Car insurance price myths: red cars, quote shopping and others

Of the nine common price beliefs tested here, three are false (red cars cost more, getting quotes lowers your credit score, and the insurer with the most ads is cheapest), and the other six are misleading or true only in some situations. The useful habit is to ask what the insurer actually rates: your driving record and claims, where the car is kept, how it is used, the car's price, repair cost and loss history, your coverage choices, and in most states a credit-based insurance score. Rules of thumb that skip that list mislead.

Each belief below is checked against a regulator, a federal statute, an industry body or a published study, with the year of any figure. State rules differ, so where a rule is state-specific the text says so.

The scorecard

Myth 1: red cars cost more to insure

This is false. The Insurance Information Institute (III) states plainly in its auto insurance myths page that color does not factor into auto insurance costs, and that premiums depend on make, model, body type, engine size, vehicle age, sticker price, repair costs, safety record and theft likelihood.

Regulators' own lists of vehicle factors agree by omission. New York's Department of Financial Services lists what drives collision and comprehensive premiums in its physical damage guide: vehicle price, repair cost, theft record, the nature of crash damage, the model's strength and safety characteristics and reparability, and its damageability. Color is not among them.

Whatever the paint, the model is what carries the price. The car insurance myths: color, make, model year and horsepower article goes deeper into make, model and horsepower. If you want to see how a specific model performs, the Insurance Institute for Highway Safety publishes loss results by make and model for six coverages, adjusted for factors such as driver age and state.

Myth 2: getting quotes lowers your credit score

For quotes, this is false. Shopping among insurers generates what the credit industry calls soft inquiries. FICO's explanation of non-lending inquiries lists an insurance company checking your credit report when you apply for or renew a policy among checks that are soft, and says soft inquiries never affect FICO Scores. Experian's consumer guide likewise says a soft inquiry can occur when an insurer provides a quote and does not affect credit scores.

Two caveats keep the answer honest:

• A soft inquiry is not the same as no inquiry. The check exists and the insurer sees the data, which is why you may want to know what they are looking at.
• Hard inquiries are tied to applications for credit, such as a loan, a credit card or a premium-finance loan. If an insurer offers a financing product, the application for that product is a different transaction from the quote. Ask before you agree to anything that sounds like a loan.

The sources above place insurance quotes on the soft side of that line. See do car insurance quotes hurt your credit score? for a longer treatment.

Myth 3: insurers just look up your credit score

This one is misleading. Insurers often use credit information, but not as a FICO score. The National Association of Insurance Commissioners (NAIC) explains on its credit-based insurance scores page that traditional credit scores predict loan repayment while insurance scores predict the likelihood of an insurance claim, that insurance scores may weigh credit factors differently, and that they are usually only one of several inputs. The same page says that in most states insurers cannot use the scores as the sole reason to increase rates, and that some states impose additional restrictions or prohibit certain uses altogether.

Federal law explains why insurers can see your credit file at all. The Fair Credit Reporting Act allows a consumer reporting agency to furnish a report to a person it has reason to believe intends to use the information in connection with the underwriting of insurance involving the consumer (15 U.S.C. 1681b(a)(3)(C), via Cornell Law School's Legal Information Institute). The same statute defines "adverse action" to include a denial or cancellation of insurance, an increase in any charge for insurance, or an unfavorable change in coverage terms in connection with underwriting (15 U.S.C. 1681a(k)(1)(B)(i), LII). The NAIC page says many states require insurers to notify consumers when credit information played a role in such a decision, and that consumers generally have the right to receive notice, review their credit report and dispute inaccuracies. If your quote or renewal jumps, ask whether credit played a part. The adverse action notices: what an insurer must tell you about a rate article shows what the notice looks like, and the credit-based insurance scores and car insurance guide explains the scoring.

Credit is only one data source. Insurers also look at claims history reports, called CLUE report files, and your driving record. Whether a given state bans or limits credit use varies, so check your state insurance department.

Myth 4: "full coverage" is a standard package, and you should always keep it

This is partly true and partly misleading, because "full coverage" is not a defined product. People use it to mean liability plus collision plus comprehensive. The NAIC states in its auto insurance overview that collision and comprehensive are not required by state law, but lenders may require them for financed or leased vehicles, and that premiums can be lowered by accepting more risk, for example by removing optional coverages or raising the deductible.

So the honest framing has two halves:

• If a lender holds your title, keeping collision and comprehensive is part of the loan terms, and dropping them has consequences beyond the premium.
• If you own the car outright, the question is whether the coverage pays more than it costs. III's myths page offers a rule of thumb: if the car is worth less than $1,000, or less than 10 times the annual premium for collision and comprehensive, the coverage may not be cost-effective.

Neither half says "always keep it" or "always drop it." The full coverage glossary entry and the when to drop collision and comprehensive on an older car: the math article show how to run the numbers for your own car.

Myth 5: a clean record always lowers your price

A clean record does lower your price relative to the price you would pay with accidents or violations. III's rating factors page says the better your record, the lower your premium. But "lower" is relative to what the insurer would otherwise charge you, not to last year's bill.

Rates move for reasons unrelated to you. The NAIC's 2022/2023 Auto Insurance Database Report found that the countrywide average expenditure per insured vehicle was $1,281 in 2023, an increase of 13.99% over the previous year. Average premiums rose for the whole market that year, including drivers with spotless records, because claim costs rose.

Say you are a hypothetical driver with no claims who paid $1,200 last year. At renewal the insurer's approved rates rise 10% and your driving-record credit is unchanged. You pay $1,320. Your record is still helping, since an otherwise identical driver with an at-fault crash would pay more than $1,320, but the number on your bill rose. The how car insurance rates are calculated guide explains the base rate and the factors multiplied on top of it, and the why your premium went up at renewal with no claims guide covers renewal increases without a claim.

Myth 6: older cars cost less to insure for every coverage

This is partly true. Collision and comprehensive pay to fix or replace your own car, so they track the car's price and repair cost. New York DFS says higher-priced cars generally cost more to insure for physical damage, and III says the vehicle's price, theft likelihood, repair costs, engine size and safety record all matter.

Liability is different. It pays for damage and injuries you cause to others, so it depends on what your car can do to other people, on who drives it and on your limits, not on how much your own car is worth. III's rating-factors page notes that insurers consider how much damage a model can cause others. IIHS says the loss results it publishes cover liability-related coverages such as property damage and bodily injury, as well as collision and comprehensive, which is a reminder that these are separate pieces of the bill with separate drivers.

The result is that when a car ages, the physical-damage portion of the premium usually shrinks, while the liability portion may barely move. Cutting coverage on an old car can save money, but the biggest remaining piece, liability, often does not fall. Insurers may also treat model-specific loss history, such as theft, as a rating input regardless of age, so check your own quotes rather than assume.

Myth 7: the insurer with the most ads is the cheapest

This is false as a general rule. The Texas Department of Insurance states on its page about how premiums are calculated that each company's premium formula is different. Because the formulas differ, the same driver can get very different prices from different companies, and the company that is cheapest for one household may be expensive for another.

The evidence for how wide the gap can be is dated but vivid. In June 2012, the Consumer Federation of America compared minimum-coverage quotes from four of the largest insurers for the same hypothetical drivers in 15 cities. In 13 of the 30 city-and-driver pairings, the spread between the highest and lowest quote exceeded $1,000. The study is old and the companies' pricing has changed since, so it proves the principle, not today's prices.

Advertising spending and low prices are not linked in any source checked here. For why insurers advertise so heavily, see why big insurers spend billions on advertising and what you pay for it, and for why prices differ, why two insurers quote the same driver very different prices.

Myth 8: paying monthly costs the same as paying once

Often false. The New York Department of Financial Services explains in a consumer FAQ that insurers price policies assuming they receive the full premium at the start of the term, so when you pay in installments they may charge fees to recover lost investment income and service costs. MoneyGeek's May 2026 comparison of six large insurers reports installment fees of $3 to $10 a month and pay-in-full discounts of 5% to 9% at insurers that offer them. On a $1,200 premium with $5 monthly fees, that is $60, or $1,260 in all.

The fees vary by company, state and payment method, and some insurers waive them for automatic payments. The policy fees, taxes and surcharges: reading the real cost of a policy article lists every charge outside the premium and gives a worksheet.

Myth 9: the state minimum is enough

Usually false for anyone with assets or income to protect. III's myths page says that carrying only the state minimum likely means higher out-of-pocket costs after an accident and that insurers and consumer groups generally recommend at least $100,000 of bodily injury coverage per person and $300,000 per accident, with an umbrella policy for those with substantial assets. Minimums differ widely by state, and the right amount depends on your finances; check your state's rule with the state car insurance requirements lookup.

A checklist for testing any "rule of thumb"

Before you act on a pricing rumor, run it through these steps:

1. Name the rating factor involved. If the claim is about something that is not a rating factor, such as paint color, it is probably wrong.
2. Find the regulator's or insurer's own description of how rates are built. State insurance departments publish them. A claim that conflicts with the regulator's list deserves doubt.
3. Ask whether the claim compares you to your own past price or to another driver. "Cheaper" depends on the comparison.
4. Check whether the rule applies to every coverage or only one.
5. Get two or three quotes with identical coverages and deductibles and compare totals. The how to compare car insurance quotes apples to apples guide shows how.

Questions to ask when a quote does not match the rumor

Use these when an agent or website says something that sounds like a rule:

• "Is that a rating factor in this state's filed plan?"
• "What changed from last year's premium: rates, my record, or my coverages?"
• "Did a credit-based insurance score affect this price, and where is my notice?"
• "What is the total for the term, including every fee and state charge?"

Common questions

Does the color of my car ever matter for insurance?

Color does not appear as a rating factor in the sources checked, and III says it does not factor into costs. If an insurer's quote screen asks for color, treat it as identification of the car, and ask the insurer directly if you suspect it changes the price.

Can a quote for a different car change my own rating?

A quote is a request for a price from a company, and it does not change a policy you hold elsewhere. Give accurate information anyway, because a price built on wrong details can change when the insurer verifies them.

Why did my quote change after I entered my driver's license number?

Insurers verify the information you give against driving records and claims databases. If the verified record differs from what you typed, the price can move. The why your final price differs from the online quote article covers this.

Is there any rule of thumb that is reliably true?

Only that prices differ between companies for the same driver, so comparing identical coverages is the one habit that consistently pays. Everything else depends on your state, your car and your record.

Key takeaways

• Car color is not a rating factor in the sources checked; the model, price, repair cost and loss history are.
• Insurance quotes use soft inquiries, which FICO scores ignore, but insurers do use a credit-based insurance score in most states, with legal limits and notice rights.
• "Full coverage" is not a defined product; collision and comprehensive are optional unless a lender requires them.
• A clean record lowers your price relative to the alternative, not necessarily from year to year, because market-wide rates move.
• Each company's formula is different, so compare identical coverages and the total cost of the term, not an advertisement.