Why You're Overpaying for Auto Insurance: 7 Myths, Busted

1. Is auto insurance really required everywhere?

You've heard you can't drive without insurance, and for the most part, that's true. All states except New Hampshire require liability coverage before you hit the road, and even New Hampshire demands proof you can pay for an at-fault accident (III — Compulsory Auto Insurance). But here's the catch: about 13 percent of drivers are still uninsured (III — Compulsory Auto Insurance). That means even if you're fully covered, you could be in a crash with someone who can't pay. That's why we always recommend uninsured/underinsured motorist coverage — it's cheap and protects you from the other guy's mistake.

2. Does the color of my car really affect my rate?

No. That's a myth we hear constantly. Insurers don't care if your car is red, blue, or neon green. What matters is the make, model, year, and safety record. Your driving history and where you park matter far more. So go ahead and buy that red convertible — just know it's the engine, not the paint, that moves your premium.

3. Should I carry only the state minimum?

If you want to be financially ruined, sure. But we don't recommend it. The average auto liability claim for bodily injury was $24,211 in 2022, and property damage averaged $5,313 (III — Auto Insurance Facts & Statistics). If you cause a multi-car accident, those numbers stack up fast — and they're averages, not worst cases. State minimums are often laughably low. We tell clients to carry at least $100,000 per person and $300,000 per accident, and to consider an umbrella policy if you have assets. Most insurers want to see $250,000 in auto liability before they'll sell you an umbrella, so that's a good target (III — Umbrella Liability Policy).

4. Is full coverage worth it?

This is where the industry splits. The data shows about 80 percent of insured drivers carry comprehensive, and 76 percent carry collision (III — Auto Insurance Facts & Statistics). But "full coverage" isn't a legal term — it means liability plus collision and comprehensive. Collision pays for your own car after a crash, and comprehensive covers theft, fire, hail, and other non-crash damage (Investopedia). The average collision claim was $5,992 in 2022, and comprehensive averaged $2,738 (III — Auto Insurance Facts & Statistics). If your car is worth less than a few thousand dollars, dropping collision and comprehensive can save you big money. But if you can't afford to replace your car out of pocket, keep them.

5. Higher deductible — friend or foe?

This is one of the few levers you actually control. Auto deductibles are typically $500 or $1,000, and the higher you go, the lower your premium (III — How Much Auto Coverage). But don't just crank it to $2,000 to save a few bucks. You need to have that cash in an emergency fund. We tell clients to think of the deductible as their first line of defense — if you can't write a $1,000 check tomorrow, a $500 deductible is safer. The premium savings from moving from $500 to $1,000 is often modest, but it can be significant if you're a safe driver. Just don't set a deductible you couldn't actually pay.

6. What's the deal with SR-22? Is that a type of insurance?

No. SR-22 is not insurance. It's a form your insurer files with the state to prove you carry the required liability coverage. You'll typically need one after a DUI, driving without insurance, or an at-fault accident while uninsured (GAINSCO — SR-22). It's basically a scarlet letter for your driving record. The coverage itself is standard, but the SR-22 filing carries a fee and tells insurers you're high-risk. That's why your premium spikes after a DUI — not because of the SR-22 form itself, but because you're now statistically more likely to file a claim. The form is just a marker.

7. Can I get insurance if I'm high-risk?

Yes, absolutely. Every state and the District of Columbia guarantees that auto insurance is available through assigned risk plans, also known as the shared or residual market (III — Auto Insurance Facts & Statistics). These plans are more expensive, but they ensure you can drive legally. If you've been denied by standard insurers, your state's department of insurance can point you to the assigned risk pool. It's not fun, but it's a lifeline. Once you've maintained a clean record for a few years, you can shop around and often find a better rate in the regular market.

8. How much should I actually pay?

The national average auto insurance expenditure was $1,062 per vehicle in 2021, according to NAIC data (III — Auto Insurance Facts & Statistics). But that's just an average — your rate depends on your car, location, driving record, and coverage choices. What we see is that people overpay by not shopping around. Rates vary wildly between insurers for the same driver. We recommend getting quotes from at least three companies every year or two. And here's a quick tip: bundling your auto with your homeowners or renters policy usually earns a discount, but don't assume it's the best deal — compare standalone quotes too.

Quick tip: Before you call your insurer, know your current coverage limits and deductibles. Then ask specific questions about discounts for safe driving, low mileage, or defensive driving courses. You'd be surprised what a polite phone call can do.

Bottom line

The single best move is to stop guessing and start comparing. Set your coverage to a level that protects your assets — not the state minimum — and then shop your policy every renewal. If you're in a high-risk situation, use the assigned risk plan as a bridge, but work on cleaning up your record. And never, ever let a red car myth talk you into paying more.

Sources

• III — Compulsory Auto Insurance - https://www.iii.org/article/background-on-compulsory-auto-uninsured-motorists
• III — Auto Insurance Facts & Statistics - https://www.iii.org/fact-statistic/facts-statistics-auto-insurance
• III — How Much Auto Coverage - https://www.iii.org/article/how-much-auto-coverage-do-i-need
• GAINSCO — SR-22 - https://www.gainsco.com/news/what-is-an-sr-22/
• III — Umbrella Liability Policy - https://www.iii.org/article/what-is-an-umbrella-liability-policy