Common Auto Insurance Myths Debunked for Smarter Savings

Auto insurance is one of those expenses that most drivers pay without fully understanding. You might have heard that red cars cost more to insure, or that your credit score has nothing to do with your premiums. These beliefs spread quickly because insurance policies are complex, and few people take the time to read the fine print. The result is that millions of drivers overpay, underinsure themselves, or miss out on legitimate discounts simply because they trust faulty information. This article tackles the most persistent misconceptions head-on, so you can make decisions based on facts rather than folklore.

Why These Myths Persist and Why They Cost You Money

Insurance is a product that you buy hoping never to use it. That emotional distance creates a vacuum where rumors thrive. Friends pass along advice that worked in a different state or a different decade. Online forums amplify outdated claims. Meanwhile, insurers do not always go out of their way to correct misunderstandings because a confused consumer is often a profitable one. When you believe a myth like "my rate will automatically drop when I turn 25," you might never shop around, and you could leave hundreds of dollars on the table every year.

The stakes go beyond your wallet. If you believe that minimum liability coverage is enough, you could face a lawsuit that wipes out your savings after a serious accident. If you think your personal auto policy covers business deliveries, you could be driving without valid coverage. Debunking these myths is not just an academic exercise. It is a practical step toward protecting your finances and your family.

One of the best ways to separate fact from fiction is to gather real quotes from multiple carriers and compare them side by side. When you see how different companies rate the same driver, you quickly realize that many assumptions about pricing are simply wrong. Platforms like Auto Insurance Quotes Texas: Compare Rates and Save Big let you test your own profile against actual market rates, which is far more reliable than repeating what you heard at a barbecue.

Myth 1: Red Cars Cost More to Insure

This is perhaps the most stubborn myth in the insurance world. The truth is that color plays no role in how insurers calculate your premium. Rating algorithms look at the make, model, year, and safety features of your vehicle, not its paint job. A red Honda Civic and a silver Honda Civic with identical VINs will receive the same base rate from the same carrier. The confusion likely stems from the fact that sports cars, which are often painted red, tend to be more expensive to insure because they cost more to repair and are driven by people who statistically take more risks.

What actually matters is the vehicle's symbol, a code that reflects the cost of parts, labor, and the likelihood of theft. A red luxury sedan may cost more to insure than a white economy hatchback, but the difference comes from the car's value and repair costs, not its color. If you are choosing between two otherwise identical vehicles, pick the color you like. It will not affect your premium.

Myth 2: Your Credit Score Does Not Affect Auto Insurance

Many drivers assume that credit checks are only for loans and credit cards. In reality, most states allow insurers to use a credit-based insurance score when setting rates. This score is not identical to your FICO score, but it is derived from similar data: payment history, outstanding debt, length of credit history, and new credit inquiries. Statistically, people with lower credit scores file more claims, so insurers charge them more to offset that risk.

There are exceptions. California, Hawaii, Massachusetts, Michigan, and a few other states restrict or ban the use of credit information for auto insurance pricing. If you live in one of those states, your credit history will not directly impact your premium. Everywhere else, improving your credit score can lead to meaningful savings. Paying bills on time, reducing credit card balances, and disputing errors on your credit report are practical steps that can lower your insurance costs over time.

It is worth noting that insurance companies must follow strict rules about how they use credit data. They cannot use your credit score as the sole reason to deny coverage, and they must provide an explanation if your rate is higher because of your credit history. If you suspect an error, you have the right to request a review.

Myth 3: Minimum Liability Coverage Is Enough

Every state except New Hampshire requires drivers to carry some form of liability insurance. The minimum limits are set by law, but they are often woefully inadequate for a serious accident. For example, some states require only $25,000 per person and $50,000 per accident for bodily injury. A single trip to the emergency room can exceed those amounts, leaving you personally responsible for the difference.

If you cause an accident and the damages exceed your liability limits, the injured party can sue you for your personal assets. Your home, your savings, and even future wages could be at risk. That is why many financial advisors recommend carrying liability limits of at least $100,000 per person and $300,000 per accident, or even higher if you have significant assets. The additional premium is usually modest compared to the potential financial devastation of a lawsuit.

Beyond liability, consider whether you need collision and comprehensive coverage. If you drive a newer car or lease a vehicle, your lender or leasing company will likely require these coverages. Even if you own your car outright, collision and comprehensive can be worthwhile if you cannot afford to replace it out of pocket after an accident, theft, or natural disaster.

Myth 4: Your Personal Auto Policy Covers Business Use

If you use your car for DoorDash, Uber, Lyft, or any other delivery or rideshare service, your personal auto policy probably will not cover you while you are working. Most personal policies include a business-use exclusion that kicks in when you are transporting goods or passengers for a fee. Some insurers offer rideshare endorsements that bridge the gap, but you often need to ask for them specifically.

The same logic applies to using your personal vehicle for business errands, carrying tools, or visiting clients. If you are self-employed and claim mileage deductions on your taxes, your insurer may consider that business use. Failing to disclose this can result in a denied claim and a canceled policy. If you are unsure whether your side hustle counts as business use, call your insurer and ask. It is better to pay a slightly higher premium than to discover after an accident that you have no coverage at all.

For drivers who need commercial auto insurance, the coverage is different from a personal policy. It typically includes higher liability limits, coverage for vehicles owned by the business, and protection for employees who drive. If you are running a business from your car, do not assume your personal policy will protect you.

Myth 5: Older Drivers Always Pay More

It is true that drivers over 65 tend to pay more than middle-aged drivers, but the relationship between age and premiums is not a straight line. Teenagers and drivers in their early 20s pay the highest rates because they lack experience and statistically file more claims. Rates gradually decrease as drivers gain experience, and they often bottom out in the 40s and 50s. After that, rates may rise slightly, but many seniors qualify for mature driver discounts that can offset the increase.

Some insurers offer specific programs for older drivers who complete defensive driving courses or who have clean records. If you are a senior, ask your agent about these discounts. You might be surprised to find that your rate is lower than you expected, especially if you drive fewer miles than the average commuter. Low-mileage discounts are common, and they can be substantial for retirees who no longer drive to work every day.

Myth 6: You Do Not Need Uninsured Motorist Coverage If You Have Health Insurance

Uninsured motorist (UM) and underinsured motorist (UIM) coverage protect you when the at-fault driver has no insurance or not enough to cover your injuries. Some drivers skip this coverage because they assume their health insurance will pick up the tab. That assumption is risky for several reasons.

First, health insurance often has deductibles, copays, and out-of-network limits that can leave you with thousands of dollars in out-of-pocket costs. Second, health insurance does not cover pain and suffering, lost wages, or other non-medical damages that you can claim from an at-fault driver. Third, if the at-fault driver has no insurance, your health insurer may seek reimbursement from any settlement you receive, leaving you with little to show for your claim.

UM/UIM coverage is relatively inexpensive, especially when you consider the protection it provides. In states with high rates of uninsured drivers, it is almost essential. Even in states with lower rates, it is a small price to pay for peace of mind.

Myth 7: Your Rate Automatically Drops When You Turn 25

Turning 25 is a milestone for many reasons, but it does not trigger an automatic rate decrease. Insurance companies use age as one factor among many, and while it is true that rates tend to be lower for drivers in their mid-20s compared to teenagers, the change is not instantaneous or guaranteed. Your rate could still go up if you have accidents, tickets, or a lapse in coverage.

What actually lowers your rate is a combination of factors: a clean driving record, continuous coverage, a good credit score, and sometimes a loyalty discount for staying with the same insurer. If you have been with the same company for years and never shopped around, you might be paying a loyalty penalty. Insurers often reserve their best rates for new customers, which means you can save money by switching.

Rather than waiting for a birthday to bring savings, take a proactive approach. Get quotes from multiple carriers at least once a year. You can do this easily by visiting NewAutoInsurance, which offers educational resources and comparison tools to help you understand your options. The site is not an insurance carrier, but it provides valuable guidance for drivers who want to make informed decisions.

Myth 8: Full Coverage Means Everything Is Covered

The term "full coverage" is not a legal or technical term in the insurance industry. It is a marketing phrase that generally means you have liability, collision, and comprehensive coverage. It does not mean that every possible event is covered. For example, full coverage typically does not include roadside assistance, rental reimbursement, or gap insurance unless you add those endorsements separately.

Even with full coverage, you will still pay your deductible when you file a claim for collision or comprehensive. If your deductible is $1,000, you are responsible for that amount before your insurer pays anything. Full coverage also does not cover normal wear and tear, mechanical breakdowns, or damage from intentional acts. It is important to read your policy and understand exactly what is included and what is not.

When you get quotes, ask the agent to explain the difference between full coverage and your state's minimum requirements. That conversation will help you choose the right level of protection for your situation.

Myth 9: You Cannot Switch Insurers If You Have an Accident

Some drivers believe that once they file a claim, they are stuck with their current insurer forever. That is not true. You can switch insurers at any time, and your new insurer will evaluate your risk based on your overall record, including the accident. However, you should be prepared for the possibility that the accident will affect your rate with the new company.

If you are considering switching, get quotes from several carriers before you cancel your current policy. Make sure you have new coverage in place before you cancel the old one to avoid a lapse in coverage. A lapse can lead to higher rates in the future and, in some states, penalties or license suspension. With careful planning, you can switch without any gap in protection.

It is also worth noting that not all accidents affect your rate equally. A minor fender bender with no injuries may have little impact, while a major at-fault accident with injuries could raise your premium significantly. Some insurers offer accident forgiveness programs that protect your rate after a first accident. Ask about these programs when you shop for coverage.

Myth 10: The Cheapest Quote Is Always the Best Deal

Price matters, but it is not the only factor. A low premium might come with poor customer service, slow claims processing, or limited coverage options. If you ever need to file a claim, you want an insurer that will respond quickly and fairly. Saving $100 a year is not worth it if you spend months fighting for a payout.

When comparing quotes, look beyond the bottom line. Check the insurer's financial strength ratings, read customer reviews, and ask about the claims process. A company with a slightly higher premium might offer better value in the long run. You can also ask about discounts that could lower your rate, such as bundling auto and home insurance, paying in full, or enrolling in autopay.

Ultimately, the best deal is the one that balances affordability with adequate coverage and reliable service. Do not let a cheap quote blind you to the importance of quality protection.

By now, you have seen that many common beliefs about auto insurance are simply wrong. The key takeaway is to question assumptions and verify facts. Whether you are a new driver, a senior, or someone with a few blemishes on your record, you have more control over your insurance costs than you might think. Compare quotes regularly, ask questions, and choose coverage that fits your life. That approach will serve you far better than any myth ever could.