Key Takeaways
Why Auto Insurance Myths Are Expensive to Believe
Auto insurance is one of the most significant recurring costs of car ownership, yet it's also one of the least understood. Myths that seem harmless — the red-car legend, the idea that minimum coverage is sufficient — can lead drivers to make choices that leave them underinsured, overcharged, or blindsided at the worst possible moment. Getting the facts straight isn't just about satisfying curiosity; it's about protecting your finances and your peace of mind on every drive.
The misconceptions below are among the most common and consequential. Some have persisted because they contain a kernel of intuitive logic. Others survive simply because nobody pushes back on them. Either way, believing them can cost you.
Myth
Red cars cost more to insure because insurers charge a premium for sporty colors.
Fact
Insurers do not use vehicle color as a rating factor. Your premium is shaped by the car's make, model, age, engine size, safety record, and your personal driving history.
This myth has circulated for decades, possibly because red cars are associated with sports cars — which do carry higher premiums due to horsepower and theft rates, not color. When you apply for coverage, insurers collect your VIN, which encodes manufacturer and model information but says nothing about paint. Two identical vehicles with different colors will receive identical base rates.
Myth
Your credit score has nothing to do with what you pay for car insurance.
Fact
In most U.S. states, insurers use a credit-based insurance score as one factor in determining your premium. Drivers with lower credit scores often pay significantly more.
Insurers argue — and actuarial research has generally supported — that credit-based insurance scores correlate with the likelihood of filing a claim. While a handful of states (including California, Hawaii, and Massachusetts) restrict or prohibit this practice, the majority allow it. Improving your credit health over time can translate into lower renewal premiums. For a fuller picture of what shapes your rate, see what insurers actually look at.
Myth
If you're hit by another driver, their insurance will cover all your costs quickly and fairly.
Fact
The at-fault driver's insurer represents their client — not you. Settlements can be slow, disputed, or capped at the other driver's policy limits, which may be low.
Relying entirely on another driver's liability coverage puts you at the mercy of their insurer's process and their policy's limits. Uninsured/underinsured motorist coverage and personal injury protection exist precisely to fill these gaps. If the at-fault driver carries only a state minimum policy, your medical and repair costs could exceed their coverage entirely.
Myth
Filing any claim will automatically spike your premium at renewal.
Fact
Rate increases after a claim depend on fault, your prior claims history, your insurer's specific policies, and state regulations. Not every claim triggers a surcharge.
A not-at-fault claim — such as a hit-and-run or weather damage — often carries no surcharge under many policies, though this varies by insurer and state. First-time claimants with clean records sometimes qualify for accident forgiveness provisions. That said, frequent claims over a short period are likely to affect your rate regardless of fault. Review your policy language or speak with your agent before assuming the worst — or before avoiding a legitimate claim out of unfounded fear.
Myth
Older cars don't need comprehensive or collision coverage because they're worth less.
Fact
Whether to carry physical damage coverage on an older vehicle is a financial calculation, not a rule — and the right answer depends on your savings, your risk tolerance, and the vehicle's actual value.
If your vehicle's market value is low enough that a total-loss payout wouldn't justify years of premiums, dropping physical damage coverage may be reasonable. However, drivers who couldn't easily replace or repair the vehicle out of pocket may still benefit from keeping it. Use published valuation tools to estimate your car's current market value, then weigh that against your annual premium cost and deductible. Understanding policy terms like actual cash value is essential — see our plain-language policy guide for definitions.
Myth
Personal auto insurance covers you when using your car for deliveries or rideshare driving.
Fact
Standard personal auto policies typically exclude commercial use. Driving for hire or delivering goods for pay usually requires a rideshare endorsement or a separate commercial policy.
This gap has caught many gig-economy drivers off guard. If you're involved in an accident while logged into a rideshare app or actively making a delivery, your personal insurer may deny the claim. Rideshare companies provide some coverage during active trips, but there are often gaps — particularly during the period when you're logged in but haven't accepted a ride. If you use your vehicle for any income-generating purpose, disclose it to your insurer and confirm your coverage status in writing.
What to Do With This Information
Knowing the facts about auto insurance gives you leverage at renewal time and helps you ask better questions when comparing coverage options. A few practical steps worth taking:
- Review your current limits. Pull out your declarations page and check whether your liability limits reflect your actual assets and income — not just the state minimum.
- Check your state's rules on credit scoring. If you live in a state that permits credit-based insurance scoring, improving your credit profile over time is a legitimate way to reduce premiums.
- Confirm your coverage for gig work. If you use your vehicle for any compensated purpose, get written confirmation of your coverage status from your insurer.
- Understand your policy language. Terms like actual cash value, subrogation, and declarations page have specific meanings that affect how claims are settled. Decoding your policy's terminology is a useful starting point.
Minimum Coverage Can Leave You Exposed
State-mandated minimums set a legal floor, not an adequate financial shield. In a serious accident involving medical bills, lost wages, and vehicle damage, minimum liability limits can be exhausted quickly — leaving you personally responsible for the remainder. Review your coverage limits with a licensed insurance professional to ensure they reflect your actual risk.
Auto insurance isn't a set-it-and-forget-it expense. Life changes — a new vehicle, a move to a different ZIP code, a change in your driving record — all affect your risk profile and your premium. An annual review with a licensed insurance agent helps ensure your coverage keeps pace with your actual situation. For a broader look at what shapes your rate, explore the full range of factors insurers consider.
1 in 8
Drivers on U.S. roads are uninsured
According to the Insurance Research Council, roughly one in eight drivers operates without any auto insurance, underscoring why uninsured motorist coverage matters.
~40%
Premium difference tied to credit score
Industry analyses have found that drivers with poor credit can pay substantially more than those with excellent credit, often in the range of 30–50% more depending on the state and insurer.
49 states
States requiring liability insurance
All U.S. states except New Hampshire require drivers to carry some form of liability coverage, though minimum required limits vary considerably by state.