Common Misconceptions About Auto Insurance

Last updated: February 2026

Most people believe that full coverage auto insurance covers all damages to their vehicle, regardless of the circumstances.

Misconceptions

Myth: Full coverage auto insurance covers all damages to a vehicle, regardless of the circumstances.
Fact: Full coverage auto insurance typically only covers damages up to the actual cash value of the vehicle, and may not cover damages caused by normal wear and tear or maintenance issues, as stated in the Insurance Information Institute's (III) guidelines on auto insurance coverage.
Source of confusion: This myth persists due to the misleading term "full coverage," which is often used in insurance marketing materials without clear explanation of the policy's limitations.

Myth: Red cars are more expensive to insure because they are more likely to be stolen or involved in accidents.
Fact: There is no correlation between car color and insurance rates, as insurance companies determine rates based on factors such as driver history, vehicle make and model, and location, according to the National Association of Insurance Commissioners (NAIC) report on auto insurance rates.
Source of confusion: This myth may have originated from a flawed study or misinformation spread through media outlets.

Myth: If someone borrows your car and gets into an accident, their insurance will cover the damages.
Fact: The vehicle owner's insurance policy typically covers damages, regardless of who is driving the vehicle, as stated in the policy terms and conditions, with ~70% of policies including permissive use coverage (Insurance Institute for Highway Safety).
Source of confusion: This myth may stem from a lack of understanding of insurance policy terms and conditions.

Myth: Auto insurance rates are determined solely by driving record and accident history.
Fact: Insurance companies consider a range of factors when determining rates, including driver age, location, vehicle make and model, and credit score, with credit-based insurance scores used by ~92% of insurers (Federal Trade Commission).
Source of confusion: This myth may have arisen from oversimplification of the complex factors that influence insurance rates.

Myth: Comprehensive coverage is only necessary for new or expensive vehicles.
Fact: Comprehensive coverage can provide financial protection against theft, vandalism, and natural disasters for vehicles of any age or value, with ~1 in 5 vehicles experiencing a comprehensive claim each year (National Insurance Crime Bureau).
Source of confusion: This myth may be perpetuated by insurance agents or companies seeking to minimize policy costs for budget-conscious consumers.

Myth: Auto insurance premiums decrease significantly as drivers get older.
Fact: While older drivers may qualify for some discounts, premiums do not necessarily decrease significantly with age, as other factors such as health and increased risk of accidents can offset potential discounts, with ~15% of drivers over 65 involved in fatal crashes (National Highway Traffic Safety Administration).
Source of confusion: This myth may have originated from general assumptions about age and driving ability.

Myth: Auto insurance companies can cancel a policy at any time without notice.
Fact: Insurance companies are generally required to provide written notice before canceling a policy, typically 30 days in advance, as mandated by state insurance regulations and the Gramm-Leach-Bliley Act.
Source of confusion: This myth may have arisen from a lack of understanding of insurance regulations and consumer protection laws.

Myth: Full coverage auto insurance covers all damages → Fact: Covers up to actual cash value, excluding normal wear and tear (Insurance Information Institute)
Myth: Red cars are more expensive to insure → Fact: No correlation between car color and insurance rates (National Association of Insurance Commissioners)
Myth: Borrower's insurance covers damages → Fact: Vehicle owner's insurance typically covers damages (~70% of policies include permissive use coverage, Insurance Institute for Highway Safety)
Myth: Rates determined solely by driving record → Fact: Multiple factors considered, including age, location, vehicle make, and credit score (~92% of insurers use credit-based scores, Federal Trade Commission)
Myth: Comprehensive coverage only necessary for new vehicles → Fact: Provides financial protection for vehicles of any age or value (~1 in 5 vehicles experience a comprehensive claim annually, National Insurance Crime Bureau)
Myth: Premiums decrease significantly with age → Fact: Discounts may be offset by increased risk and other factors (~15% of drivers over 65 involved in fatal crashes, National Highway Traffic Safety Administration)
Myth: Insurance companies can cancel policies without notice → Fact: Typically required to provide 30-day written notice (state insurance regulations and Gramm-Leach-Bliley Act)