12 Car Insurance Myths That Are Costing You Money

Car insurance is one of those things everyone has but few people truly understand. That knowledge gap breeds myths - and myths cost money. Here are 12 of the most persistent car insurance misconceptions and the truth behind each one.

Myth 1: Red Cars Cost More to Insure

The truth: Your car's color has absolutely zero impact on your insurance rate. Insurers don't even ask about color. Rates are based on make, model, year, engine size, safety ratings, repair costs, and theft rates. A red Honda Civic costs exactly the same to insure as a blue one. This myth likely originated from the association between red cars, sports cars, and aggressive driving - but it's the vehicle type, not the paint, that matters.

Myth 2: Your Insurance Follows the Driver, Not the Car

The truth: In most cases, insurance follows the car first, then the driver. If you lend your car to a friend and they cause an accident, your insurance is the primary coverage. Your friend's insurance only kicks in if damages exceed your policy limits. This is why you should be selective about who you lend your car to - their accident goes on your policy.

Myth 3: Minimum Coverage Is Enough

The truth: State minimum coverage is dangerously inadequate. Most states require just 25/50/25 liability - which covers $25,000 per person and $50,000 per accident in bodily injury. A single hospital stay after a serious accident can easily exceed $100,000. If you cause that accident with minimum coverage, you're personally liable for everything above $25,000. That can mean lawsuits, wage garnishment, and financial devastation.

Myth 4: Your Rate Always Goes Up After Any Accident

The truth: Not-at-fault accidents typically don't raise your rates at most insurers. Comprehensive claims (hitting a deer, hail damage, theft) usually don't either. Only at-fault accidents and certain violations trigger rate increases. And if you have accident forgiveness, even your first at-fault accident may not increase your premium.

Myth 5: Older Drivers Always Pay More

The truth: Drivers aged 55-70 often pay the lowest rates of any age group. Rates only start climbing again after 70-75 as accident risk increases. The most expensive age brackets are under 25 and over 80. If you're between 30 and 70 with a clean record, age is working in your favor.

Myth 6: "Full Coverage" Covers Everything

The truth: "Full coverage" is not an insurance industry term. It colloquially means liability + comprehensive + collision - but it still doesn't cover everything. It doesn't cover mechanical breakdowns, normal wear and tear, personal items stolen from your car (that's renters or homeowners insurance), custom modifications unless specifically added, rideshare driving (Uber/Lyft - you need a separate rideshare endorsement), and commercial use of a personal vehicle.

Myth 7: New Cars Are Always More Expensive to Insure

The truth: New cars have higher replacement costs, but they also have better safety features that earn significant discounts. In some cases, a 2026 model with automatic emergency braking, lane assist, and a top safety rating can cost less to insure than a 2015 model with none of these features. Always get an insurance quote before buying - the result may surprise you.

Myth 8: Your Credit Score Doesn't Affect Car Insurance

The truth: In 47 states, credit-based insurance scores significantly impact your premium. Drivers with poor credit pay an average of 71% more than those with excellent credit. Only California, Hawaii, and Massachusetts prohibit credit-based pricing. Improving your credit is one of the most effective ways to lower your car insurance premium.

Myth 9: You Only Need Insurance on Cars You Drive

The truth: If a car is registered in your name, most states require it to be insured - even if it's parked in your garage. If you have a vehicle you're not driving for an extended period, you can potentially reduce coverage to comprehensive-only (which covers theft, weather, and vandalism while parked) and drop collision. But you can't drop insurance entirely on a registered vehicle.

Myth 10: Filing a Claim Is Always Worth It

The truth: Small claims can cost you more in premium increases than the claim is worth. If you have a $500 deductible and $1,200 in damage, the insurer only pays $700 - but the resulting rate increase might be $300-$500/year for 3-5 years, totaling $900-$2,500. For minor damage, paying out of pocket is often the smarter financial move.

Myth 11: Your Insurance Company Can Cancel You Anytime

The truth: After the initial 60-day underwriting period, your insurer can only cancel your policy for specific reasons: non-payment of premium, license suspension, fraud, or material misrepresentation on your application. They can choose not to renew at the end of your policy term, but they must provide advance notice (typically 30-60 days depending on your state).

Myth 12: Shopping Around Hurts Your Credit Score

The truth: Insurance quote inquiries are classified as "soft pulls" on your credit report and have zero impact on your credit score. You can get quotes from 20 different insurers in one afternoon and your score won't budge. This myth keeps people from shopping around - which is exactly what insurance companies want. Shop freely and aggressively.