Are You Avoiding These Common Mistakes When Buying Car Insurance?
Car insurance is not a one-size-fits-all proposition. Determining exactly what your auto insurance should cover and how much you should pay for it can be tricky and confusing.
Not Being Prepared
Shopping for car insurance impulsively and deciding on a policy without the appropriate preparation can leave you paying too much, getting the wrong coverage, or both.
See below for some common mistakes shoppers make when in a hurry to buy insurance and how to avoid them.
Shopping Without Preparation
Before you even ask for car insurance quotes, do some research so you can make informed comparisons and choices.
At the minimum, you should know the answers to the following questions:
- How much car insurance coverage does your state require?
- You can view your state’s coverage minimums in our section on car insurance requirements.
- If your car isn’t paid off, how much additional coverage does your lender require?
- For example, are you required to hold collision and comprehensive coverage?
- How much can you afford to pay for monthly premiums?
- How much can you afford to pay out of pocket in case of an accident?
The answers to these questions will help you establish a baseline for how much auto insurance to buy and how much you can pay.
Not Doing Research
All insurance companies are not created equal. Some are much better at service than others. Before you decide where to buy your car insurance, check out the reputation of different companies online and through friends.
Check out your auto insurance company’s complaint ratio at the National Association of Insurance Commissioners website.
Not Knowing Your Needs
Without adequately assessing your needs, you can end up with a car insurance policy that provides insufficient protection in the case of an accident or other incidents.
See below for the mistakes insurance customers make when electing coverage types and limits, and how to avoid these mistakes.
Not Buying Enough Car Insurance Coverage
In most states, the minimum required coverage, usually called compulsory insurance, is not enough to fully protect your assets.
State minimums for bodily injury and property damage liability coverage range from $10,000 to $50,000 per person in one incident/accident.
If you’re in an accident where the other party’s damages exceed your coverage, you could be sued and held liable for the remaining costs. Speak with your auto insurance agent and thoroughly assess your needs to make sure you buy enough car insurance to protect you in case of an accident.
Learn about your state’s minimum insurance requirements in our car insurance requirements section.
Not Understanding Your Needs
Optional coverage can come in handy but may add more to your premium than it’s worth. Before you get car insurance quotes, ask yourself these questions to help you decide whether additional options are worth their cost to you.
- Do you have transportation available if your primary vehicle is in the shop?
- If not, rental reimbursement coverage may be valuable to you.
- Do you pay for roadside assistance through AAA or another company?
- If not, you may wish to add emergency roadside service coverage.
- Is your car new or very valuable?
- If you stand to pay a lot in the case of damage to your vehicle, you might consider collision and/or comprehensive coverage.
- Do you have a loan or lease on your car?
- If you have a loan and your car gets totaled, you may have to pay the balance between your car’s current actual cash value and your loan amount, and it can be big.
- Gap coverage is a good option for you if you have a loan.
Learn more about the many types of optional car insurance in our Coverages section.
Carrying Collision and Comprehensive When You Don’t Need It
Can you afford to replace your vehicle if it’s stolen or totaled? Evaluate whether or not it’s cost-effective to continue paying for comp and collision after your car is paid off.
You might consider dropping these optional coverages if the premiums are more than 10% of your car’s total value.
Check your car’s value at the Kelly Blue Book website.
Choosing a Deductible That Isn’t Right for You
Most policies require you to pay a certain amount, called a deductible, before your car insurance coverage kicks in after an accident or other incident.
Carefully consider your budget when choosing your deductible. While raising it can lower your monthly premiums, it may be too much to pay out of pocket after an accident.
Be honest with yourself about whether you’ll be able to pay that $1,000 deductible at a moment’s notice.
Not Shopping Around
Every car insurance company uses its own set of parameters to analyze risk and decide how much to charge, which means that two insurance companies can offer the exact same coverage at very different prices.
Get multiple car insurance quotes to make sure you’re getting the best price.
NOTE: While it’s important to check around for price, don’t let that be your only measure of a company. The cheapest car insurance policy isn’t necessarily the best car insurance policy. You’ll want to make sure you get good coverage and quality customer service as well.
Other Mistakes When Shopping
Lying on Your Application
It’s tempting to distort the truth in order to get a lower premium, but lies can come back to haunt you later.
If your car insurance company finds out you’ve omitted or given false information on your quote, they can cancel your policy and refuse to pay any claims.
Leaving Discounts on the Table
Always ask about any discounts that may apply to your policy. Some common discounts include those for:
- Paying your policy in full.
- Making monthly payments via EFT.
- Bundling your auto insurance with homeowners’ insurance.
- Insuring more than one vehicle on the same policy.
- Low mileage discounts.
- Good driver discounts.
- Good student discounts for young drivers.
For more information, visit our section on auto insurance discounts.
Not Updating Your Car Insurance After a Life Change
Life changes, such as marriage or divorce, can have a major impact on your coverage needs and your rates.
For example, when you add a teen driver, get married or divorced, have a child, or buy a new car, you should let your car insurance company know. You may be eligible for a discount for which you weren’t previously qualified, or you may need to switch up your coverages.
Be a Smart Customer
By doing your research and comparing car insurance companies, you can ensure you find the right coverage at the most affordable price point. A little leg work up front can save you from overpaying on your policy and/or risking your assets by electing the wrong coverages or the wrong limits. If you are confused about what you need, check our Coverages section and talk to an insurance agent.
You should think about whether you have the right car insurance coverages for you whenever you have a major life change, such as when you buy a home, get married, or have a child. A life change can have a major effect on which coverages provide the right protection for you.
Also, it can make sense to get quotes and compare prices periodically. Many consumers stick with their insurance company out of convenience. Switching providers may save you significant amounts of money.
It depends on which country you’re visiting. Your car insurance usually covers you to drive in Canada; however, if you’re driving in Mexico or other countries, you may need to purchase international auto insurance.
Talk your current company before planning your trip if you wish to drive while away.
It might. Minimum requirements vary by states, so you may need to adjust your car insurance coverages and limits. Also, your auto insurance company may not offer service in your new state, so you might have to switch providers.
Speak with your current insurance company if you are planning to move so you make the right adjustments.
Any licensed drivers in your household are generally covered to drive your car, as well as anyone else who has permission to use your vehicle.
NOTE: If you exclude someone from your policy, they are NOT covered when driving your car, meaning you could be responsible for all damages if they do take your car out and get into an accident.
Generally, yes. However, in most cases your friend’s insurance would be the primary coverage, meaning you’d only access your own coverage in the event that the limits of his policy were met.
If you hit one of your own cars while driving another of your cars, liability insurance will not cover you; it only covers damages to any party in an accident you cause.
However, collision coverage will pay for those damages to your vehicle if you’ve elected to purchase it.
Typically, you’ll only be covered for the cost of a rental if you’ve purchased rental reimbursement coverage.
NOTE: Your insurance company may require that you have comprehensive and collision insurance coverage in order to purchase this type of coverage.
It depends. If you’ve elected to purchase towing and labor coverage, often called “emergency road service coverage,” you’ll be covered for items such as:
- Tire changes
- Locksmith services
- Roadside labor
Generally, comprehensive insurance coverage will pay for non-accident-related vehicle damages. Comprehensive coverage will usually pay for costs from:
- Weather damage
- Fire damage
- Animal collisions
The answer depends on who is at fault and what coverage you have.
If you are not at fault, the other party’s liability coverage is responsible for paying your medical bills after an accident UNLESS you live in a no-fault state.
If you are at fault, but you live in a no-fault state, your personal injury protection coverage will cover your medical bills after meeting your deductible.
If you’re hit by a driver with no or insufficient insurance, uninsured motorist coverage can step in.
Medical payments coverage can also be used to pay your medical bills after an accident, regardless of fault.
Another source of payment for your medical bills is your medical insurance coverage, which you can use in combination with your car insurance coverage if you need to.
You must carry the minimum car insurance coverage limits required by law, which varies by state.
After you have met the minimum legal requirements, you can choose to increase your coverage limits for greater reimbursement potential.
For additional protection, you can also choose to add additional car insurance coverage, such as comp and collision, uninsured motorist, towing and labor, etc.
The required coverage varies by state. Most states require at least a minimum amount of liability insurance, while some states, such as Massachusetts, also require a minimum amount of personal injury protection coverage (also referred to as “PIP insurance”).
Each state sets its own level for minimum coverage for various portions of insurance.
In California, for example, these are the minimum coverage amounts for liability insurance.
$15,000 for accident-related injury or death to one person.
$30,000 for accident-related injury or death to multiple people.
$5,000 for accident-related property damage.
There are many types of car insurance coverage; however, while most are optional, certain coverages are generally required by law.
Most states require drivers to purchase a minimum amount of liability insurance coverage, which pays for injuries and property damage that you cause to others in an accident. It does not cover your own injuries or property damage.
If you live in a state with no-fault laws, you may also be required to purchase personal injury protection (no-fault) coverage. This coverage allows you to file a claim with your own insurer to pay for your medical costs associated with an accident, regardless of who was at fault.
Uninsured/underinsured motorist coverage may also be required by your state, but is typically optional.
Other optional coverages include (but are not limited to):
- Collision coverage.
- Comprehensive coverage.
- Towing and labor coverage.
- Rental reimbursement coverage.