January 6, 2022

The Biggest Auto Insurance Myths

Real insurance agents disclose what’s fact and what’s fiction.

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Despite Americans paying $311 billion for auto insurance policies in 20211, much of what goes into the prices of policies is not well known or volunteered by providers. In the absence of reliable data, misinformation abounds, like the idea that red cars cost more to insure.

Our auto insurance experts investigated these myths to provide transparency to consumers. In analyzing data from federal agencies, industry studies, and AutoInsurance.com’s proprietary industry sources, we separated fact from fiction.

Do you have a question about auto insurance? Feel free to ask us, and we’ll ask our trusted panel. Here’s what we asked this time:

  1. Do Red Cars Cost More to Insure?
  2. Do More Expensive Cars Cost More to Insure?
  3. Does Credit Affect Insurance Costs?
  4. Does Getting a Ticket or Getting Into an Accident Automatically Increase Your Rates?

Let’s get myth-busting.

Do Red Cars Cost More to Insure?

Does the color of your car matter when it comes to the cost of insurance?

The Myth

There’s an urban legend that red cars cost more to insure, and it’s not clear exactly how this legend came to be. However, we think it may have sprung from another misconception, the idea that red cars get stopped for speeding more. Some people think it’s because red cars are more noticeable to police, although police claim color is not a factor in who they stop and ticket. Of course, this information is self-reported, so we can’t trust it on its face.2

Another hypothesis is that red cars cause increased heart rates, which leads to more speeding. While science has shown that the color red increases heart rates3, the connection to increased heart rates and speeding isn’t so clear. Sure, some people may speed because they’re hopped up on coffee, but some people may simply be running late, a problem that afflicts everyone regardless of the color of their car. Call it equal-opportunity speeding.

While many auto insurance providers and car dealerships report that white cars actually get pulled over the most — followed by red, gray, and silver — the lack of citations gave us pause. When we looked up the topic in academic journals, we found only one similar study, which took place in Auckland, New Zealand, from 1998 to 1999. And it wasn’t about speeding, but about serious car crash injuries.

The results? The only statistically significant finding was that silver cars are about 50 percent less likely to result in car crashes involving serious injuries than white cars, with no difference for red, yellow, blue, or gray cars.4

Of course, we live in the U.S. in 2021, not New Zealand in the late ’90s. Everything from wages to hairstyles has changed since that time, so we knew we couldn’t trust this outdated data either. To get more relevant and research information, we talked to local insurance agents to find out if red cars really cost more to insure.

The Verdict

Insurance agents agree unanimously that red cars do not cost more to insure than cars of any other color. Color isn’t even a factor in auto insurance rates.

The Details

“The color of the car has nothing to do with the cost,” said Patrick Nolin, owner of Patrick Nolin Farmers Agency in Little Elm, Texas. “The cost of insurance has to do with the policyholder’s age, address, ZIP code, driving history, length of tenure of existing insurance, and other minor items.”

Other local agents agreed.

“From my experience, [the idea that red cars cost more to insure] is not accurate,” said Brian Bruce, owner of Brian Bruce Farm Bureau Agency in Olathe, Kansas. “A vehicle’s VIN (vehicle identification number) is the key to what insurance will cost. Many factors, including year, make, and model, all factor into the price of insurance (as well as underwriting score, garaging address, etc.). But a vehicle being a specific color, red in this example, has no bearing on insurance premiums.”

A third agent cosigned this busted myth. “The color of your vehicle does not impact your insurance premium in any way,” said Kevin Hamill, owner at Alliances Insurance Agency in the greater Philadelphia area.

So, to the 60-year-old guy with the bright red convertible, you can rest assured that you’re not paying more for car insurance simply because of the color of your car.

TIP

Learn more about what factors affect the cost of car insurance. (Hint: They don’t include color.)

Do More Expensive Cars Cost More to Insure?

Will your insurance rates go up if you switch from a Honda Civic to that $131,750 G-Wagon you saw in a music video? Hypothetically speaking, of course.

The Myth

It’s commonly reported that expensive cars cost more to insure, even from institutions as trustworthy as the Insurance Information Institute (III)5. However, we know from experience that you can’t believe everything you read on the internet, as anyone who’s ever used WebMD probably knows. The III article we referenced, for example, was first published in 2014, back when Iggy Azalea was still topping the charts. Is it still accurate, according to actual working insurance agents?

The Verdict

In contrast to the myth about red cars, more expensive cars are actually more expensive to insure than lower-cost automobiles.

The Details

Nolin explains that this spike in rates “mainly has to do with the cost to repair. Insurance is all about risk and cost to the insurance company.” More expensive cars are more expensive to repair, leading to higher insurance rates.

Bruce gave the example of two totaled vehicles, one worth $50,000 and one worth $12,000. To make a client “whole” after a loss, the insurance needed to cover the more expensive vehicle will have higher premiums.

Bruce explained that “pricing in the insurance world is all based on risk shouldered by the company versus risk shouldered by the client. The more risk the company takes on, the higher the premiums. In this example, the company is on the hook for more payout as the value of the vehicle increases.”

However, the vehicle’s value isn’t the only factor that affects rates. Insurance providers also take factors like mileage and commuting into account, which is bad news for anyone who lives in the notoriously congested LA. Learn more about why car insurance in California is so expensive.

“A prime example would be a show car,” Hamill said. “The value of the vehicle may be far in excess of $100,000. However, if the vehicle is not an everyday vehicle and is only taken out of the garage for special occasions, your premium on that vehicle can be significantly lower than what you pay on your everyday commuter vehicle.”

So, while the price of the vehicle isn’t the only factor in the insurance rates, if all else is equal, then yes, more expensive vehicles are more expensive to insure. So don’t be too jealous of those luxurious vehicles you see on Instagram; their owners are probably paying a ton for insurance.

Does Credit Affect Insurance Costs?

Anyone with bad credit has probably felt its impact when trying to find a solid auto insurance provider, along with trying to rent an apartment, get a loan, or even secure employment. While we can’t dive into all of the ways that having bad credit affects you (we’d be here all night), does bad credit really make it harder to find affordable auto insurance?

The Myth

Let’s zoom out of the auto insurance industry for a second. Civil rights movements in the U.S. have focused on discrimination toward minority groups, whether racial minorities, low-income communities, or disabled people. So it’s only logical to think that insurance providers can’t base auto insurance premiums on credit scores. That would be discriminatory to low-income, minority, and undocumented immigrant communities6 and is thus illegal everywhere, right?

The Verdict

Wrong. Credit scores factor into auto insurance costs, unless you live in a state where credit-based insurance scores are banned, like Massachusetts, California, Hawaii, or Michigan7.

The Details

Bruce put it bluntly: “This statement [that credit doesn’t affect car insurance] is categorically false. Credit and credit scores absolutely affect the insurance rates you can access. Folks with better credit histories and credit scores always get better insurance rates than those with worse numbers.”

In other words, people with bad credit are more likely to have claims, so the insurance providers take that risk into account when determining premiums.

“Most clients don’t take this into account and can’t understand why their friend [or] family member is getting better rates than them,” Bruce said. “Typically, the credit score is the answer.”

However, many top auto insurance companies offer alternatives to credit-based insurance. If you’d like a no credit check auto insurance quote, look for usage-based insurance companies, such as Milewise from Allstate or SmartMiles from Nationwide. You’ll pay based on how much you drive rather than your credit score. That’s good news for someone who works from home or uses public transportation, only using their car for the occasional day trip upstate.

Similarly, you can opt to use telematics, a system that measures your driving habits and rewards you for safe driving. If defensive driving is your middle name, telematics is a great option. Look at Allstate’s Drivewise, GEICO’s DriveEasy, Farmers’ Signal, State Farm’s Safe & Save, or Progressive’s Snapshot.

Will Getting a Ticket or Getting Into an Accident Increase Your Rates Automatically?

We’ve all experienced the anxiety that comes with getting a ticket or getting into an accident. Property damage and bodily injuries aside, we tend to tense up, waiting for the exact moment that our auto insurance premiums increase. The anxiety is so bad that some people don’t even report accidents to their insurance providers for fear of inflated rates, preferring to pay the other driver out of pocket. Is this paranoia necessary, or is it a mere superstition?

The Myth

The myth is that if you get into an accident or get a driving ticket, your rates will always go up, no matter what. For example, Progressive claims that customers with a single speeding ticket pay an average of 15 percent more on six-month policies; for at-fault accidents, rates shot even higher to 28 percent more. But is this always true across all types of tickets, accidents, and auto insurance providers?

The Verdict

Although getting a ticket or getting into an accident may increase your car insurance rates, it’s not automatic or guaranteed for every situation. “I hesitate to ever use the word ‘automatically,’ ” said Bruce regarding auto insurance policies in general.

The Details

Accident forgiveness programs mean that sometimes, your rates won’t go up after a ticket or accident. Progressive, for example, has accident forgiveness that means customers’ rates won’t increase for accidents outside of their control, like hail hitting their windshield, so long as the claim is under $5008. So if you’re accident-prone, paying extra for accident forgiveness could be worth your while.

“Many insurance carriers have enhanced insurance plans that waive tickets and/or accidents,” Hamill said. “Moreover, insurance carriers rarely re-rate your insurance policy until your renewal (every six months to a year, depending on your policy). While tickets and accidents are never a good thing, in many cases they are waived due to the plan that you are on or your tenure with your insurance carrier.”

That being said, if your provider doesn’t have accident forgiveness, your rates will most likely increase. While getting a ticket will probably increase your auto insurance rates somewhere down the line, according to Bruce, “if the accident is your fault and your company pays out on a claim, then your rates will end up rising. That is a fact.”

However, things change depending on who was at fault. If you get into a car accident and it’s the other driver’s fault, your rates won’t increase. Read more about what to do after a car accident is your fault and how accidents affect the cost of car insurance.

DID YOU KNOW?

Some auto insurance providers that offer accident forgiveness are Liberty Mutual, Allstate, and Nationwide, in select states.

Recap

That’s it for the biggest myths of the auto insurance industry, debunked. If you want to learn more, read about what an insurance agent does, or our complete car insurance agent guide.

You can also check out our car insurance research hub, where we educate readers on our original findings regarding the auto insurance industry. We’ve covered topics such as how to file a claim, what car insurance coverage you need, the difference between comprehensive and collision coverage and liability insurance, and how traffic tickets will affect your driving record.

Find the right car insurance company for your personal auto insurance, with the best auto insurance premium and auto insurance coverage around. It’s a good idea to save money by bundling your car with home insurance, dropping rental car reimbursement coverage, and adding safety features like steering wheel locks. No matter who drives your car, make sure they’re protected.

About Our Data

The data and research found on AutoInsurance.com comes from the datasets that auto insurers are required to provide to state insurance agencies on coverages and rates. We also utilized information directly from local insurance agents and our proprietary research.

We conducted interviews in November 2021 with three local insurance agents: Patrick Nolin from the Patrick Nolin Farmers Agency in Little Elm, Texas; Brian Bruce from the Brian Bruce Farm Bureau Agency in Olathe, Kansas; and Kevin Hamill from the Alliances Insurance Agency in the greater Philadelphia area.

We also included third-party information from sources such as Snopes, American Auto Insurance, the U.S. National Institutes of Health, the Insurance Information Institute, the Wayback Machine, the Wiley Online Library, United Policyholders, and Progressive.

Citations

  1. Automobile Insurance in the US – Market Size 2004–2026. IBISWorld. (2020, Jun 16).
    https://www.ibisworld.com/industry-statistics/market-size/automobile-insurance-united-states/

  2. Do Red Cars Get More Speeding Tickets? Snopes. (2014, Jun 12).
    https://www.snopes.com/fact-check/red-handed/

  3. The influence of color on student emotion, heart rate, and performance in learning environments. Color Research and Application. (2015, Feb 26).
    https://onlinelibrary.wiley.com/doi/abs/10.1002/col.21949

  4. Car colour and risk of car crash injury: population based case control study. PMC. (2003, Dec 20).
    https://www.ncbi.nlm.nih.gov/pmc/articles/PMC300804/

  5. What determines the price of an auto insurance policy? III. (2022).
    https://www.iii.org/article/what-determines-price-my-auto-insurance-policy/

  6. Credit Scoring in Insurance: An Unfair Practice. United Policyholders. (2022).
    https://uphelp.org/buying-tips/credit-scoring-in-insurance-an-unfair-practice/

  7. Which States Restrict the Use of Credit Scores in Determining Insurance Rates? United Policyholders. (2020, Sept 23).
    https://www.experian.com/blogs/ask-experian/which-states-prohibit-or-restrict-the-use-of-credit-based-insurance-scores/

  8. Do accidents affect insurance rates? Progressive. (2022).
    https://www.progressive.com/answers/how-accidents-impact-insurance/