Key Takeaways
- Vehicle color has no effect on insurance premiums — what you drive matters far more than what shade it is.
- Your credit-based insurance score affects your rate in most U.S. states, regardless of your driving record.
- Minimum state liability coverage rarely protects drivers adequately after a serious accident.
- Comprehensive coverage, not collision, pays for theft and weather damage.
- Personal auto policies typically do not cover vehicles used for rideshare or delivery work.
Why Auto Insurance Myths Are Surprisingly Costly
Auto insurance is one of the most consistent ongoing expenses of car ownership, yet many drivers navigate it on the basis of assumptions passed down from friends, family, or pop culture. Acting on those assumptions — skipping adequate liability limits, misunderstanding what comprehensive actually covers, or ignoring how credit affects rates — can result in real financial harm at precisely the wrong moment.
The myths below aren't obscure edge cases. They're the kind of widespread misconceptions that lead drivers to buy the wrong coverage, underestimate their exposure, or pay more than necessary. Getting them straight is a practical step toward better financial protection. For a full picture of what owning a vehicle actually costs, a realistic breakdown of car ownership costs in America is a useful starting point.
Myth
Red cars cost more to insure because insurers charge extra for the color.
Fact
Insurers do not factor in a vehicle's color when calculating premiums.
This myth is remarkably persistent, but vehicle color appears nowhere on an insurance application. What insurers do consider includes the car's make, model, trim level, engine size, body style, age, safety ratings, and repair cost history. A red sports car may carry a higher premium than a beige sedan — but only because of the vehicle type, not the paint. If you're curious about what actually drives your rate, the factors insurers actually use to set rates are worth understanding before your next renewal.
Myth
My credit score has nothing to do with my car insurance rate.
Fact
In most states, insurers use a credit-based insurance score as one factor in setting premiums.
A credit-based insurance score is distinct from a standard FICO score, but it draws on similar data — payment history, outstanding debt, and length of credit history. Insurers argue that statistical correlations exist between certain credit patterns and the likelihood of filing claims. Only California, Hawaii, Massachusetts, and Michigan currently prohibit or significantly restrict the practice. For drivers in other states, improving credit health can have a real effect on insurance costs. For a broader look at how credit misconceptions affect your finances, see common credit score myths.
Myth
Carrying your state's minimum required liability coverage is enough protection.
Fact
State minimums are legal floors, not financial safety nets — they are often far too low to cover a serious accident.
A state might require only $25,000 in bodily injury liability per person. A single ambulance ride, emergency room visit, and short hospital stay can easily exceed that figure. If damages surpass your coverage limits, you are personally responsible for the remainder — and you can be sued for it. Minimum coverage satisfies the law but leaves significant financial exposure. Understanding what each coverage type actually does is essential; what every policy section actually means breaks this down clearly.
Myth
Comprehensive coverage protects me if I hit another car.
Fact
Comprehensive covers non-collision events — collision coverage is what pays when your vehicle strikes another object.
These two coverage types are frequently confused. Comprehensive handles damage from theft, vandalism, hail, flooding, fire, falling objects, and animal strikes. Collision handles damage from your vehicle hitting another car, a guardrail, or a tree. Carrying one without the other can leave you exposed in predictable ways. Understanding the difference between comprehensive and collision can help you decide whether you need one, both, or neither based on your vehicle's value and your situation.
Myth
My personal auto policy covers me while driving for a rideshare or delivery app.
Fact
Standard personal auto policies typically exclude commercial or for-hire use — coverage can lapse the moment you activate the app.
This is one of the most financially dangerous misconceptions for gig economy drivers. Most personal policies contain an exclusion for using your vehicle to transport people or goods for compensation. Rideshare companies often provide some coverage when a ride is in progress, but coverage during the period when the app is on and you're waiting for a match is frequently limited or absent. Drivers in this situation should ask their insurer about a rideshare endorsement or a commercial policy add-on. See coverage gaps that leave drivers exposed for other commonly overlooked situations.
What These Myths Have in Common — and How to Protect Yourself
Most of these misconceptions share a root cause: insurance policies are dense, and few people read them in full before a claim forces them to. The gap between what drivers assume their policy does and what it actually does can be substantial.
Rideshare and Delivery Drivers: Check Your Policy Now
If you use your personal vehicle for any app-based work — rideshare, food delivery, package delivery — your standard auto policy may not cover you during that work. A gap in coverage during a commercial trip can leave you personally liable for damages your insurer refuses to pay. Contact your insurer before your next shift to confirm your coverage status and ask about available endorsements.
The practical remedy is straightforward. Read the declarations page of your policy annually. Ask your insurer specific questions about exclusions — particularly if your circumstances have changed, such as starting a side gig, adding a young driver, or relocating to a new state. If a claim ever arises, how to navigate the claim process from documentation to settlement can help you avoid missteps that slow or reduce your payout.
~75%
U.S. states allowing credit-based insurance scoring
Only a handful of states, including California, Hawaii, and Massachusetts, prohibit or significantly restrict the use of credit-based insurance scores in setting auto premiums.
$25,000
Typical state minimum bodily injury liability limit
Many states set bodily injury liability minimums at or around $25,000 per person — a figure that can be exhausted quickly by emergency medical care after a serious collision.
Drivers who understand their coverage tend to carry more appropriate limits and experience fewer coverage gaps. That knowledge starts with letting go of the myths.