8 Common Insurance Myths You Should Stop Believing

March 11th is Debunking Day, making it the perfect opportunity to clear up some long-standing misconceptions about home and auto insurance. Many people still base their decisions on outdated or incomplete information, which can leave them financially exposed when the unexpected happens. Understanding the truth behind these myths can help you make better choices and avoid costly surprises.

Below, we break down eight persistent insurance myths and explain what you should know instead.

Myth #1: “Red cars cost more to insure.”

Although it’s a widely repeated belief, the color of your vehicle does not influence your insurance premium. Insurers look at practical factors such as the make and model of your car, its year, engine size, safety ratings, how much you drive, where you drive, and your personal driving record. Paint color never factors into their calculations.

Myth #2: “I only need flood insurance if I live in a flood zone.”

Flooding is not limited to high-risk areas. In fact, a significant portion of flood insurance claims—around a quarter—originate from properties outside designated flood zones. Standard homeowners insurance typically does not cover flood-related damage, so even if you live in a low-risk area, it’s worth evaluating whether flood insurance makes sense for your situation.

Myth #3: “An older car doesn’t need full coverage.”

While older vehicles may lose value over time, that doesn’t mean you can safely drop all coverage. Liability insurance is still required in most states regardless of your car’s age. If you depend on your vehicle and would struggle to pay out of pocket for repairs or a replacement after an accident, maintaining collision and comprehensive coverage may still be a wise choice.

Myth #4: “My homeowners policy covers everything I own.”

Most homeowners policies provide personal property protection, but the coverage amount is usually capped based on a percentage of your overall insured value. High-value or rare items—such as fine jewelry, collectibles, or high-end electronics—may exceed those limits. To protect these types of belongings fully, you may need separate scheduled coverage or additional endorsements.

Myth #5: “Anyone driving my car is automatically insured.”

Your insurance may extend to someone who occasionally borrows your car with your permission, but there are important limitations. Certain uses—like delivery work, ridesharing, or other business-related driving—may not be covered under a standard auto policy. If someone regularly drives your vehicle or uses it for professional purposes, you’ll want to verify that they have appropriate coverage.

Myth #6: “A strong savings account means I don’t need homeowners insurance.”

Even a well-built emergency fund may not be enough to handle the wide range of expenses that can result from a major incident. Homeowners insurance doesn’t just protect your structure—it also includes liability coverage, loss-of-use coverage if you’re displaced, and protection for your belongings. Considering the rising cost to rebuild a home—now averaging over $320,000—skipping insurance puts you at considerable financial risk.

Myth #7: “My auto insurance always covers rental cars.”

Many personal auto policies do extend coverage to rental vehicles, but usually only for personal use. If you rent a car for business or commercial reasons, your personal policy may not apply. To avoid unexpected bills at the rental counter, confirm your coverage before declining the insurance offered by the rental agency.

Myth #8: “My credit score doesn’t affect my insurance rates.”

In many states, insurers use credit-based insurance scoring as part of their pricing model. This practice is rooted in data showing a correlation between credit history and risk. If your credit has improved recently, it may be a good time to reach out and see whether you’re eligible for a more favorable rate.

Quick Tips to Avoid Gaps in Coverage

Taking an active role in reviewing your insurance policies can help prevent unwelcome surprises down the road. Here are a few smart habits to adopt:

• Review your policies annually—especially after major life events.
• Ask about exclusions so you fully understand what isn’t covered.
• Keep a record of your belongings, including photos and approximate values.
• Learn the difference between “replacement cost” and “actual cash value,” as it can significantly affect claim payouts.
• Consider whether you’d be financially prepared if you had to file a claim tomorrow.

When to Revisit Your Insurance Policies

As your life changes, your insurance needs may change as well. It’s essential to re-evaluate your coverage when:

• You buy or sell a home or vehicle.
• You complete renovations or make major upgrades.
• You get married, divorced, or welcome a child.
• A teen or new driver joins your household.
• You launch a new business or side venture.
• Your income or credit score shifts significantly.

Whether you’ve believed one of these myths or simply want to ensure your coverage still fits your needs, now is a great time to take a fresh look at your policies. We’re here to support you as you make informed decisions and protect what matters most. Reach out anytime to schedule a quick, pressure-free review of your insurance coverage.