Purchasing comprehensive auto insurance coverage is essential to protect yourself financially in the event of an accident or vehicle theft. However, many drivers make common mistakes when buying policies that end up costing them extra in the long run. Avoid these pitfalls with smart insurance decisions.
This article will overview the top mistakes people make and provide tips to choose coverage wisely. We'll discuss errors like underestimating your coverage needs, failing to take advantage of discounts, lying on your application, and staying loyal to one insurer. We'll also offer guidance on picking optimal deductibles and how to shop for cars that won't break the bank to insure.
Follow these tips when buying your policy and at each subsequent renewal. Doing so will help you maximize your protection while minimizing costs. It takes some diligence, but avoiding these common car insurance mistakes will pay off tremendously in the years ahead.
Underestimating Your Coverage Needs
Many people try to save money on car insurance by underestimating their coverage needs and getting only the minimum required by law. However, this can leave you seriously under-protected in the event of an accident. Here are some common issues with underestimating coverage:
Only getting the state-mandated minimum liability coverage leaves you exposed if you cause extensive damage or injury. The average auto accident claim is over $23,000 - far exceeding minimums.
Skipping optional coverages like collision, comprehensive, and uninsured motorist leaves you unprotected if your own vehicle is damaged. This table shows average claim costs:
| Coverage | Average Claim |
|---|---|
| Collision | $4,179 |
| Comprehensive | $1,905 |
| Uninsured Motorist | $16,988 |
Not accounting for potential medical bills. Even minor injuries can cost thousands in medical claims. Personal injury protection helps cover these.
Overestimating the value of your car insurance deductible. A higher deductible seems cheaper but leaves you covering more costs yourself after an accident.
Failing to account for potential loss of income if injuries prevent you from working. Loss of income coverage is important.
The bottom line is you should carefully assess your coverage needs instead of just buying the minimum. Account for potential accident costs, choose appropriate limits and deductibles, and consider adding key optional coverages. Doing this properly on the front end can prevent huge financial stress if an accident occurs.
Failing to Review Your Policy Regularly
Failing to regularly review and update your auto insurance policy is one of the biggest mistakes you can make. Your policy should adapt as your life and situation changes - otherwise you risk being seriously underinsured or overpaying unnecessarily. Here's why regular policy reviews are essential:
Your coverage needs change over time. When you were single, liability coverage may have been enough. But now that you have a family, you probably want more extensive coverage to protect your assets and cover potential medical care. Or perhaps you no longer need collision coverage on an older car. Frequent reviews help align your policy with your life.
You may qualify for new discounts. Car insurance companies offer a myriad of ways to get discounted rates, including:
- Good driver discounts
- Low mileage discounts
- Bundling home & auto coverage
- Adding anti-theft devices
- Insuring multiple cars
- And more
Checking for new discounts should happen each time your policy is up for renewal. You could be missing out on considerable savings otherwise.
Your personal details may change. Things like your marital status, address, commute distance, credit score and more can all impact your insurance rates. Keeping your insurer updated ensures you get the best rate possible.
Your vehicle changes. Upgrading your car, adding a new driver, or insuring an antique or RV all affect your coverage needs. Failing to update your policy could negate claims.
New insurers may offer better rates. The insurance market is constantly changing. Unless you check other providers, you won't know if you could get a better deal. Loyalty doesn't often pay off - do your research.
Policies renew automatically. Insurers count on you not reviewing the renewal terms. But automatic renewal kills your leverage to renegotiate rates, modify your policy, and threaten to switch companies. Proactively reviewing prevents you getting stuck in auto-renew purgatory.
The bottom line is you should diarize reminders to review your policy at least a few weeks before renewal. Compare market rates, shop around if needed, and negotiate any changes with your provider. Doing this annually can save you hundreds of dollars while still keeping you adequately protected.
Lying on Your Insurance Application
Being tempted to lie on your auto insurance application to get a lower rate is understandable. But this common mistake can have severe negative consequences, including denial of claims, higher premiums, and even cancellation of your policy. Here's why lying is never worth it:
Insurers can easily verify details. Thanks to public records, credit checks, and databases, insurers can double check just about any information you provide. Getting caught lying means you'll lose their trust.
Honesty gets you the most accurate rate. Telling the truth allows insurers to accurately assess your risk profile and give you the optimum premium rate. Lying skews this process.
Major lies can lead to fraud charges. Providing false driver license numbers, falsifying accidents/tickets, omitting teen drivers - these could cross the line into fraudulent behavior if intentional. This leads to heavy fines and a criminal record.
Minor lies still impact claims. Even small lies like saying you live slightly closer to work than you do could allow an insurer to deny a claim later on. It establishes a pattern of dishonesty.
Canceled policies mean higher future rates. If your insurer drops you after discovering lies, your premiums will be sky high when trying to get covered elsewhere. Some insurers may refuse you outright.
It's just not worth the small savings. The minimal premium reduction you might get from fudging some facts is nothing compared to the severe consequences if caught. It's always better to just be honest.
Instead of lying, research ways to legitimately save on your premium such as:
- Taking defensive driving courses
- Dropping collision coverage on older cars
- Raising your deductible
- Bundling home and auto policies
- Using telematics devices to prove good driving
- Comparing quotes from multiple insurers
The bottom line is lying on your application is never a good idea. Your best bet is being totally honest upfront, doing what you can to manage risk factors, and shopping around for the best rate. This keeps you protected without compromising your integrity.
Not Checking for Available Discounts
One of the easiest ways to save money on your car insurance is by taking advantage of the many discounts available from most insurers. However, a common mistake is not proactively asking about and checking your eligibility for these discounts. Here's why it pays to check:
Discounts can reduce your premium by up to 30%. Most insurers offer a range of discounts - bundling policies, good driver, anti-theft devices, defensive driving courses, and more. Combined, these can shave hundreds off your annual costs.
New discounts may be available at renewal. Insurers periodically add new ways to get discounted rates based on analysis of their claim data. You could be missing out on new savings opportunities if you don't ask.
You may qualify for discounts you didn't before. Maybe you took a defensive driving course, installed an anti-theft device, improved your credit score, or bought a home recently. These life changes may newly qualify you for discounts.
Some discounts require proactive action. For example, you may get a discount for combining home and auto policies with one insurer. But you have to be the one to ask about bundling - they won't automatically do it for you.
Discount qualification criteria can change. Income limits, credit score thresholds, and eligibility rules often change from year to year. Just because you didn't qualify before doesn't mean you won't now.
Online quotes may not include discounts. Getting quick online quotes is easy, but they often don't factor in many discounts you may be entitled to. Talking to an agent gives a more accurate cost picture.
Being vigilant about discounts takes some effort, but pays off by keeping more money in your pocket. Make discount queries a regular part of your policy review before each renewal to ensure you never overpay your car insurance premiums.
Choosing the Wrong Deductible
When buying car insurance, most policies require you to select a deductible amount - the portion of any claim you pay before insurance covers the rest. Choosing the wrong deductible is a common mistake that can lead to higher premiums or unexpected out-of-pocket costs. Here's how to pick the right amount:
Understand how deductibles impact premiums. A higher deductible, like $1000, means a lower monthly premium. But you pay more upfront if you file a claim. A lower deductible, like $500, has higher premiums but less out-of-pocket on a claim.
Factor in how often you've filed claims before. If you file a claim every few years, a higher deductible saves on premiums long-term. If you've never filed a claim, paying a bit more for a lower deductible provides better peace of mind.
Consider your current finances. Could you afford to pay a $1000 deductible if an accident occurred tomorrow? If not, a lower deductible reduces financial stress when claims happen.
Compare quotes with different deductibles. Plugging in different amounts when getting quotes lets you see the exact premium difference. Make sure any extra savings are worth the trade-off.
Remember deductibles apply per claim. Your deductible resets each time you file a new claim. Frequent small claims mean you're paying the deductible amount repeatedly.
Review your choice at each renewal. As your finances and driving record change over time, so should your deductible. Re-evaluate at each renewal to ensure it suits your current situation.
Inform others on your policy. If others drive your car, make sure they know the deductible amount they'll be responsible for so there are no surprises.
Choosing a deductible is a balance between premium savings and paying costs out-of-pocket after an accident. Consider all these factors to find the sweet spot. And remember - you can change it each renewal as your needs change.
Staying Loyal to One Insurer
It's natural to want to stay loyal to one auto insurance company year after year. Switching can seem complicated, and you appreciate the familiarity. However, this loyalty can cost you hundreds in potential savings. Here's why shopping around is important:
Better rates may be available. Insurance companies regularly adjust their formulas, risk factors, and base rates. The company that was most affordable for you 5 years ago may not be the cheapest anymore.
New insurers enter the market. New insurance carriers crop up all the time. They attract customers by offering very competitive rates. Unless you check, you'll never know if a new insurer could save you money.
Promotional discounts change. Companies incentivize switching with discounts like:
- 15% off your first 6 months
- 10% off your first year
- Free roadside assistance for a year
Locking in promotional rates can provide short-term savings on top of lower premiums.
Policy bundling offers evaporate. You may miss better deals by bundling home and auto policies with different insurers. But this requires switching one policy.
Customer service changes over time. The reliable company you first signed up with may have gone downhill. New players often have better service.
Your loyalty is likely not rewarded. Despite years paying premiums, most insurers won't proactively offer you their best rate. You need to pursue that yourself.
Checking other insurance rates takes a bit of effort but pays off. Set calendar reminders to compare quotes from competitors whenever your policy is close to renewal. This ensures you never overpay just because of brand loyalty.
Buying an Expensive Car to Insure
When shopping for a new car, it's tempting to splurge on that luxury model you've always wanted. However, buying an expensive car to insure can dramatically increase your insurance costs. Here's how to choose wisely:
Research insurance rates by vehicle. Sites like Insure.com provide average premium costs by make and model. Compare rates for the cars you're considering before purchasing.
Understand what makes a car costly to insure. Factors like high repair costs, likelihood of theft, engine power, and more all increase premiums. Opt for a model with fewer risk factors.
Consider the vehicle's safety rating. Cars with excellent safety scores have lower injury claim rates. This makes them cheaper to insure. Prioritize safety over power or aesthetics.
Buy new if possible. Brand new cars qualify for lower insurance rates. As a car ages, premiums increase due to higher repair costs and reduced safety protections.
Choose a model with anti-theft devices. Features like car alarms, VIN etching, ignition kill switches and LoJacks prove the car is less risky to insure. Ask your insurer about potential discounts.
Select a car color with lower rates. Believe it or not, auto insurers charge more for cars in colors statistically stolen more often. Stick with white, silver, gray or blue hues.
Opt for a 4-door sedan over a 2-door coupe. Data shows coupes are driven harder and stolen more frequently. The extra doors on sedans reduce insurance premiums.
While driving your dream car may be exciting, higher recurring insurance costs add up enormously over time. Do your homework to find an optimal balance between the car you want and insurance affordability.
Conclusion
Avoiding common mistakes when buying car insurance is crucial to get adequate protection at the best possible price. Be sure to properly assess your coverage needs and avoid the temptation to underestimate. Regularly review your policy in full to catch any changes in discounts, life events, or new providers with better rates. Always provide honest information - lying is never worth the consequences. Take time to check for discounts you may have missed. Pick deductibles and cars to insure smartly by weighing premium impact. And don't let brand loyalty stop you from exploring competitors at each renewal.
Making smart insurance decisions upfront and continuing to reevaluate your policy over time helps safeguard your assets and family. While no one enjoys shopping for car insurance, a little diligence goes a long way. Use this article as your guide to avoid mistakes and get the optimal protection you deserve. With the right policy in place, you can rest easy knowing you've made good choices to secure your financial future.
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