Insurance can be a powerful tool to protect yourself and your assets—but misconceptions about how it works can lead to costly mistakes.
To help you make smarter decisions, we’re setting the record straight on 5 common insurance myths:
- Red cars cost more to insure
- Life insurance is only for people with dependents
- Home insurance covers all types of water damage
- No-fault auto insurance means it's not your fault
- Travel insurance is unnecessary
Myth #1: Red Cars Cost More to Insure
One of the longest-standing insurance myths is that red cars come with higher premiums. The idea behind this myth is that bright colors, especially red, attract more attention and may lead to riskier driving.
However, the color of your car has no impact on insurance costs! Insurers base premiums on factors like the car’s make, model, age, and safety features—not its color.
So, if you’re dreaming of a red car, go for it! Your insurance rate will be the same as it would be for any other color.
Myth #2: Life Insurance Is Only for People with Dependents
It’s easy to assume life insurance is only necessary if you have a family that depends on your income, but it can be beneficial for individuals without dependents, too.
Life insurance can cover expenses such as funeral costs, outstanding debts, or even charitable donations. Additionally, policies purchased earlier in life can lock in lower premiums, helping you save money over time.
In some cases, life insurance can also serve as a financial asset, offering benefits like tax advantages or borrowing potential later in life. So, even if you don’t have dependents, life insurance can be a valuable investment in your financial future.
Myth #3: Home Insurance Covers All Types of Water Damage
When it comes to home insurance, it’s common to think you’re covered for any water-related damage, but this is not always the case.
Most standard home insurance policies cover certain types of water damage, such as burst pipes or appliance leaks. However, they often exclude damage caused by floods, sewer backups, or gradual leaks.
To ensure you’re fully protected, you may need additional coverage, like flood insurance, especially if you live in an area prone to flooding. Understanding what your home insurance policy covers (and doesn’t cover) is key to protecting your property.
Myth #4: No-Fault Auto Insurance Means It’s Not Your Fault
“No-fault” auto insurance is a term that can be confusing. Some people think it means they’re not liable if they cause an accident, but that’s not what it means.
No-fault insurance simply means that after an accident, each driver’s insurance pays for their own injuries, regardless of who was at fault. However, in many cases, drivers can still be held responsible for property damage or other costs if they were at fault. No-fault insurance is designed to streamline the claims process for injuries but doesn’t remove accountability.
Myth #5: Travel Insurance Is Unnecessary
Many travelers believe they don’t need travel insurance, especially for shorter trips or vacations. However, travel insurance can be a lifesaver in situations like trip cancellations, lost luggage, medical emergencies, or even natural disasters.
For international travel, it’s particularly valuable, as your regular health insurance may not cover you abroad. Travel insurance provides peace of mind, knowing that unexpected expenses won’t disrupt your trip—or your wallet.
Make Informed Insurance Choices
Understanding the truth behind these insurance myths can help you make more informed choices about your coverage.
The right insurance plan can give you peace of mind, financial security, and support when you need it most. So, before buying your next policy, take the time to get the facts and choose a plan that aligns with your actual needs—not one based on popular misconceptions.