Car insurance myths cost drivers hundreds of dollars every renewal cycle. A driver who believes red cars cost more, that minimum coverage is enough for most households, or that a single missed payment is fine, makes worse decisions than a driver who knows what’s actually true. The myths persist because the right answer is rarely repeated, while the myth gets repeated constantly.

This guide walks through 10 of the most expensive car insurance myths, what the actual truth is, and how each one shows up in real premium dollars. The goal is not to score points; the goal is to fix the decisions a driver makes every year because of a wrong belief.

Myth 1: Red Cars Cost More to Insure

The most persistent car insurance myth of all is also one of the easiest to verify as false. Carriers do not use vehicle color in rating. They use make, model, year, trim, safety equipment, theft rate, repair cost, and engine size. The color field on a quote form is for identification, not for pricing.

The Insurance Information Institute addresses this directly: “color does not affect the price you pay for auto insurance.” Carriers don’t even ask for vehicle color in many quote tools because it doesn’t move the price.

Myth 2: Minimum State Coverage Is “Enough”

State minimum liability is what the state requires to drive legally. It is not what protects a household financially. In most states, the minimum bodily injury limit is $25,000 per person, which doesn’t cover a single ER visit and overnight admission at modern medical prices. State minimum is usually the most expensive cheap policy you can buy, because one serious claim leaves the driver personally liable for everything above the limit.

The working floor for most households is 100/300/100 liability. Detailed limits guidance is in Car Insurance Premium Factors.

Myth 3: Your Insurance Follows the Driver, Not the Car

This one’s mixed. In most states, insurance primarily follows the car, not the driver. If you lend your car to a friend and they crash it, your insurance pays first, even though they were driving. Your friend’s insurance might pay if your coverage is insufficient, but only as secondary.

Three exceptions: rental cars (where personal auto coverage usually extends), commercial use (which most personal policies exclude), and unlisted regular drivers in the household (carriers can deny if a regular driver isn’t on the policy).

Myth 4: Filing a Small Claim Doesn’t Hurt Your Rate

Even a small claim, especially at-fault, raises rates at most carriers. The average insurance claim rate increase after one at-fault claim runs 47% nationally, stepping down over three years. A $700 net payout on a small fender-bender claim can cost the driver $1,000 or more in surcharges over the surcharge window.

The full math on when filing is and isn’t worth it is at Insurance Claim Rate Increase.

Myth 5: Older Drivers Always Pay Less

Drivers in their 30s through 60s typically pay less than drivers under 25, that part is true. But premiums often start climbing again after 70. Carriers price for slower reaction time and higher injury severity in older drivers. The cheapest decade for most drivers is 50 to 65.

Myth 6: Credit Doesn’t Affect Car Insurance

In 46 of 50 states, credit-based insurance score is one of the top three or four rating factors. The exceptions are California, Hawaii, Massachusetts, and Michigan, which restrict or prohibit credit use in auto rating. In every other state, a driver’s credit profile can swing the premium 20% to 50% versus another driver with the same record and vehicle.

Myth 7: Comprehensive Coverage Covers Everything

The name suggests it does. The reality is more specific. Comprehensive covers damage to your car from non-collision causes: theft, vandalism, falling objects, weather (hail, wind), fire, animal strikes, and glass breakage. It does not cover collision damage (that’s collision coverage), liability to others (liability), your medical costs (PIP or MedPay), or mechanical breakdown (separate policy or warranty).

Myth 8: You Only Need to Shop Insurance When Something Changes

The cheapest carrier for a given driver shifts every year, often more than 20%. Carriers raise rates on existing customers at the same speed they raise rates on new ones, but only new customers get the cleanest pricing on day one. Annual shopping is the single biggest savings habit available to drivers who don’t have a record change to drive the move.

Shopping mechanics are at How to Compare Auto Insurance.

Myth 9: Paying Every Six Months Has No Discount

Most carriers offer a paid-in-full discount of 5% to 10% for paying the full six-month premium upfront instead of monthly installments. Many also charge an installment fee on top of monthly billing. The combined difference between paid-in-full at one carrier and monthly billing at another can be $80 to $150 a year on a typical policy.

Myth 10: Your Insurance Company Will Warn You About Coverage Gaps

Carriers are not in the business of advising customers to raise limits or add coverage. The renewal notice will tell you what you currently have at what price. It will not tell you that your liability limit is below the average household asset level for your ZIP code, or that you’re missing rental reimbursement, or that gap coverage stopped mattering when you paid off your loan two years ago.

The annual policy review is what catches these gaps. The full review checklist is at Review Your Auto Insurance Policy.

Why These Car Insurance Myths Persist

Three reasons keep these myths circulating despite easy access to the actual answers.

The first is that insurance is sold once and reviewed almost never. A driver might buy a policy in their early 20s and not seriously revisit it until something forces them to. The myths they learned in their 20s carry forward unchallenged for decades.

The second is that quote tools are designed to sell, not to teach. The carrier’s job at quote time is to convert the visitor into a policy, not to walk them through the trade-offs of every coverage line.

The third is that the small differences add up. A driver who believes three of the 10 myths above might overpay by $400 to $800 a year. That adds up to meaningful dollars over a decade, but no single decision feels expensive enough to investigate.

How to Save on Insurance

Five moves work for drivers who want to clear out the car insurance myths in their own decision-making.

1. Pull your declarations page and read every line. The myths get exposed when you actually see what your policy says vs what you assumed it said.
2. Re-shop every year. The cheapest carrier for your profile shifts faster than most drivers expect.
3. Match liability limits to your actual household assets, not to the state minimum.
4. Run the math on filing any small claim. Surcharges often cost more than the payout for claims under about 30% of three-year premium.
5. Treat insurance as a yearly decision, not a one-time setup. The annual review takes 30 minutes and catches almost everything.

Car insurance myths aren’t going away, but they don’t have to keep costing you money. The real numbers are knowable, and the right decisions follow from the real numbers. The myth gets repeated; the truth requires a little more work to find.

Bonus Myth: Bundling Always Saves Money

Bundling home and auto with the same carrier often saves money, but not always, and not by as much as the marketing implies. The typical bundle discount runs 10% to 25%, but the bundle math depends on the price of both standalone products. A great auto rate paired with a mediocre home rate can produce a bundled price that’s higher than splitting the policies between two carriers.

The right move: run both the standalone home quote and the bundled package quote at every renewal. Compare both against splitting the policies between the two cheapest carriers for each line. The bundle wins maybe 60% of the time, not 100%, especially in states with active competition in homeowners insurance.

Each of these car insurance myths costs money in a slightly different way. Some inflate the premium (state minimum, never shopping, believing color matters). Some hide coverage gaps (assuming comprehensive covers everything, trusting the carrier to warn you).

Some affect both at once. The driver who clears them out of their thinking has a real edge over the driver who carries them quietly into every renewal.

How Car Insurance Myths Spread

Three channels keep these myths alive across decades. Family lore is the strongest: a parent who told a teenager “red cars cost more” in 1985 passed that belief to a generation. Quote tools rarely correct the assumption, since their job is to convert visitors into policies.

And carrier marketing focuses on what they want to sell (bundling, telematics, brand loyalty) rather than on what would make customers more informed about coverage trade-offs. The result is a stable equilibrium of misinformation that only breaks when a driver decides to actually read the policy and compare carriers directly.

What Changes When You Stop Believing the Myths

A driver who clears the most common car insurance myths from their decision-making sees three changes within one or two renewal cycles. Premium tends to drop 8% to 20% from the combination of better shopping, right-sized coverage, and avoiding small claims that aren’t worth filing. Coverage tends to improve because the driver moves above state minimum and adds the layers that actually matter. And the renewal letter stops feeling like a tax to be paid; it becomes a question to be answered with a quick market check.

Sources Used

• NAIC, 2023 Auto Insurance Database Average Premium Supplement: content.naic.org
• Insurance Information Institute, Facts + Statistics: Auto insurance: iii.org
• InsuranceRateGuard.com, 2026 quote runs across major U.S. auto carriers.

Fact-checked: 2026-05-16