Common Mistakes When Buying Car Insurance

No one looks forward to buying car insurance, but an insurance policy is essential for staying protected on the road and, in most states, it’s mandatory. Getting maximum cover for the cheapest possible price is somewhat of a minefield, as there are numerous mistakes that could cost you hundreds of dollars over the course of the year.

Find your best rate on Car Insurance!

Attention: Still Open During the Financial Crisis...

Tip: Act now to see if you qualify for lower rates!

Compare free personalized quotes from the nation's top providers.

Currently insured?
Do you own multiple vehicles?
Own your home?

Avoiding common mistakes, therefore, is essential, and it’s those mistakes that we will look at here.

1. Not Having the Information Prepared

Before you apply for car insurance, you need to be prepared with all relevant information about you and your car. This will ensure that you’re not over-insured or underinsured. 

Everything from the size of the car’s engine to your location will be taken into consideration. They may also ask you how many miles you travel per day, including your daily commute. Make sure you have all of this information in advance.

2. Not Paying Attention to Your Credit Score

Your credit score is taken into consideration when setting your monthly premiums. Bad credit policyholders could find themselves paying several hundred dollars more than those with Very Good or Excellent credit, so it’s something you need to pay close attention to.

It can take time to improve your credit score, but there are a few quick fixes as well, including:

  • Avoid too many hard inquiries, which result from new credit card and loan applications.
  • Avoid opening too many new credit accounts.
  • Increase your credit limits on credit cards.
  • Pay off as much of your debt as you can.
  • Add yourself as an authorized user on a parent’s credit card.

3. Getting an Expensive Car

Most young drivers want to be seen in a flash car, one that will impress their friends and appeal to their Fast and Furious fantasies. But fast cars are involved in more accidents, and when they are driven by young drivers and new drivers, the risk increases exponentially.

If you want to save money on your car insurance policy, look for a car that is fitted with numerous safety features and anti-theft features. If it’s a new car, even better, as it will likely have more of these features fitted. However, new cars also cost more and may require more liability coverage.

Finding the right car is a delicate balance. It’s about finding a car that you like and can afford, while making sure it won’t drive your insurance rates high and require costly comprehensive coverage. 

4. Not Comparing Car Insurance Quotes at All

Don’t take the first seemingly acceptable offer that you receive and don’t simply go with the provider that you have used in the past or that a close friend or family member uses.

Allstate might have the best policy and the best rates for a friend, but that doesn’t mean they have the best rates for you. And just because Geico can cover you, doesn’t mean they should.

5. Not Comparing Car Insurance Quotes Properly

A mistake that a lot of people make when applying for car insurance is assuming that these providers offer a one-size-fits-all service. Just because a particular provider has the cheapest rates, doesn’t mean it has the best auto insurance.

That provider might have a higher deductible, offer the bare minimum cover or not take your discounts into consideration. When comparing auto insurance companies, it’s important to compare like-for-like, matching the exact coverage and discounts. 

6. Not Telling the Truth

Lying on your auto insurance policy could save you a few bucks, but at what cost? This is one of the costliest insurance mistakes because it could result in a claim being rejected or your insurance policy being voided completely.

In the short-term, you’ll get lower premiums, but in the long-term you’ll pay for those seemingly innocent white lies.

7. Misjudging What’s Needed

Miscalculating how much insurance coverage you need can cost you severely. Each state has its own rules with regards to minimum coverage and these change depending on the policyholder. Understanding these rules will ensure you get the cover you need.

8. Getting Too Much Coverage

While it’s important to get the bare minimum cover you need, it’s equally important not to go overboard. Only purchase comprehensive coverage if you actually need it, and not if you have an old cheap car that can be written off following an accident and will cost a fortune if it needs any repairs.

Many insurance providers will give you extras that you might not need, including roadside assistance. If you’re a member of an automobile club or own a premium credit card, you may already have free roadside assistance.

9. Not Looking at Reviews

Don’t judge car insurance providers based solely on price and coverage. These companies are providing you with a service and you’ll have to deal with them in the future if you ever need to claim. The last thing you want is a company that will require you to jump through numerous hoops and try their best to avoid paying you.

You wouldn’t purchase from a retailer that had a lot of bad reviews complaining about everything from products and services to security and marketing techniques. Make sure you do your research on your chosen company and compare this research to other companies.

This can be tricky with insurance providers, because many consumers only think to leave reviews when they have a grievance, in which case the reviews are always bad. But you’re not necessarily looking for a high bad-to-good review ratio. You’re looking for ratios that are better than competitors, as well as critical reviews and expert opinions.

10. Not Updating Following a Major Life Event

A major life event can have a big impact on your insurance premiums and it’s important to update your policy after every event. Not only can this save you a few bucks on your monthly payment, but it will also ensure you’re completely covered when the time comes.

Major events include marriage, divorce, getting a mortgage, going to college, and buying your own house.

11. Paying a Low or High Deductible

A low deductible will decrease the amount you pay following an accident, but it will also increase your monthly premiums; a high deductible will do the opposite. You can change these according to your monthly budget and how much cover you think you will need in an accident.

For instance, a new car may require a smaller deductible, as that will reduce your liability if the car needs expensive repairs. Just remember that some states and providers will not let you set your deductible very high and there are regional limits determining how high or low they can be.

12. Failing to Bundle

Insurance providers offer discounts when you purchase other insurance policies from them, such as homeowners insurance and renters insurance. Known as “bundling”, this applies to most multi-service providers and can save you as much as a third off your total monthly premium costs.

13. Not Looking into Discounts

Bundling isn’t the only way to save money on your insurance. You can also get discounts for being a good driver, good student, and for completing defensive driving and safe driving courses. You may also be offered senior or military discounts and can secure savings if you are part of specific automobile clubs.

14. Staying with the Same Car Insurance Company

Loyalty is rewarded in most industries, but not the insurance industry. If you stick with the same provider year after year, you’ll likely see your rates increase.

The insurance providers know that most customers don’t want the hassle of dealing with new quotes and new providers every year, so they take advantage of this and stop offering competitive rates to their most loyal customers.

As soon as you can change, do it. By all means, stick with your current provider if they are able to offer you the best rates, but it’s highly unlikely.

15. Paying for Financing

Insurance companies offer a number of finance options to make the premiums more affordable, but as tempting as these can seem if you don’t have much money to spare, you could be hit with finance charges and may end up paying much more than you should.

Bottom Line: Avoiding Costly Mistakes

As you can see, there are a huge number of mistakes you can make when applying for car insurance. Keep all these tips in mind, avoid making any of the mistakes above (where possible) and you can get the cheapest and best car insurance for your needs. 

If you need any more information, take a look at our many other articles on the subject of car insurance.