaluate market value against the annual cost of the coverage plus your deductible.
Myth
You should always file a claim — that's what insurance is for.
Fact
Filing a small claim can cost more over time through premium increases than paying for the damage yourself.
Insurance is designed to protect against significant financial losses, not every minor fender-bender. When you file a claim, insurers may apply a surcharge at renewal, and this increase can persist for several years. If the repair cost is close to your deductible, or only modestly above it, paying out of pocket often makes financial sense. Before filing, compare the repair estimate against your deductible and consider how a claim might affect your premium.
Myth
Your personal auto insurance automatically covers business use of your vehicle.
Fact
Standard personal auto policies typically exclude or limit coverage for commercial or business use.
If you regularly use your personal vehicle for business purposes — such as transporting clients, making deliveries, or driving for a rideshare platform — a standard personal policy may deny a claim that occurs during that use. Rideshare drivers, in particular, occupy a coverage gap between their personal policy and the platform's commercial coverage depending on the phase of a trip. Drivers who use their vehicles for work should discuss their situation with a licensed insurance agent to understand what additional coverage, if any, is appropriate.
What These Myths Cost You in the Real World
Believing that minimum coverage is enough, or that filing every claim is always smart, has concrete financial consequences. Underinsured drivers who cause a serious accident may face personal liability that exceeds their policy limits — meaning their own assets could be at risk. Conversely, drivers who over-insure older vehicles with low market value pay for protection that a payout will never fully justify.
Underinsurance Is a Serious Financial Risk
Carrying only your state's minimum liability limits can leave you personally exposed if you cause an accident with significant injuries or property damage. Medical costs and legal judgments regularly exceed minimum policy limits. Review your liability limits carefully and consider whether they reflect the actual financial risk you're willing to carry. A licensed insurance agent can explain the implications of different coverage levels for your specific situation.
When it comes time to evaluate your policy, understanding what you're actually comparing matters enormously. Our walkthrough of shopping for auto insurance explains what to verify before signing. And if you're in the market for a new vehicle, insurance costs are part of the total ownership picture — the buying a car hub covers the full financial landscape of a vehicle purchase.
The core takeaway: treat your insurance policy as a living document, not a set-and-forget product. Review coverage annually, especially after major life changes such as moving, adding a driver, or paying off a vehicle loan. Informed decisions start with accurate information — and that begins by letting go of the myths.
