Key Takeaways
Why Insurance Myths Are Expensive
Auto insurance is one of the biggest recurring costs of car ownership, yet most new owners shop for it based on incomplete or simply wrong information. Believing a myth about how premiums are calculated can mean overpaying for years — or, worse, being underinsured when you actually need to file a claim.
The myths below are among the most common ones we hear from first-time owners. Each one has a measurable financial consequence. Understanding what insurance actually covers is the foundation — but knowing what it doesn't work the way you think is equally important.
Myth
Red cars cost more to insure because insurers charge extra for sporty colors.
Fact
Insurers do not ask about, record, or price your vehicle's color. It has no effect on your premium.
This is probably the most persistent auto insurance myth in circulation. The reality is that insurers rate your vehicle based on its make, model, model year, body type, engine size, and safety features — not its paint color. A red sedan and a white sedan of the same year and trim level will receive identical base rates. The myth likely persists because red cars are sometimes associated with sports cars, which do cost more to insure due to engine power and repair costs — but that's the vehicle type doing the work, not the color.
Myth
Your credit score has nothing to do with your car insurance rate.
Fact
In most US states, insurers use a credit-based insurance score as a significant pricing factor.
Research by state insurance regulators has consistently shown that credit-based insurance scores correlate statistically with the likelihood of filing a claim. As a result, most states allow insurers to use a version of your credit history when calculating your premium. A lower score can meaningfully raise your rate. California, Hawaii, Massachusetts, and Michigan are among the states that restrict or ban this practice, but in the majority of the country it applies. Misconceptions about credit scoring affect more than just borrowing — they affect what you pay to drive.
Myth
State minimum coverage is enough — if it's legal, it protects you.
Fact
Meeting the legal minimum means you're street-legal, not necessarily financially protected.
Every state sets minimum liability limits that drivers must carry, but those limits are often quite low — sometimes $25,000 or less per accident. If you're at fault in a serious collision and the damages exceed your coverage, you're personally responsible for the remainder. Medical bills and vehicle repair costs from a single accident can easily run into six figures. Minimum coverage also typically provides zero protection for your own vehicle unless you add collision and comprehensive coverage. State minimums were designed to protect other people on the road — not to make you whole.
Myth
Older cars are always cheaper to insure than new ones.
Fact
An older car can actually cost more to insure depending on its safety record, theft rates, and parts availability.
It's true that dropping collision and comprehensive coverage on an older vehicle with low market value can reduce your premium. But the liability and medical portions of your policy — which make up a large share of your total cost — aren't directly tied to your car's age. An older vehicle with poor crash-test ratings, expensive parts, or a high theft rate in your area can carry surprisingly steep premiums. Newer vehicles with advanced safety features sometimes qualify for discounts that partially offset their higher insured value.
Myth
You should always file a claim — that's what insurance is for.
Fact
Filing a small claim can trigger a premium increase that costs more over time than just paying out of pocket.
Insurance is best used for significant, unexpected losses — not routine dents and scratches. Many insurers apply a surcharge after a claim, and that rate increase can last three to five years. If a repair costs $800 and your deductible is $500, you'd be filing a claim for $300 in coverage — potentially triggering hundreds of dollars per year in added premiums. A useful rule of thumb: if the repair cost is close to or below twice your deductible, it may be smarter to pay out of pocket and preserve your claims history. Always run the numbers before calling your insurer.
Myth
Your personal auto policy covers you when driving for a rideshare or delivery app.
Fact
Most personal auto policies explicitly exclude commercial or for-hire use — leaving drivers with a serious coverage gap.
Using your personal vehicle to earn money through a rideshare or delivery platform changes how insurers categorize your risk. Many standard personal policies contain language that voids coverage when the vehicle is being used for commercial purposes. Rideshare companies provide some coverage during active trips, but the gap between trips — when you're logged into the app but haven't accepted a ride — is often where personal policies end and platform coverage hasn't yet begun. If this situation applies to you, ask your insurer specifically about rideshare endorsements or a commercial use rider.
What These Myths Have in Common
Most of these misconceptions share a root cause: people assume insurance pricing is simpler and more intuitive than it actually is. Insurers use actuarial models that weigh dozens of variables — many of which are invisible to the buyer. That gap between perception and reality is where money gets lost.
Don't Assume Your Policy Covers Everything
Many new owners don't read their full policy document until after a claim is denied. Key exclusions — such as coverage gaps during rideshare use, or the absence of uninsured motorist protection — are often buried in the fine print. Take 20 minutes to read through your declarations page and call your insurer with any questions before you need to file.
Before your next renewal, it's worth reviewing your policy with fresh eyes. Are you carrying only the state minimum? Did you skip uninsured motorist coverage? Common gaps in first-timer policies are often easy to fix once you know they exist. Auto insurance fits into the broader picture of total vehicle ownership costs, so getting it right matters for your whole budget.
This Is General Information, Not Insurance Advice
Insurance rules, minimums, and rating factors vary significantly by state and by insurer. The information here is meant to help you ask better questions — not to substitute for a conversation with a licensed insurance professional. Contact your state's insurance commissioner or a licensed agent to understand exactly what your policy covers and what's required where you live.