Common Myths About Car Insurance That Cost Drivers Money

This is one of the oldest myths in auto insurance, and it simply isn't true. When you apply for a policy, insurers ask for your vehicle identification number (VIN), which encodes the make, model, trim level, engine size, and year — not the exterior color. What does raise rates for sporty vehicles is the vehicle type itself: a high-performance sports car costs more to insure because it is statistically more likely to be driven at speed and more expensive to repair, regardless of its paint.

Every state sets a minimum level of liability coverage drivers must carry, but those floors were established years ago and haven't kept pace with medical and repair costs. A multi-vehicle collision with injuries can easily generate damages well into six figures. If your policy limit is exhausted, the injured party can pursue your personal assets — savings, wages, property — for the remainder. Many insurance professionals recommend carrying significantly higher liability limits than the state minimum, though the right amount depends on your individual financial situation and should be discussed with a licensed agent.

Research cited by the Federal Trade Commission found that credit-based insurance scores correlate with the likelihood of a policyholder filing a claim. As a result, most states permit insurers to factor this score into auto insurance pricing. Drivers with lower scores often pay meaningfully higher premiums than those with similar driving records but stronger credit profiles. A handful of states — including California, Hawaii, and Massachusetts — prohibit the use of credit in auto insurance rating. If you're working on improving your financial profile, see our related piece on credit myths that cost Americans money.

The naming is admittedly confusing. "Comprehensive" sounds like it covers everything, but in insurance terminology it refers specifically to damage caused by events other than a collision. Collisions with other vehicles or stationary objects are covered under collision coverage, which is a separate component. Drivers who drop collision coverage to save money — sometimes believing comprehensive alone is sufficient — can find themselves unprotected after a crash.

Insurers track claims history, and even a single at-fault claim can result in a rate surcharge that lasts three to five years. For small repairs — a minor fender scrape, a cracked side mirror — it's worth calculating whether paying out of pocket is cheaper than absorbing the long-term premium increase. This is especially true if you have a higher deductible, where the insurer's net payout after the deductible may be modest anyway. Understanding when to file is one of the most practical insurance skills a driver can develop.

Standard personal auto policies are written for personal, non-commercial use. When a driver is logged into a rideshare or delivery app — even while waiting for a match, before any fare is accepted — most personal policies do not apply. Rideshare companies provide some coverage during active trips, but the gap between logging in and accepting a ride is often uninsured under a personal policy. Drivers doing this kind of work should ask their insurer about a rideshare endorsement or a commercial policy.