Common Car Insurance Buying Mistakes

If you're in the market for car insurance coverage, resist the urge to rush through the process. By taking a careful and measured approach, you're less likely to make mistakes that could cost you later on. From choosing the wrong deductible to limiting your carrier options, seemingly small mistakes can cause major headaches.

Going forward, make sure to avoid these 10 common mistakes when shopping for car insurance.

Unprepared to Shop

Before collecting quotes, make sure you've asked the following fundamental questions:

  • How much can you realistically afford for your monthly premiums and deductible?
  • How much liability coverage is required in your state of residence?
  • If you're paying a car loan, how much coverage does your lender require? Do you need to have comprehensive and collision coverage in addition to liability coverage?

Not Enough Coverage

Almost all states have compulsory auto insurance laws. However, just because a policy fulfills your state's minimum requirements doesn't mean it suits your personal needs.

Often, states' bodily injury and property damage liability coverage minimums fall woefully short of completely protecting drivers' assets. If you're at fault in an accident that causes more damage or injury than the state's minimum coverage requirements, you could be sued.

More often than not, it's a good idea to purchase more coverage than what your state requires.

Choosing the Wrong Deductible

If you buy comprehensive and collision coverage your auto insurance policy will have a deductible, which is the amount of money you must pay before the rest of the claim is paid by your carrier.

Generally speaking, the higher the deductible, the lower the premiums. As a result, people often gravitate toward higher deductible policies because their monthly payments will be lower. However, will you actually be able to pay your high deductible if you end up in an accident?

Don't leave your finances to chance. Be realistic about what you can afford to shell out at one time, and choose a deductible that is affordable, even if it means paying higher premiums.

Lack of Research

When shopping for car insurance, people are often swept away by insurance providers' marketing campaigns and don't bother to do any actual research on the carriers.

Just because a company makes big claims about its affordability doesn't necessarily mean it's your best option. Be sure to check with friends and family AND search online to learn more about each company's reputation.

Missing Out Optional Coverage

In the mad dash to find suitable coverage, it's easy to overlook various types of optional coverage that could be beneficial to you, like:

  • Emergency Roadside Assistance:
    • With roadside assistance coverage, you don't have to worry about paying extra money for services like having your car towed, replacing a wheel, or requesting a locksmith.
  • Gap Coverage:
    • If you're still paying off a car loan and your vehicle is totaled in a crash, your insurance payout may fall short of what you owe. Therefore, many car insurance companies offer gap insurance to cover the difference between what you still owe on your loan and what your carrier will pay.
  • Collision and Comprehensive Coverage:
    • These types of coverage will reimburse you for accidents involving non-living objects and incidents out of your control (e.g. fire, theft, vandalism). If you have a car that's still new or quite valuable, these optional types of coverage are essential.
  • Rental Reimbursement Coverage:
    • If you don't have access to a spare car for when yours is in the shop, this is a great option.

Unnecessary Coverage

People often pay extra for collision and comprehensive coverage that they don't really need. It only makes sense to buy this coverage if your car is fairly new, valuable, or if your lender requires it.

A good rule of thumb: If your potential monthly premiums will exceed 10 percent of the value of your car, you may want to reconsider.

Focusing Solely on Price

Everyone wants to spend as little as possible on car insurance. However, if you choose the cheapest policy you can find, you could easily end up with coverage that doesn't suit your needs.

Many other variables must be taken into consideration, including benefit limits and levels, coverage types, and the reputation and claims history of the insurance provider. Paying a little bit more each month could end up saving you a lot of money in the future.

Missing Out on Discounts

Make sure you're receiving every discount to which you are entitled. Common insurance discounts include:

  • Multi-line discounts for insuring your home and car with the same provider.
  • Discounts for automatic monthly payments OR paying your premium in full.
  • Safe driver discounts.
  • Good student discounts.
  • Low-mileage discounts.
  • Discounts for insuring multiple vehicles on one policy.

Failing to Shop Around

Like many people, you may assume all auto insurance providers are generally the same. However, each one has its own method for assessing risk, which means each one will have a different price to offer based on your circumstances.

Decide what's important to YOU. Are you willing to pay higher rates for a carrier with a reputation for excellent customer service? Or do you prefer a company that allows you to complete most transactions online? What are the customer reviews on each carrier you're considering? Regardless of where your priorities lie, take the time to shop around and don't limit your options.

Lying to Your Insurance Company

Sometimes, people lie when applying for auto insurance to try to avoid being charged extra for certain aspects of their policy. However, this approach can easily backfire and end up costing you dearly.

If you end up having to file a claim and your lies come to light, your provider may opt not to pay on the claim. They will most likely cancel your policy entirely, forcing you to pay out-of-pocket, and making it even harder to good coverage later.

Shopping for car insurance is stressful, but given how important this coverage is and how many factors come into play, it literally pays to take your time and be honest.