8 Common Insurance Myths That Could Leave You Exposed

Why It’s Time to Rethink What You Know About Insurance

With Debunking Day coming up on March 11th, there’s no better opportunity to clear up some of the most persistent misunderstandings about home and auto insurance. Many people make decisions based on assumptions that used to be true, never were true, or came from outdated information. Unfortunately, these misconceptions can create real financial gaps when an accident, disaster, or unexpected event occurs.

To help you stay protected, let’s walk through eight widely believed insurance myths—and what you should actually rely on instead.

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

The reality: The color of your vehicle—red or otherwise—has zero impact on what you pay for insurance. Insurers focus on factors that actually affect risk, such as the make and model of your car, its safety features, how old it is, your driving record, typical mileage, and even where you live. Paint color never enters the equation.

Myth #2: “Only people in flood zones need flood insurance.”

The reality: Floods are not limited to designated high‑risk areas. Roughly one-quarter of all flood insurance claims come from people living outside of these zones. On top of that, most standard homeowners policies do not cover flood damage at all. If your area is prone to heavy rain—or even occasional storms—flood insurance is worth considering as part of your overall protection strategy.

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

The reality: While older cars may be worth less on paper, the bigger question is whether you could afford repair or replacement costs out of pocket. Liability insurance is still legally required in most states, regardless of vehicle age. And if you rely heavily on your car or would struggle to pay for a major repair after a crash, collision and comprehensive coverage can still play an important role.

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

The reality: Homeowners insurance does cover personal belongings, but there are limits. Typically, your property coverage is capped at a percentage of the home’s total insured value. High-value items—such as jewelry, rare collectibles, artwork, or top-tier electronics—may exceed those limits. To properly insure them, you may need to list them individually on your policy or purchase additional coverage through endorsements.

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

The reality: Coverage doesn't automatically apply to every driver who gets behind your wheel. Your policy may extend protection to occasional drivers you’ve permitted to use your vehicle, but there are important restrictions. Business use, deliveries, and rideshare driving often require separate coverage. And if someone uses your car regularly, you’ll want to ensure they’re specifically listed on your policy.

Myth #6: “I don’t need homeowners insurance because I have a solid savings cushion.”

The reality: Even a strong savings account may not be enough to handle major losses. Homeowners insurance covers far more than the structure itself—it includes liability if someone gets hurt on your property, coverage for your belongings, and help paying for temporary housing if your home becomes uninhabitable. With the average rebuild cost now exceeding $320,000, skipping coverage could create significant financial risk.

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

The reality: Many personal auto policies do extend coverage to rental vehicles, but usually only for personal travel. If you’re renting a car for business purposes, that coverage may not apply. Before you decline the rental company’s insurance at the counter, it’s worth double-checking what your existing policy includes.

Myth #8: “My credit score has nothing to do with my insurance rates.”

The reality: In many states, insurers are allowed to use a credit-based insurance score when determining premiums. This is because credit behavior has been shown to correlate with claim risk. If your credit has recently improved, you might benefit from talking with your agent—your rate may be eligible for an adjustment.

Smart Ways to Prevent Coverage Gaps

Being intentional about your insurance is one of the strongest ways to protect your financial health. Here are a few easy practices that can help you stay fully covered:

• Schedule a yearly policy review—especially after major life changes.
• Ask your agent to walk you through exclusions so you’re clear on what isn’t included in your policy.
• Create an inventory of your belongings or keep updated photos and values for easier future claims.
• Learn the difference between “replacement cost” and “actual cash value”—these terms greatly affect your reimbursement after a loss.

It’s also worth asking yourself: “Would I be financially secure if I needed to file a claim tomorrow?”

When Should You Revisit Your Policy?

Life changes quickly, and your coverage should keep pace. Consider reassessing your insurance when:

• You buy or sell a home or car
• You complete a major home renovation
• You get married, divorced, or welcome a child
• A new driver joins your household (especially teen drivers!)
• You launch a business or start a side gig
• Your financial situation, income, or credit score changes

Final Thoughts

Whether you’ve subscribed to one of these myths or just want to verify that your coverage still matches your needs, now is a great time to take a fresh look at your policies. Understanding what your insurance does—and doesn’t—cover can make a major difference during stressful moments.

We’re here to help you navigate your options, answer questions, and ensure you’re fully protected. Reach out anytime to schedule a fast, friendly policy review with no pressure attached.