8 Insurance Myths You Should Stop Believing
Many people make insurance decisions based on assumptions, half-truths, or outdated information. These misunderstandings can leave families and drivers with unexpected gaps in protection. In honor of Debunking Day on March 11, this updated guide breaks down some of the most common insurance myths and reveals what you should actually trust when evaluating your coverage.
Below, you’ll find eight widespread misconceptions about home and auto insurance—along with the facts that can help you avoid costly surprises.
Myth #1: “Red cars cost more to insure.”
The truth is simpler than most people think: the color of your vehicle has no impact on your premium. Insurance carriers don’t factor paint color into pricing. Instead, they look at characteristics such as the vehicle’s make and model, age, engine size, safety technology, and your personal driving history. These are the details that influence risk—not whether your car is red, blue, black, or anything else.
Myth #2: “Flood insurance is only necessary in designated flood zones.”
Living in a high-risk area isn’t the only reason to consider flood coverage. Roughly a quarter of all flood-related claims originate outside federally mapped flood zones. Many homeowners don’t realize that standard home insurance policies exclude flood damage entirely. If rainfall is common where you live, adding flood insurance may provide meaningful protection that your base policy simply can’t offer.
Myth #3: “Older vehicles don’t need full coverage.”
While older cars do lose value over time, eliminating important protections shouldn’t be automatic. Liability insurance is still required by law in most states regardless of vehicle age. Additionally, if you depend on your car daily and would struggle to pay for major repairs or replacement after an accident, keeping collision and comprehensive coverage may still be financially smart. The age of your vehicle doesn’t eliminate the potential cost of an unexpected loss.
Myth #4: “Homeowners insurance covers absolutely everything in my house.”
Home insurance policies do safeguard personal belongings, but the coverage amount usually has limits tied to a percentage of your dwelling’s insured value. High-value items—such as fine jewelry, collectibles, or specialized electronics—can exceed those standard caps. To ensure full reimbursement if something happens to these expensive possessions, you might need to schedule them separately or add endorsements for increased limits.
Myth #5: “Anyone who drives my vehicle is automatically covered.”
Insurance for other drivers isn’t always guaranteed. Many auto policies extend coverage to occasional drivers when you give permission, but this isn’t universal. Restrictions often apply if the vehicle is used for business, delivery services, or ridesharing. If someone regularly operates your car or uses it for work, you’ll want to verify they’re properly listed on your policy to avoid potential issues during a claim.
Myth #6: “My savings account can replace homeowners insurance.”
Even a large emergency fund can fall short after a major loss. Homeowners coverage is far more comprehensive than many people realize. It protects the structure of your home, your belongings, your liability if someone gets hurt on your property, and your additional living expenses if you’re unable to stay in your home after a covered incident. With the average cost to rebuild a home exceeding $320,000, relying solely on savings presents significant financial risk.
Myth #7: “Rental cars are always covered under my personal auto policy.”
Personal auto insurance can apply to rental cars, but typically only for personal use. When rentals involve business travel, commercial purposes, or other non-personal activities, your policy may not apply at all. Before declining the insurance offered by the rental company, it’s always wise to confirm exactly what type of use your personal policy covers.
Myth #8: “My credit score doesn’t affect my insurance rates.”
In many states, insurers use what’s called a credit-based insurance score to help determine premiums. This practice exists because research shows a correlation between credit behavior and claim likelihood. If your credit has recently improved or changed, informing your agent may help you qualify for better pricing.
Quick Tips to Prevent Coverage Gaps
Staying ahead of potential risks can make a big difference when it comes to insurance. Consider the following steps to keep your coverage aligned with your needs:
- Review your policy every year, especially after major personal or financial changes.
- Ask your agent to explain exclusions so you understand where gaps may exist.
- Create a home or vehicle inventory, including photos and estimated values, to simplify any future claims.
- Learn the difference between “replacement cost” and “actual cash value,” as each affects claim payouts differently.
- Reflect on whether you could comfortably handle a large claim out of pocket if it happened tomorrow.
When It’s Time to Review Your Insurance
Your life evolves—and your insurance should evolve with it. A policy review is especially helpful when:
- You purchase or sell a home or car.
- You complete significant home improvements or renovations.
- You experience major life changes such as marriage, divorce, or welcoming a child.
- A teen or new driver joins your household.
- You launch a business or take on a new side hustle.
- Your financial circumstances, credit score, or income shift.
Whether you previously believed one of these myths or simply want to make sure your coverage fully reflects your situation, now is an excellent time to reevaluate your policies. Taking a closer look today can help prevent costly surprises tomorrow.
A quick, no-pressure policy review can make all the difference in protecting what matters most. Reach out whenever you’re ready to get started.