Debunking 8 Common Insurance Myths That Could Leave You Exposed

With Debunking Day coming up on March 11th, there’s no better moment to sift through some of the most persistent misunderstandings about home and auto insurance. Many people base their decisions on outdated assumptions or half-true information, and unfortunately, these misconceptions can come back to bite when it’s time to file a claim. Clearing up the confusion now can save a lot of financial stress later.

Below, we’re breaking down eight widespread insurance myths—and what the facts actually say.

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

The reality: Insurance premiums have nothing to do with the color of your vehicle. Whether your car is red, blue, black, or lime green, the color never factors into your rate. What insurers pay attention to instead are features like the car’s make and model, how old it is, its safety equipment, your driving patterns, and your personal driving history.

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

The reality: Flooding isn’t exclusive to high-risk areas—far from it. Roughly one-quarter of all flood insurance claims originate from places outside designated flood zones. And here’s something many homeowners don’t realize: standard homeowners policies almost never include flood coverage. If rainfall is a normal part of life where you live, it’s worth at least exploring flood insurance.

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

The reality: While older cars often decline in value, that doesn’t automatically mean you should drop coverage. Most states still require you to maintain liability insurance, no matter how old your vehicle is. And if you depend on your car daily—or would struggle to pay for repairs or replacement after an accident—collision and comprehensive coverage may still provide important protection.

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

The reality: Homeowners policies do include personal property protection, but only up to certain limits. High-value belongings like jewelry, artwork, collectibles, and premium electronics may exceed those standard limits. To fully safeguard items like these, you may need scheduled coverage or separate endorsements to make sure they’re properly protected.

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

The reality: Permission doesn’t always equal coverage. While many policies will extend coverage to someone who occasionally borrows your car, the rules change when it comes to business use, delivery jobs, or rideshare driving. If another person regularly uses your vehicle or drives it for work-related reasons, you’ll want to confirm that your policy actually covers those scenarios.

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

The reality: Even a strong emergency fund may not withstand the financial hit of a major property loss. Homeowners insurance covers more than just your home’s structure—it also includes liability coverage, protection for personal belongings, and loss of use coverage if you’re unable to live in your home after a covered event. Considering that rebuilding a home often exceeds $320,000 today, going without insurance is a substantial gamble.

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

The reality: Many personal auto policies do cover rental vehicles—but usually only when you’re using them for personal, not business, needs. If you're renting a car for work travel or commercial activities, your personal policy may not apply. Before opting out of the rental company’s coverage, double-check what your own policy does and doesn’t include.

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

The reality: In a number of states, insurers use credit-based insurance scores when determining premiums. These scores help predict potential risk, which is why they’re factored into your rate. If your credit has recently improved, it’s worth checking in with your agent—you might qualify for better pricing.

Smart Ways to Prevent Unexpected Coverage Gaps

Making a habit of reviewing your insurance can help you avoid unpleasant surprises later. Consider these proactive steps:

• Set aside time each year to review your policy, especially after major life events.
• Ask your agent to walk you through any exclusions so you understand where gaps may exist.
• Document your belongings with photos, values, or a home inventory to make the claims process smoother.
• Learn the difference between “replacement cost” and “actual cash value,” since they impact how much you’d receive after a loss.

It’s always worth asking yourself: If I had to file a claim tomorrow, would I be financially prepared?

When to Revisit Your Coverage

Your insurance needs naturally evolve as your life changes. It’s a good idea to reassess your policies when:

• You buy or sell a home or vehicle
• You complete a remodel or significant upgrade
• You experience a major life event like marriage, divorce, or welcoming a child
• A teen or new driver joins your household
• You launch a business or add a side gig
• Your financial picture shifts—whether through income changes, debt reduction, or an improved credit score

Whether these myths influenced your thinking or you simply want reassurance that your coverage still fits your needs, now is a great time to take a fresh look. We’re here to walk you through your options, answer questions, and help you avoid costly surprises down the road.

Reach out anytime to schedule a quick, no-pressure coverage review. We’re always happy to help.