Insurance is one of those things most people buy, file away, and try not to think about until something goes wrong. The problem? That “set it and forget it” approach leaves plenty of room for myths and half-truths to take root. And some of these insurance misconceptions can cost you real money or leave you dangerously underinsured when it matters most.
As Farmers Insurance agents in San Marcos, we hear these myths constantly from clients across Hays County, Comal County, and the surrounding Central Texas area. Let’s separate insurance facts from fiction and clear up the most persistent misunderstandings.
Myth: Your Credit Score Doesn’t Affect Your Insurance Premiums
This is one of the most common insurance myths we encounter, and it catches a lot of people off guard. The truth? In Texas, insurance companies absolutely use your credit history when calculating your premiums. They don’t pull your exact FICO score, but they do use what’s called a “credit-based insurance score” that factors in payment history, outstanding debt, length of credit history, and other financial indicators.
So does credit score affect insurance rates? Yes, and the impact can be significant. Studies consistently show a correlation between lower credit scores and higher claim frequency. From the insurer’s perspective, that makes someone with poor credit a higher risk to cover. The Texas Department of Insurance (TDI) allows this practice, though insurers can’t use credit as the sole factor in denying coverage.
What this means for you: if your credit has taken a hit recently, your premiums might be higher than you’d expect. On the flip side, improving your credit score over time can lead to lower rates at renewal. It’s worth checking your credit report annually and disputing any errors, since even small corrections can affect what you’re paying for auto or homeowners insurance.
Myth: All Insurance Policies Are Basically the Same
If you’ve ever assumed that one auto insurance policy is pretty much identical to another, you’re not alone. But this misconception can lead to some expensive surprises at claim time.
Policies differ in coverage limits, deductibles, exclusions, and the specific situations they cover. Two policies might both be called “full coverage auto insurance,” but one could include rental car reimbursement and new car replacement while the other doesn’t. One homeowners policy might cover water damage from a burst pipe but exclude foundation movement (a real concern here in Central Texas, where our expansive clay soils shift constantly).
Texas insurance regulations also create differences you won’t find in other states. For example, Texas requires specific windstorm and hail provisions in many policies, and if you’re in a coastal county, you might need separate windstorm coverage through the Texas Windstorm Insurance Association (TWIA). Here in the San Marcos and New Braunfels area, we don’t deal with TWIA, but we do see plenty of hail claims that catch people off guard when their policy’s deductible structure isn’t what they expected.
The takeaway: read your policy declarations page. Compare the actual coverage terms, not just the monthly premium. A cheaper policy that doesn’t cover what you need isn’t saving you anything.
Myth: Carrying Extra Insurance Is a Waste of Money
“Why would I pay for more coverage than I need?” It sounds logical on the surface. But the problem is that most people underestimate what they actually need, especially when it comes to liability coverage.
Texas requires minimum auto insurance liability limits of 30/60/25: $30,000 per person for bodily injury, $60,000 per accident, and $25,000 for property damage. Is minimum coverage enough? Honestly, in most real-world accident scenarios, it falls short. A single trip to the ER can easily exceed $30,000, and if you cause an accident that injures multiple people, $60,000 disappears fast. You’d be personally responsible for everything above your policy limits.
That’s where umbrella insurance comes in. An umbrella policy provides an extra layer of liability protection (typically $1 million or more) that kicks in after your auto or homeowners policy limits are exhausted. For most families, umbrella coverage costs somewhere between $150 and $350 per year, which is remarkably affordable considering the protection it provides.
We’ve seen clients in Kyle and Buda who thought their standard policy limits were fine until a multi-car accident or a liability claim from someone injured on their property proved otherwise. Carrying adequate coverage isn’t about wasting money. It’s about making sure one bad day doesn’t wipe out everything you’ve built.
Myth: Insurance Is Only for Big Businesses and Wealthy People
This one might sound outdated, but we still hear it. Some people think insurance is primarily designed for corporations and high-net-worth individuals, and that everyday folks are just paying into a system that doesn’t really serve them.
The reality is the opposite. Insurance exists precisely because most individuals and families can’t absorb a major financial loss on their own. If your car is totaled, your house floods, or you’re hit with a medical emergency, insurance is the difference between a manageable inconvenience and financial catastrophe.
Renters insurance is a perfect example. Many renters in San Marcos (especially near Texas State University) skip coverage because they think they don’t own enough stuff to justify it. But a typical renter’s policy costs $15 to $30 per month and covers your belongings against theft, fire, and certain water damage. It also includes liability protection if someone gets hurt in your apartment. That’s meaningful coverage for the cost of a couple of fast food meals.
Myth: Your Premiums Stay the Same as Long as You Don’t File a Claim
Plenty of people assume that if they’re claim-free, their rates should stay flat (or even go down) every year. While a clean claims history does help, it’s far from the only factor at play.
Insurance premiums fluctuate based on a wide range of variables: inflation in repair costs, changes in local weather patterns, shifts in the reinsurance market, and updates to your credit-based insurance score. Here in Central Texas, we’ve seen homeowners insurance rates climb in recent years partly due to increased hail and storm activity across the region. That has nothing to do with your individual claims history.
Auto insurance rates also respond to broader trends. If the cost of car repairs goes up (which it has, thanks to more complex vehicle electronics and supply chain issues), everyone’s premiums tend to follow. Age, mileage changes, and even your zip code can trigger rate adjustments at renewal.
This is exactly why it pays to review your insurance at least 30 days before each renewal date. Don’t just auto-pay and move on. Compare what you’re getting with what’s available, and ask your agent if there are discounts you’re missing.
Myth: A Red Car Costs More to Insure
Does a red car cost more to insure? This one has been floating around for decades, and it’s completely false. Your car’s color has zero impact on your insurance premium. Insurers don’t even ask about paint color on their applications.
What does affect your auto insurance rate is the vehicle’s make, model, year, engine size, safety ratings, theft statistics, and repair costs. A red Honda Civic costs the same to insure as a white one. But a sports car with a turbocharged engine will cost more to insure than a minivan, regardless of what color either one is painted.
Myth: Older Cars Are Always Cheaper to Insure
The idea that older cars are automatically cheaper to insure is another common myth that doesn’t hold up under scrutiny. While it’s true that you might drop collision and comprehensive coverage on a vehicle that’s lost most of its value, the liability portion of your premium stays the same regardless of your car’s age.
There’s also a safety factor. Newer vehicles tend to have better crash test ratings, advanced driver assistance systems (automatic braking, lane departure warnings, blind spot monitoring), and more effective crumble zones. These features reduce the severity and frequency of claims, which can actually make newer cars cheaper to insure in some cases.
And if you’re driving an older car without modern safety tech, you could be paying more for medical payments and personal injury protection coverage because accidents in those vehicles tend to result in more serious injuries.
Myth: You Should Always Buy Insurance Online for the Best Price
The “insurance agent vs. online” debate is a common one, and the assumption that cutting out the agent always saves money is a misconception worth addressing.
Online quote tools are convenient, and they’re a fine starting point. But they have limitations. They can’t tell you whether your coverage is actually adequate for your situation. They won’t flag that your homeowners policy has a percentage-based hail deductible that could cost you thousands out of pocket. And they definitely won’t call you back to suggest an umbrella policy after learning you have a teenage driver and a backyard trampoline.
A local Farmers agent knows the full range of available coverages, discounts, and bundling options. We can often find savings you wouldn’t discover on your own, with the added benefit of someone who actually reviews your coverage and advocates for you during the claims process.
Here in Texas, where insurance regulations and weather risks create unique coverage needs, having a local agent who understands the specifics of your area matters more than you might think.
Myth: Loyalty to One Insurance Company Gets You the Best Rates
Sticking with the same insurer for years feels like it should earn you a loyalty discount, and some companies do offer small ones. But loyalty alone doesn’t guarantee the best rate. Insurance markets shift constantly, and the company that was cheapest three years ago might not be competitive today.
We regularly see clients who haven’t reviewed their coverage in years and are paying more than they need to because they’re missing available discounts or carrying coverage that no longer fits their situation. A regular policy review with your agent can uncover real savings.
The smart move? Let your agent run a market comparison at each renewal. If your current carrier is still the best fit, great. If not, switching is straightforward and doesn’t create any gaps in coverage when handled properly.
Myth: Insurance Covers Everything
This might be the most dangerous myth of all. No insurance policy covers every possible loss or scenario. Every policy has exclusions, and understanding those exclusions is just as important as knowing what’s covered.
Common homeowners policy exclusions in Texas include flood damage (requires a separate flood policy), earthquake damage, foundation issues from normal settling, and gradual wear and tear. Auto policies typically exclude mechanical breakdowns, damage from racing or off-road use, and wear-related issues.
The key is reading your policy’s exclusions section and asking your agent about anything that isn’t clear. If there’s a specific risk you’re concerned about (flooding in Wimberley, for instance, where the Blanco River has a well-documented flood history), there’s usually supplemental coverage available. But you need to add it before you need it.
Get the Facts from a Local Agent Who Knows Texas Insurance
Insurance myths persist because insurance itself can be confusing, and most people would rather not think about it until they have to. But the difference between being properly covered and dangerously underinsured often comes down to having accurate information and an agent who takes the time to explain it.
At Matt Patterson Insurance in San Marcos, we work with clients across San Marcos, Kyle, Buda, New Braunfels, and Wimberley to make sure their Farmers coverage actually fits their lives. We’ll review your policies, identify any gaps or unnecessary costs, and make sure you’re getting every discount you qualify for.
Have questions about your current coverage? Not sure if one of these myths has been affecting your insurance decisions? Give us a call or visit mattpattersoninsurance.com to schedule a free policy review. We’d rather spend 20 minutes going over your coverage now than have you find out it’s not enough after a claim.
