Car insurance can be confusing. It’s a world filled with jargon, rules, and calculations that can feel impossible to understand. It is easy to see how myths and misunderstandings about how insurance works take hold. These false ideas can sometimes lead people to make poor decisions about their coverage or their finances.

This guide will clear up some of the biggest car insurance myths, giving you a better idea of what really impacts your rates. You can start making smarter choices to get the right coverage for your needs.

Myth 1: Red Cars Are More Expensive to Insure

This is a classic myth that has been around forever. The idea is that drivers of red cars are more likely to speed and get into accidents, so insurers charge them more. A survey found that 44% of Americans believe this is true.

The truth is, the color of your car has absolutely no effect on your insurance premium. Insurers don’t care if your car is red, black, or blue. They use hard data to assess risk, not stereotypes or what a car looks like.

Instead of color, insurers look at things like your car’s make, model, age, engine size, and body type. They also consider the cost of repairs for your specific vehicle and its history of being stolen. A mid-priced car might even cost more to insure than a luxury car if it is more expensive to fix after a crash. Safety features or anti-theft devices can sometimes get you a discount, but the paint job has zero impact.

Myth 2: Minimum Coverage Is Enough Protection

Many people think that if they have the state’s minimum required liability coverage, they are fully protected. While it is great to meet the legal requirement, minimum coverage is often not enough to protect you financially.

The reality is that state minimums were set a long time ago and haven’t kept up with the rising costs of medical care and car repairs. If you cause an accident, your minimum coverage may not pay for all the other driver’s medical bills and damages.

You could be on the hook to pay for the rest out of your own pocket. A minimum liability policy also typically doesn’t cover any damage to your own car. If you cause a crash, you may have to pay for your car’s repairs yourself.

To be financially safe, most experts recommend much higher liability limits, like at least $100,000 per person and $300,000 per accident. If you have a lot of assets, like a home or significant savings, you might even consider an umbrella policy for an extra layer of protection against a major lawsuit.

Myth 3: “Full Coverage” Means Everything Is Covered

When people say they have “full coverage,” they usually mean they have a policy that includes comprehensive and collision coverage in addition to the state-mandated liability. Many people believe this term means they’re protected from every possible scenario, but this is not the case.

“Full coverage” is not an official insurance term. It does not guarantee you’re protected from everything. Comprehensive and collision coverage primarily pay for damage to your car.

• Comprehensive coverage protects your car from things like theft, vandalism, fire, or damage from a hailstorm or hitting an animal.
• Collision coverage pays to repair your car if it hits another car or an object, regardless of who is at fault.

But what about other things? A “full coverage” policy won’t cover personal items stolen from your car (your homeowners or renters insurance might) or pay for a rental car while yours is in the shop (you need a separate endorsement for that). All policies have specific limits and exclusions, and you always have to pay your deductible before coverage kicks in. This is why it is so important to review your actual policy documents to know exactly what is and isn’t covered.

Myth 4: Your Credit Score Doesn’t Matter

You might think that your credit history has nothing to do with how you drive. But in most states, your personal credit history can play a role in what you pay for insurance.

Most insurers use what’s called a credit-based insurance score to help determine your premium. This isn’t the same as the score used for loans, but it’s based on your credit history. Insurers have found that people with higher credit scores tend to file fewer claims, making them a lower risk. Because of this, those with good credit often get lower rates.

This practice is controversial, with some people arguing it’s unfair and has nothing to do with driving ability. Insurers, however, maintain it’s a data-driven way to predict risk. The takeaway here is that your overall financial behavior can influence what you pay for insurance, so managing your credit responsibly can help you save money.

Myth 5: Insurance Gets More Expensive as You Get Older

It’s a common fear that as you get older, your insurance premiums will just keep going up. The opposite is often true for mature drivers.

Insurance rates are typically highest for young, inexperienced drivers, especially those under 25. As you move into middle age and gain more driving experience, your rates usually decrease. Once you reach your later years, you may even become eligible for special discounts.

Many insurers offer premium reductions for drivers over 55 who take an approved defensive driving course. If you’re retired and driving less, you might also qualify for a low mileage discount. The key is to be proactive and ask your insurer about these discounts at different stages of your life.