Car Insurance Myths That Lead Drivers to Make Costly Assumptions

This is one of the oldest and most durable auto insurance myths. In reality, insurance companies base rates on factors such as the vehicle's make, model, age, engine size, safety record, and how it is used — not its paint color. The perception that red equals speed, and speed equals risk, may be culturally intuitive, but it has no basis in how policies are actually priced.

Every US state sets a minimum liability coverage requirement, but those thresholds were often established years ago and may not reflect today's medical costs or vehicle repair bills. If damages from an at-fault accident exceed your policy limits, you can be held personally responsible for the difference — meaning your savings or future wages could be at risk. Many drivers benefit from carrying higher limits than the legal minimum, though the right amount depends on your individual financial situation. A licensed insurance agent can help you assess your exposure.

A credit-based insurance score is not identical to the FICO score lenders use, but it draws on similar underlying data. Insurers and researchers have found statistical correlations between credit history and the likelihood of filing claims — which is why most states allow its use in pricing. California, Hawaii, and Massachusetts are among the states that prohibit or significantly restrict this practice. If you live in a state where it applies, maintaining healthy credit habits can have a modest influence on your auto insurance costs over time.

When people say full coverage, they typically mean a policy that includes liability, collision, and comprehensive coverage combined. But even that combination has limits, deductibles, and exclusions. Intentional damage, mechanical breakdowns, and personal belongings left in the car are examples of things that are commonly excluded. Reading your declarations page and policy documents — rather than relying on the label — is the only reliable way to know what is and isn't covered.

This gap has caught many drivers off guard. When you're logged into a rideshare or delivery platform — whether waiting for a ride request or actively transporting a passenger or package — you may be in a coverage gap between your personal policy and the platform's commercial coverage. Most major rideshare companies carry some coverage during active trips, but the specifics vary and periods between trips are often under-covered. Drivers doing this type of work should ask their insurer about a rideshare endorsement or a separate commercial policy.

Insurance is designed for losses that would genuinely strain your finances, not every small fender-bender or parking lot scrape. Filing a claim — even a relatively small one — can result in a surcharge that persists for several years on your renewal. Before filing, it is worth comparing the expected claim payout against your deductible and the likely long-term premium impact. Paying for minor repairs out of pocket is sometimes the less expensive option overall.