Auto Insurance Myths That Cost American Drivers Money

This myth has circulated for decades, likely because red sports cars are associated with fast driving. In reality, insurers rate vehicles based on the make, model, year, body type, engine size, safety ratings, and theft frequency — none of which is color. Two identical cars in different colors will receive the same quote. If you've ever avoided a color you liked over insurance concerns, that worry was unfounded.

A credit-based insurance score is distinct from the credit score used for lending, but it draws on similar underlying data — payment history, outstanding debt, and credit history length. Insurers use it because actuarial research has found a statistical correlation between certain credit patterns and the likelihood of filing a claim. California, Hawaii, Massachusetts, and Michigan currently restrict or prohibit this practice, but in the majority of states it is a legal and commonly used rating variable. Improving your broader financial habits can, over time, influence this factor. For more on credit myths generally, see Credit Score Myths Americans Still Believe.

A typical serious collision involving injuries and vehicle damage can easily generate costs that exceed state minimum liability limits, which in some states are as low as $15,000 per person for bodily injury. Once your coverage limit is exhausted, you are personally liable for the remainder. That means your savings, wages, and assets could be at risk. State minimums exist to protect other parties on the road — not to fully protect you. Most insurance professionals suggest carrying liability limits significantly above the state minimum, especially if you have assets worth protecting.

When you file a claim, it is recorded in the CLUE (Comprehensive Loss Underwriting Exchange) database and may be visible to other insurers for up to seven years. Even if the at-fault party was someone else, an uptick in your claim history can affect future quotes. Before filing, compare the repair cost to your deductible and weigh the potential premium impact. For minor damage where the repair cost barely exceeds your deductible, paying out of pocket is often the smarter financial choice. See Filing an Auto Insurance Claim Without Derailing Your Rate for a fuller breakdown of when filing makes sense.

When a driver is logged into a rideshare app — even before accepting a ride — many personal policies consider the vehicle to be in commercial use and will deny claims. Rideshare companies offer limited coverage during certain phases of a trip, but this coverage is often secondary to your personal policy, which may not apply at all. Drivers who use their vehicles for rideshare or delivery platforms should ask their insurer specifically about rideshare endorsements or consider a commercial-use policy. This is one of the coverage gaps that catches drivers most off guard. Gaps in Auto Coverage That Catch Drivers Off Guard covers this scenario and others in detail.

Each insurer uses its own proprietary formula to weight rating factors like age, location, driving record, credit, and vehicle type. Two insurers looking at identical inputs can produce meaningfully different premiums because their actuarial models — and their appetite for certain risk profiles — differ. This is why comparing multiple quotes is consistently recommended by consumer advocates and state insurance commissioners. The Factors Insurers Use to Calculate Your Auto Rate explains in detail how each variable is typically weighted.