Key Takeaways
- Vehicle color, including red, has no effect on your car insurance premium.
- 'Full coverage' is an informal term — it does not mean every possible loss is covered.
- Your personal credit history can legally affect your insurance rate in most U.S. states.
- Minimum state-required liability coverage rarely provides enough financial protection.
- An at-fault accident on your record can raise premiums for several years after the event.
Why Car Insurance Myths Are More Costly Than They Seem
Misunderstanding how car insurance works is not just a trivia problem — it can lead to real financial harm. Drivers who believe they are fully protected may discover coverage gaps only after an accident. Others may overpay for coverage they don't understand or unknowingly let influencing factors go unmanaged.
Car insurance is one of the largest recurring costs of vehicle ownership. Getting the facts right matters. The myths below are among the most common — and most consequential — that everyday drivers carry with them. For a broader look at where insurance fits into the overall picture, see our article on car ownership costs beyond the monthly payment.
Myth
Red cars cost more to insure because insurers charge a premium for the color.
Fact
Insurers do not factor vehicle color into premium calculations at all.
This is one of the most persistent car insurance myths in circulation. Insurance companies base premiums on factors such as the vehicle's make, model, body style, engine size, age, safety ratings, and your driving record — not its paint color. The belief likely persists because red cars are often associated with sports models, which do typically cost more to insure due to their performance specs, not their hue.
Myth
If I have 'full coverage,' I'm protected against every possible loss.
Fact
'Full coverage' is an informal term that typically means liability plus collision and comprehensive — it still has gaps and exclusions.
'Full coverage' is not a defined insurance product; it is shorthand that agents and drivers use loosely. A policy combining liability, collision, and comprehensive coverage still excludes things like mechanical breakdown, normal wear and tear, custom equipment not declared on the policy, or losses that fall below your deductible. For a clear breakdown of what each coverage type actually does, see our guide to what every car insurance policy actually covers.
Myth
My personal credit score has nothing to do with my car insurance rate.
Fact
In most U.S. states, insurers are permitted to use a credit-based insurance score as one factor in pricing your policy.
Insurers in the majority of states use credit-based insurance scores — which are related to but distinct from the FICO score lenders use — when calculating premiums. Research cited by industry regulators suggests a statistical correlation between certain credit patterns and claim frequency. A handful of states, including California, Hawaii, and Massachusetts, prohibit or restrict this practice. If you are curious how credit myths affect your broader financial life, our related article on credit score myths is worth a read.
Myth
Carrying the state minimum liability coverage is all I legally need, so it must be sufficient.
Fact
Minimum limits satisfy a legal requirement but can leave significant financial gaps if you cause a serious accident.
State minimums vary widely — some require as little as $15,000 per person in bodily injury liability. A single emergency room visit can exceed that figure. If damages surpass your policy limits, you may be personally liable for the remainder. Understanding the difference between minimum and adequate coverage is a core part of managing the real total cost of car ownership.
Myth
If the other driver hits me, my own insurance rate won't be affected.
Fact
While a not-at-fault claim is generally less damaging than an at-fault one, filing any claim can sometimes influence your renewal rate depending on your insurer and state.
Rate treatment after a not-at-fault accident varies by insurer and state regulation. Some carriers do not surcharge not-at-fault claims; others may. Additionally, if the at-fault driver is uninsured and you file through your own uninsured motorist coverage, how that affects your rate depends on your specific policy terms. Always review your policy documents and ask your insurer directly before assuming your rate is immune to any claim.
Myth
Older cars don't need comprehensive or collision coverage because they're worth so little.
Fact
Whether to drop comprehensive and collision on an older vehicle is a financial calculation, not an automatic rule — and dropping it means you absorb any repair or total-loss cost yourself.
A common rule of thumb suggests dropping collision or comprehensive when the annual premium cost approaches the vehicle's market value. That is a reasonable starting point, but it ignores your personal ability to absorb a sudden out-of-pocket loss. If replacing or repairing the car would strain your finances, maintaining those coverages may still make sense. For a fuller look at coverage types side by side, see comprehensive vs. third-party car insurance explained.
What These Myths Mean for Your Policy Decisions
Clearing up these misconceptions is a practical starting point, but it is only step one. Insurance policy language is specific, and general information — including this article — cannot substitute for reading your own declarations page and discussing your situation with a licensed insurance professional.
Minimum Coverage Is Often Not Enough
State minimum liability limits are designed to satisfy a legal requirement — not to fully protect you financially. If you cause a serious accident, medical bills and property damage can far exceed those minimums, leaving you personally responsible for the difference. Review your coverage limits carefully and consider whether they match your real-world financial exposure.
Two areas that deserve particular attention are your liability limits and your deductible. Liability limits determine how much your insurer pays on your behalf if you cause harm to others; a deductible is what you pay out of pocket before coverage kicks in on collision or comprehensive claims. Balancing those two numbers against your financial situation is a personal calculation worth revisiting annually — especially after major life changes like moving, adding a driver, or buying a different vehicle.
It is also worth knowing that maintenance-related myths can compound insurance misunderstandings. A vehicle that is poorly maintained can affect claims outcomes in specific circumstances. Our car maintenance myths article addresses common upkeep misconceptions that affect the day-to-day cost of ownership.
1 in 8
U.S. drivers estimated to be uninsured
According to the Insurance Research Council, roughly one in eight drivers on U.S. roads carries no insurance, making uninsured motorist coverage a meaningful consideration.
~45 states
States permitting credit-based insurance scoring
The majority of U.S. states allow insurers to use credit-based insurance scores as a rating factor, though rules governing their use vary by state.
This article provides general information about car insurance concepts and is not a substitute for advice from a licensed insurance professional. Policy terms, state regulations, and individual circumstances vary — always consult your insurer or a licensed agent for guidance specific to your situation.