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We all make mistakes, right? But you can avoid costly auto insurance mistakes by shopping around, understanding coverage needs and not skimping on necessary protections. Follow along to learn about eight common auto insurance mistakes when you're buying or maintaining coverage—and how to avoid them.
1. Not Shopping Around
One of the biggest mistakes that can put a dent in your budget is not shopping around for auto insurance.
The Insurance Information Institute recommends getting quotes from at least three auto insurance companies when you're looking for coverage. This allows you to compare coverage apples-to-apples and find the best deal that meets your coverage needs.
2. Underestimating Coverage Needs
You might think that buying only the minimum coverage mandated by your state or required by a lender or leasing company is sufficient. You may want to rethink that, though. Buying the bare minimum amount of coverage might not offer enough protection.
For example, Texas requires motorists to carry at least $30,000 in liability coverage for each injured person, up to a total of $60,000 per accident, and $25,000 for property damage per accident.
But would that be enough to ensure that your finances aren't drained if you're involved in a crash? Minimum coverage might not be enough to cover costs if you're at fault in an accident, such as legal bills you might pay if another driver sues you.
Keep in mind, too, that if you took out a loan or lease for your car, the lender or leasing company will typically require you to purchase comprehensive and collision coverage.
3. Overinsuring Your Car
Underestimating your insurance needs can be costly. But so can overestimating them.
For example, let's say you own an old car that's not worth a lot. The Insurance Information Institute suggests looking into dropping comprehensive and collision coverage for that car, given that the premium cost might outweigh the benefits. Work with an insurance agent to get recommendations on the coverage that will be right for your individual needs.
4. Overemphasizing the Cost of a Policy
While price certainly is an important factor when buying auto insurance, it's not the only factor.
For instance, you should check out the reputation of a car insurance company that you're considering and review its track record for customer service. Also, you should study the discounts that an auto insurer provides. You may find that one insurer offers more or better discounts than another, or better customer service when you're in an accident, making paying a little extra per month worthwhile.
5. Overlooking Life Changes
It's understandable: Your teenager just got their driver's license and is now getting behind the wheel of your SUV, but you forget to tell your insurance company. If your teen driver got involved in a crash and wasn't covered by your policy, you could face steep financial challenges.
This and other big life changes should always warrant a call to your car insurance company. And the consequences of making the call can be good. For instance, you might see your premium go down if you get married or relocate to a lower-crime neighborhood.
6. Picking the Wrong Deductible
Let's say you want to save money on your auto insurance coverage, so you decide to go with a higher deductible of $1,000 instead of a lower deductible of $500.
Unfortunately, a higher deductible could put you in a financial bind. The deductible is the amount of money you must come up with out of your own pocket when you file a claim.
So, if you've got a $1,000 deductible, you may be able to trim your premium. But if you file a claim, the insurer will subtract that $1,000 from your payout. On the other hand, a $500 deductible would mean just $500 less in your claim check.
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7. Lying on Your Application
Your parents probably taught you that lying is wrong. This definitely holds true when you're filling out an auto insurance application, such as providing a phony address to score a lower rate.
If an auto insurance company finds out that you lied on your application, it might:
- Cancel your policy
- Reject your claim
- Bump up your premium
- Pursue fraud charges against you
8. Not Exploring Discounts
If you're not digging into the discounts you may qualify for, you could be throwing money out your car window. Discounts you should check into include:
- Good student discount
- Good driver discount
- Discount for insuring at least two vehicles with the same company
- Bundling discount for buying two types of coverage, such as auto and home insurance, from the same company
- Low-mileage discount
- Discount for driving a car with certain safety features
- Other discounts, such as senior discounts, discounts for certain professions and the like
While you may not qualify for any discounts from your insurance company, not asking and missing out on savings is worse than asking and being told no.
The Bottom Line
Drivers make any number of mistakes when they're getting or maintaining auto insurance. To avoid making one of the most common mistakes—not shopping around for coverage—use Experian's free auto insurance comparison tool. You'll get side-by-side comparisons of multiple insurance providers, making your rate-shopping easier.