Car insurance might not be the most exciting purchase, but it’s one of the most important decisions every car owner has to make. Whether you’re a new driver or someone who’s been on the road for years, picking the right car insurance can feel overwhelming. With so many options, coverage types, and rates, it’s easy to make mistakes that could cost you more money or leave you underinsured. In this article, we’ll take a deep dive into the common mistakes people make when choosing car insurance and how you can avoid them.
1. Not Shopping Around for the Best Deal
One of the biggest mistakes you can make is settling for the first car insurance policy you come across. Car insurance premiums vary widely between companies because each one uses different factors to calculate risk and pricing.
Why This Is a Problem:
If you don’t shop around, you might end up paying hundreds of dollars more than you need to. A policy that seems reasonable at first glance might not offer the best value when compared to other options.
How to Avoid It:
Spend some time comparing quotes from at least three to five different insurance providers. Many online tools and comparison websites can help you gather multiple quotes within minutes. Don’t just focus on price either; take into account customer reviews, claim handling, and the specific coverage each company offers.
2. Choosing the Cheapest Policy Without Considering Coverage
It’s tempting to go for the cheapest car insurance option to save a few bucks. But choosing the lowest premium might leave you exposed to risks that could cost you even more in the long run.
Why This Is a Problem:
A policy with minimal coverage might not offer sufficient protection in case of an accident. For example, if you only have liability insurance and you get into a major accident, you’ll be stuck paying for your car repairs and medical bills out of pocket.
How to Avoid It:
Instead of automatically choosing the cheapest option, balance cost and coverage. Consider the types of coverage you really need. For most drivers, a full-coverage policy that includes collision and comprehensive insurance is worth the added expense. Make sure you understand what each policy covers and whether it suits your situation.
3. Not Understanding Your Policy
A lot of people sign up for car insurance without fully understanding what their policy covers—or doesn’t cover. Unfortunately, this lack of understanding often comes to light when it’s too late, usually after an accident.
Why This Is a Problem:
If you don’t know the details of your policy, you could end up paying for damages that you thought were covered. Or, worse, you might be driving around uninsured for certain incidents because you assumed your policy had you covered.
How to Avoid It:
Before you sign on the dotted line, take the time to read through the policy carefully. Understand what’s included in your coverage, the limits of your policy, and any exclusions. Don’t hesitate to ask your insurance agent questions if anything is unclear. It’s better to be informed now than to regret it later.
4. Not Taking Advantage of Discounts
Insurance companies offer various discounts to policyholders, but many drivers don’t take advantage of them, either because they don’t know about them or they forget to ask.
Why This Is a Problem:
You could be leaving money on the table by not capitalizing on discounts you’re eligible for. Many insurers offer discounts for things like having multiple policies with them (home and auto), being a safe driver, having a car with safety features, or even being a good student.
How to Avoid It:
Ask your insurance company about available discounts. Some common ones include bundling home and auto insurance, low-mileage discounts, or good driver rewards. You might also qualify for discounts if your car has anti-theft devices, airbags, or other safety features.
5. Setting Deductibles Too Low or Too High
The deductible is the amount of money you pay out of pocket before your insurance kicks in. Some people make the mistake of setting their deductible too high to lower their premium or too low to avoid high upfront costs in case of an accident.
Why This Is a Problem:
If you set your deductible too high, you might struggle to pay it if you get into an accident, even though your premiums are lower. On the other hand, setting it too low could lead to unnecessarily high monthly premiums.
How to Avoid It:
Strike a balance. A higher deductible will lower your premium, but make sure it’s an amount you can comfortably afford to pay if you need to file a claim. Conversely, don’t set your deductible so low that your premiums are unaffordable over time.
6. Not Reviewing Your Policy Regularly
A lot can change over the course of a year—your driving habits, the value of your car, or even where you live. Yet many people don’t review their car insurance policy regularly, missing out on opportunities to update their coverage and save money.
Why This Is a Problem:
Your coverage needs might change over time, and sticking with the same old policy could leave you either underinsured or overpaying for coverage you no longer need.
How to Avoid It:
Make it a habit to review your policy at least once a year. Check if any changes in your life (buying a new car, moving to a new city, improving your credit score) might qualify you for better rates or require adjustments in coverage. Don’t be afraid to shop around each year to see if you can get a better deal elsewhere.
7. Ignoring Your Credit Score
Believe it or not, your credit score plays a significant role in determining your car insurance premiums in many states. However, many drivers overlook this factor when purchasing insurance.
Why This Is a Problem:
If your credit score is low, you might be paying significantly higher premiums. Insurance companies view people with lower credit scores as higher risk, and they adjust premiums accordingly.
How to Avoid It:
Work on improving your credit score by paying bills on time, reducing your debt, and monitoring your credit report for any errors. Even a small improvement in your credit score can lead to lower car insurance rates.
8. Skipping Comprehensive and Collision Coverage on Older Cars
A common misconception is that older cars don’t need comprehensive and collision coverage because their value is lower. Some drivers believe that once their car has depreciated, it’s no longer worth insuring against non-accident damage or theft.
Why This Is a Problem:
Even if your car is older, repairs or replacements can still be expensive. Without comprehensive or collision coverage, you’ll be on the hook for repair costs or the cost of replacing the vehicle entirely.
How to Avoid It:
Evaluate your car’s value versus the cost of insurance. If the cost of repairs or replacement is significant enough to cause financial strain, it might be worth keeping comprehensive and collision coverage. A good rule of thumb is if your car is worth less than 10 times the premium for these coverages, it might be time to drop them.
9. Failing to Include Uninsured/Underinsured Motorist Coverage
Some drivers opt out of uninsured/underinsured motorist coverage to save on their premium costs, thinking it’s an unnecessary add-on.
Why This Is a Problem:
If you get into an accident with someone who doesn’t have insurance or doesn’t have enough coverage to pay for your damages, you could be left to foot the bill for repairs and medical expenses. With the rising number of uninsured drivers, this is a real risk.
How to Avoid It:
Always include uninsured/underinsured motorist coverage in your policy. It’s usually not very expensive and can be a lifesaver if you’re involved in an accident with an uninsured driver.
10. Not Considering Usage-Based Insurance Options
In recent years, many insurance companies have started offering usage-based insurance (UBI), which monitors your driving habits and adjusts premiums accordingly. However, some drivers don’t consider this option because they’re unaware of how it works or think it’s too intrusive.
Why This Is a Problem:
If you’re a safe driver or don’t drive much, you could be missing out on substantial savings by not exploring UBI options.
How to Avoid It:
If you’re a low-mileage driver or someone who follows safe driving habits, usage-based insurance could save you a lot on your premiums. These programs often track things like speed, braking, and mileage, and reward safe drivers with lower rates. Talk to your insurer to see if they offer such a program.
Conclusion
Choosing the right car insurance is more than just picking a policy and paying your premium. It’s about understanding your coverage, knowing what you’re paying for, and making informed decisions to avoid common pitfalls. By shopping around, understanding your policy, and regularly reviewing your coverage, you can avoid these common mistakes and ensure that you’re getting the best protection for your needs and budget.
Remember, car insurance isn’t one-size-fits-all. Tailor your policy to your unique situation, and you’ll have peace of mind on the road knowing you’re covered, no matter what happens. Safe driving!
