Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Jul 19, 2021

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Insurance agents hear a lot of misinformation from their clients on a daily basis.

So we thought it would help some people out by sharing the top 10 auto insurance myths circulating around insurance circles.

1. Red Cars Cost More to Insure: FALSE. If the year, make and model of any two vehicles are the same, the rate is the same. Now, if you have a convertible; that’s a different story.

2. Rental Car Coverage is Necessary: FALSE (if you’re already insured). There are two types of rental car insurance out there. First, you can purchase coverage to pay for your rental car if your car isn’t drivable after an accident (you need to have purchased physical damage coverage). Then, there is the scam where the car rental company offers you a Collision Damage Waiver or other insurance.

Tip: Many credit card companies will insure the rental against damage as part of your card agreement.

3. You Can Only Be Sued For Your Policy Limits: FALSE. You can be sued for an unlimited amount of money. If you lose; you can be responsible for whatever a jury awards in damages. Higher liability limits and a personal umbrella policy are recommended for protection against landing in the poorhouse in the event you seriously injure someone or damage their property.

4. Major Insurance Companies (Farmers, State Farm) Insure You Better: FALSE. Don’t believe everything your television set tells you. Many large, VERY financially stable insurers depend solely on independent insurance agents to sell their products – not Lebron James or any other TV actors.

Tip: Listen to a chef about food, a mechanic about your car, and an insurance agent about insurance. If you are interested in advice about acting or sports, that’s when you should consult a professional actor or athlete.

5. More Discounts Equal Lower Premiums: FALSE (most of the time). Quick question…which costs more? A policy that starts at $1,000 and is discounted 35%, or a policy that costs $600 with no discounts? There’s your answer.

6. My Insurance Policy Only Covers Me: FALSE. Coverage follows the vehicle. Almost anyone can drive your car.

Tip: Anyone who has regular, unrestricted access to your vehicle should be listed on your policy (picture your wife or live-in girlfriend). You ARE the ONLY person insured on a broad form policy.

7. A Car Parked In a Garage Is Covered By Homeowners Insurance: FALSE. Your vehicle will be replaced (minus the auto insurance deductible) if the vehicle has comprehensive coverage (collision coverage won’t cut it).

[What’s the difference between collision and comprehensive coverage?]

8. Your Personal Property is Covered by Car Insurance: FALSE. Your back pack got stolen out of your ride? You’ll need to file a renters insurance or homeowners insurance claim to recover your stolen items. Items targeted for theft are typically subject to special sub-limits on these policies, so be sure to check with your agent to see how much coverage you have.

9. You Will Be Rewarded For Loyalty to an Insurer: FALSE. Have you noticed that every insurance company advertisement says if you switch you can save? They are referring to anyone who has been with the same company for an extended period of time. If that’s you, move on already. Insurance agents regularly hear about people getting “dropped” after one insurance claim, despite being with the same company for a decade (unless they pay extra for accident forgiveness, which may be a rip-off).

10. Full Coverage Means Your Bulletproof: FALSE (in some cases). Having full coverage auto insurance with state minimum liability-only car insurance is far from bulletproof. Full coverage simply means you have liability and physical damage coverage on your policy (versus liability only). With state minimum limits, you are certainly not going to feel “fully covered” if you severely injure someone or total someone’s expensive vehicle. You’ll be on the hook for damages.

Well, there you have it. Ten things agents hear every day that make them cringe.

Do yourself a favor and shop online for insurance quotes to get an idea of how much you should be paying for insurance and then locate a local independent insurance agent to seal the deal.