Introduction
There’s a lot of misinformation about car insurance — and believing the wrong things can cost you money or leave you underinsured. In this article, we bust 10 of the most common car insurance myths so you can make smarter decisions.
Myth 1: Red Cars Cost More to Insure
Truth:
Insurance companies don’t care about the color of your car. Your rate is based on factors like the make, model, year, engine size, safety features, and your driving history — not whether your car is red, black, or green.
Myth 2: Your Insurance Covers Any Damage, No Matter What
Truth:
You must have the right type of coverage. Liability won’t cover your car’s damage in an accident — only collision or comprehensive will. Always review what your policy includes.
Myth 3: Older Cars Don’t Need Insurance
Truth:
If you drive it, it needs to be insured (at least with liability). While you might drop collision or comprehensive on an older vehicle, liability coverage is legally required in most places.
Myth 4: Full Coverage Means Everything Is Covered
Truth:
“Full coverage” usually means you have liability, collision, and comprehensive — but it doesn’t cover every possible situation. You may still need extras like uninsured motorist protection or rental car reimbursement.
Myth 5: Your Personal Insurance Covers Business Use
Truth:
If you use your car for work — like rideshare driving or deliveries — your personal policy may not cover accidents. You might need a commercial or rideshare insurance policy.
Myth 6: Filing a Claim Always Raises Your Rates
Truth:
Not always. If you’re not at fault, or it’s your first incident, your rates might stay the same. However, frequent claims or serious accidents will likely raise premiums.
Myth 7: Minimum Coverage Is Enough
Truth:
The legal minimum often doesn’t cover all the costs of a serious accident. If you cause major injuries or damage, you could be personally responsible for the difference.
Myth 8: Your Insurance Follows You, Not the Car
Truth:
In most cases, car insurance follows the vehicle, not the driver. If you lend your car to someone and they crash it, your insurance is usually the first to cover the damage.
Myth 9: Small Accidents Should Always Be Paid Out-of-Pocket
Truth:
While this can avoid premium increases, not reporting an accident — even a minor one — can backfire if there are later claims or injuries. Always check your policy and local laws.
Myth 10: Credit Score Doesn’t Affect Your Car Insurance
Truth:
In many places, insurers use your credit-based insurance score to help determine rates. Poor credit can result in higher premiums, although this practice is banned in some states.
Conclusion
Misunderstanding how car insurance works can lead to underinsurance, higher costs, or denied claims. By knowing the truth behind these common myths, you’ll be better equipped to make informed and cost-effective choices.
