Why These Myths Persist — and Why They Matter
Auto insurance is something most Americans buy but relatively few truly understand. Policies run to dozens of pages of dense language, and most of us only scrutinize them after something goes wrong. That knowledge gap creates fertile ground for myths that get passed from neighbor to neighbor as though they were fact.
The cost of believing the wrong thing isn't abstract. Drivers who assume their minimum-limit policy is adequate, or who don't realize their rideshare driving voids their personal coverage, can face financially devastating consequences. The myths below are among the most commonly repeated — and the most consequential to get wrong.
Myth
Red cars cost more to insure because insurers charge a premium for flashy colors.
Fact
Insurers do not factor vehicle color into rate calculations — not red, not any other shade.
This is one of the most enduring myths in auto insurance. Carriers base premiums on factors like the vehicle's make, model, age, engine size, safety ratings, and your driving history. Color is simply not in the equation. When you apply for a policy or get a quote, you'll notice insurers never ask what color your car is — because it doesn't matter to them actuarially.
Myth
If you carry the minimum coverage your state requires, you're adequately protected.
Fact
State minimums set a legal floor, not a financial safety net — they are frequently far too low to cover a serious accident.
Every state sets a minimum liability limit drivers must carry, but those floors were often established decades ago and haven't kept pace with medical costs or vehicle repair bills. A single at-fault crash involving injuries can easily generate six-figure bills. If your liability limit is exhausted, you're personally responsible for the remainder. State minimums protect other drivers from you — they don't protect your finances. For a fuller breakdown of what each coverage type actually does, see what your auto policy actually covers.
Myth
'Full coverage' means your insurer will pay for any damage to your car, no matter what.
Fact
'Full coverage' is informal shorthand, not a policy term — it typically means liability plus collision and comprehensive, each with its own exclusions.
When people say 'full coverage,' they usually mean a policy that bundles liability, collision, and comprehensive protection. But each of those components has its own deductible, its own limits, and its own exclusions. Mechanical breakdowns, normal wear and tear, and personal belongings stolen from your car are common gaps even in so-called full coverage policies. Reading the declarations page of your actual policy is the only way to know what you have.
Myth
Your credit score has nothing to do with your auto insurance rate.
Fact
In most U.S. states, insurers can and do use a credit-based insurance score as one factor in setting premiums.
Insurance companies use an insurance-specific credit score — not your exact FICO score — to help predict the likelihood of a claim. Research by state insurance regulators has generally found a statistical relationship between credit history and claim frequency, which is why the practice is permitted in most states. California, Hawaii, Massachusetts, and Michigan are among the states that restrict or prohibit its use. If your credit has improved, it's worth asking your insurer whether a re-rating would affect your premium.
Myth
Your personal auto policy covers you when you drive for a rideshare or make deliveries for pay.
Fact
Most personal auto policies exclude coverage during commercial or app-based for-hire driving — a gap that can leave you fully exposed.
Personal auto insurance is written for personal, non-commercial use. When you log into a rideshare or delivery app and accept a trip, you've entered commercial territory. Many standard personal policies will deny a claim that occurs during that period. Rideshare companies typically provide some coverage, but it varies significantly depending on whether you're waiting for a ride request, en route, or completing a trip. If you drive for hire, talk to a licensed agent about a rideshare endorsement or a commercial policy before an incident forces the issue.
What These Corrections Mean for Your Coverage
Getting the facts straight isn't just a trivia exercise — it should prompt a practical review of your own policy. Consider these steps:
- Pull your declarations page. This one-to-two page summary lists your actual coverage types, limits, and deductibles. If you've never read it, now is the time.
- Compare your liability limits to real costs. Medical bills and vehicle replacement costs in a serious accident routinely exceed $100,000. Weigh that against what your policy actually pays out.
- Ask about exclusions that apply to you. If you use your car for any paid work — deliveries, rideshare, mobile services — confirm in writing whether your policy covers those activities.
- Check whether your state restricts credit-based pricing. If you live in a state where it's permitted and your credit has improved, a policy review could reflect that.
Don't Rely on Verbal Summaries Alone
What an agent tells you over the phone or in an email is not the same as what your written policy actually says. If there's ever a conflict, the policy document governs. Always confirm critical coverage questions — especially business-use exclusions and liability limits — by reviewing the actual policy language or asking for a written confirmation.
Myths aren't unique to auto insurance. If you're curious how similar misconceptions play out in other coverage types, life insurance myths that lead people to skip coverage follows the same pattern — misunderstanding the basics leads to real financial exposure.
This article is for general informational purposes only and does not constitute personalized insurance, financial, or legal advice. Coverage terms, exclusions, and regulations vary by insurer, policy, and state. Always read your actual policy documents and consult a licensed insurance agent or adviser for guidance specific to your situation.
