Car Insurance Myths That Cost Drivers Money

This is one of the most durable myths in auto insurance. Insurers base premiums on factors like your driving record, the vehicle's make, model, body type, engine size, age, and safety ratings — not its paint. When you apply for coverage, you'll typically provide the VIN (Vehicle Identification Number), which encodes the vehicle's specs but says nothing about color.

Credit-based insurance scores are derived from your credit history and are used by the majority of auto insurers in states where it is legally permitted. Insurers argue that credit history correlates with the likelihood of filing a claim. A handful of states — including California, Hawaii, and Massachusetts — prohibit or restrict this practice. If you're unsure of the rules in your state, your state's department of insurance is the authoritative source.

Every state sets a floor for liability coverage, but those minimums are often modest relative to the real costs of a serious accident — medical bills, vehicle repairs, and legal liability can quickly exceed them. If damages surpass your coverage limits, you may be personally responsible for the difference. Drivers who own assets, carry a loan, or simply want greater financial protection typically need more than the legal minimum. Reading the fine print in your policy helps clarify exactly where your limits sit.

Handling a minor accident without involving your insurer may seem appealing, but it carries real risks. The other party may later report injuries or damage not apparent at the scene. Many policies include a duty-to-notify clause, meaning failure to report could complicate or void a future claim. Separately, some states require reporting any accident above a certain damage threshold to the DMV. When in doubt, contact your insurer after any collision.

Despite its name, comprehensive coverage is not all-inclusive. It protects against losses from theft, vandalism, weather events, fire, and animal strikes — losses unrelated to a collision with another vehicle or object. Collision damage to your own car requires separate collision coverage. Injuries to you or your passengers may require yet another coverage type, such as medical payments or personal injury protection, depending on your state. Understanding these distinctions is essential to knowing what you're actually buying.