Auto Insurance Myths That Cost Drivers Real Money

This is probably the most durable auto insurance myth in circulation. The actual factors that determine your premium based on the vehicle itself include the make, model, year, body type, engine size, safety ratings, and the cost to repair or replace it. A red sports car may cost more to insure than a beige sedan, but that's because of the vehicle's performance profile — not the paint. You could repaint your car any color and your premium would not change by a single dollar.

A credit-based insurance score is a separate calculation from your standard FICO score, but it draws on similar underlying data — payment history, debt levels, and length of credit history. Insurers use it because actuarial data shows a statistical correlation between certain credit patterns and claim frequency. California, Hawaii, Massachusetts, and Michigan are among the states that prohibit or restrict its use. If you live in a state where it applies, improving your credit profile over time may have a meaningful effect on what you pay. This is one of the non-obvious factors covered in more depth at Things That Quietly Raise Your Car Insurance Premium.

Every state sets a minimum amount of liability coverage drivers must carry, often expressed as a three-number formula (e.g., 25/50/25 — meaning $25,000 per person for bodily injury, $50,000 per accident, and $25,000 for property damage). These thresholds were established years ago and have not kept pace with medical costs or vehicle values. A single hospitalization can exceed a low bodily injury limit. If a court judgment against you surpasses your coverage, you may be personally responsible for the remainder — meaning your savings, wages, or assets could be at risk. Carrying higher liability limits is generally considered sound financial planning, not a luxury.

Comprehensive coverage pays for damage to your vehicle caused by events outside a collision — theft, vandalism, fire, hail, flooding, or striking an animal. Collision coverage pays for damage resulting from your vehicle striking another object or vehicle, regardless of fault. If a tree falls on your parked car, that's comprehensive. If you back into a pole, that's collision. If you have one but not the other, certain scenarios will leave you paying out of pocket. Many drivers assume "full coverage" means every possible loss is covered — but even policies with both collision and comprehensive include deductibles, exclusions, and limits that apply.

In an ideal scenario, the at-fault driver's liability insurance covers your damages. In practice, roughly one in eight drivers on U.S. roads is uninsured, according to data from the Insurance Research Council. If the at-fault driver has no insurance or insufficient coverage, your own uninsured/underinsured motorist (UM/UIM) coverage steps in — if you have it. Additionally, if you file under your collision coverage to get your vehicle repaired quickly, your insurer may pursue subrogation (recovering costs from the at-fault party's insurer). Your insurer's involvement doesn't automatically mean your rates will increase, but it's worth asking your agent how a specific claim could affect your policy.