8 Common Insurance Myths You Should Stop Believing

With Debunking Day coming up on March 11th, it is the perfect moment to clear up some of the biggest misunderstandings people have about home and auto insurance. Many of these myths have been repeated for years, and relying on them can leave you financially exposed when something unexpected happens.

To help you stay protected, here is a fresh look at eight frequently misunderstood insurance beliefs—and what is actually true.

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

There is no truth to the idea that insurers charge higher premiums for red vehicles. Color plays absolutely no role in how your auto insurance rate is determined. Instead, companies evaluate details such as the vehicle’s make, age, safety features, engine size, where and how often you drive, and your driving record. The shade of your car does not influence your premium at all.

Myth #2: “Flood insurance is only for people in flood zones.”

Flooding can occur nearly anywhere, even outside designated high‑risk areas. In fact, roughly one‑quarter of all flood insurance claims originate from locations considered lower risk. Since most standard homeowners policies exclude flood-related damage, anyone living in an area where it rains should at least consider whether a separate flood policy makes sense for their situation.

Myth #3: “Older cars don’t need full coverage.”

While older cars typically decrease in value over time, that doesn’t automatically mean you should drop key coverages. In most states, liability insurance is legally required regardless of your car’s age. And if replacing or repairing your vehicle after an accident would cause financial strain, maintaining collision and comprehensive coverage might still be an important safeguard—even for an older model.

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

Homeowners insurance does protect your personal belongings, but that protection usually has limits tied to a percentage of your home’s insured value. High-value possessions such as jewelry, collectibles, specialty equipment, and luxury electronics can exceed those limits. To fully protect these items, you may need separate scheduled coverage or additional endorsements.

Myth #5: “Anyone who drives my car is automatically covered.”

Your policy may extend to someone who occasionally drives your car with your permission, but that isn’t universal. Certain situations—like business use, delivery services, or ridesharing—may fall outside your standard coverage. And if someone regularly uses your vehicle, your insurer may require them to be specifically listed on your policy to ensure full protection.

Myth #6: “I don’t need homeowners insurance if I have strong savings.”

A robust savings account can be helpful, but it may not be enough to cover a major loss. Homeowners insurance doesn’t just protect the structure of your property—it also includes liability coverage, loss‑of‑use benefits if your home becomes temporarily uninhabitable, and protection for your belongings. Considering that rebuilding a home now averages more than $1,200,000 (in Hawaii), going without insurance is a significant financial risk.

Myth #7: “My car insurance automatically applies to rental cars.”

Personal auto policies often cover rental cars for personal travel, but that protection doesn’t always apply to business-related rentals or commercial purposes. Before refusing the rental company’s insurance options, it’s wise to confirm what your own policy will handle and where the gaps may be.

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

In many states, insurers use a credit-based insurance score as part of calculating premiums. These scores help predict risk, which can influence pricing. If your credit has recently improved, it may be worth reaching out to your agent to see whether you qualify for a lower rate.

Quick Tips to Prevent Coverage Gaps

Staying on top of your insurance coverage can help prevent unpleasant surprises later. Here are a few smart habits to adopt:

• Review your policy every year, especially after major life adjustments.
• Ask your agent about exclusions so you understand what your policy does not cover.
• Keep a home inventory—or photos and values of important items—to streamline future claims.
• Learn the difference between “replacement cost” and “actual cash value,” as they may significantly affect your payout.

A helpful question to ask yourself is: “Would I be financially secure if I had to file a claim tomorrow?” If the answer is uncertain, it may be time for a review.

When to Reevaluate Your Insurance Policy

Life evolves quickly, and your insurance should evolve with it. Consider reassessing your coverage when any of the following occur:

• You buy or sell a vehicle or home.
• You complete a renovation or major upgrade to your property.
• You experience a significant life event like marriage, divorce, or the birth of a child.
• A new driver—especially a teenager—joins your household.
• You start a side business or new venture.
• Your income or credit score changes in meaningful ways.

Whether you truly believed one of these insurance myths or simply want to make sure you’re fully protected, now is a great time to take another look at your policies. Reviewing your coverage can help you avoid gaps that might otherwise put your finances at risk.

We’re here to help you make sense of the details and feel confident in your protection. Reach out anytime to set up a quick, pressure-free review of your policies.