8 Common Insurance Myths That Could Leave You Exposed

March 11th is Debunking Day, making it the perfect opportunity to clear up some of the most persistent misunderstandings surrounding home and auto insurance. Many people make decisions based on information that’s outdated, incomplete, or simply untrue—and those assumptions can create major financial risks when a claim arises.

Below, we’ll walk through eight widespread insurance myths and explain what’s actually true, so you can feel confident that your coverage is doing what you expect it to do.

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

The truth: The color of your car has zero influence on your insurance premium. Insurers don’t factor paint color into their calculations at all. What does matter are elements like the vehicle’s make, model, age, safety features, engine size, mileage, and your overall driving record. The shade of your car—red or otherwise—never comes into play.

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

The truth: Flooding can happen in almost any community, not just areas labeled high-risk. Roughly one in four flood insurance claims come from outside designated flood zones, which often surprises homeowners. Standard homeowners policies typically exclude flood damage altogether, so if your area gets rain—which is nearly everywhere—it’s worth considering flood insurance.

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

The truth: While older vehicles do lose value over time, that doesn’t automatically mean full coverage is unnecessary. Liability coverage is still required in most states, regardless of the car’s age. And if losing your car or paying out-of-pocket for significant repairs would create a hardship, maintaining collision and comprehensive coverage may still be a smart choice.

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

The truth: Homeowners policies include personal property protection, but this coverage is often limited to a set percentage of your home’s insured value. High-value belongings—like fine jewelry, rare collectibles, premium electronics, or artwork—may fall outside those limits. To ensure they’re fully protected, you may need to list these valuables individually through scheduled property endorsements or separate specialty policies.

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

The truth: Your auto policy doesn’t always extend universally to every driver. Occasional use by someone you’ve given permission to is usually covered, but regular users or those driving for business purposes may not be. Activities like ridesharing, deliveries, or commuting for work often require specific types of coverage. If someone else frequently gets behind the wheel, make sure your insurer knows.

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

The truth: Even a comfortable savings account may not come close to covering the financial loss from major property damage or liability issues. Homeowners insurance protects far more than the physical structure. It typically includes liability protection, coverage for personal belongings, and additional living expenses if you can’t stay in your home after a covered loss. Considering that rebuilding a home now averages more than $320,000, choosing to go without insurance is a substantial gamble.

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

The truth: Many personal auto policies do cover rental vehicles, but usually only when the rental is for personal use. If the rental is tied to business travel, work-related duties, or commercial purposes, your personal coverage may not apply. Before you decline the rental agency’s insurance, it’s wise to verify exactly how your policy extends.

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

The truth: In many states, insurers use what’s known as a credit-based insurance score when determining premiums. This isn’t your regular credit score, but it is influenced by similar financial behaviors. Research shows that credit patterns can be linked to risk, which is why insurers consider them. If your credit has improved, checking in with your agent could lead to better pricing.

Tips to Prevent Costly Coverage Gaps

Taking an active role in reviewing your insurance can help you avoid unpleasant surprises later. Here are a few smart habits to adopt:

  • Review your policies at least once a year, especially after major life events.
  • Ask your agent about exclusions—knowing what isn’t covered is just as important as knowing what is.
  • Document your belongings with a home inventory or photos, which makes claims easier and faster.
  • Understand the difference between “replacement cost” and “actual cash value,” since they affect your payout after a loss.
  • Reflect on whether you’d be financially comfortable filing a claim tomorrow—if not, your coverage may need adjusting.

When It’s Time to Revisit Your Insurance Coverage

Life changes quickly, and your insurance should evolve alongside it. It’s a good idea to review your coverage when:

  • You buy or sell a home or vehicle
  • You complete a major renovation or upgrade
  • You get married, divorced, or welcome a new child
  • A new driver joins your household (especially teenagers!)
  • You launch a business or take on a side hustle
  • Your income, credit score, or overall financial situation shifts

Whether you’ve been influenced by one of these myths or simply want to make sure your insurance still reflects your needs, now is an ideal moment to take a fresh look. Staying informed helps you avoid gaps, reduce risks, and feel confident that your coverage will protect you when it matters most.

We’re here to support you with clear guidance and straightforward advice. Reach out anytime to schedule a no-pressure review of your policies and ensure your protection is up to date.