Car insurance commercials make it seem as if buying coverage is a 15-minute process that finds you the best rates for your needs. In reality, low-cost auto insurance often gives you what you pay for — less coverage than you need.
Understanding common mistakes auto insurance buyers make will help you shop policies more effectively and get the right coverage for you.
Cost should be one of the last considerations when buying car insurance.
Misunderstanding the Coverage
A common mistake insurance buyers make is not understanding what coverage they need. The first step in purchasing car insurance is to write a list of the coverage and limits you need. An insurance company will be able to tell to you your state’s minimum legal requirements for injury and property damage, but you’ll need to discuss these with your partner to decide if the minimum coverage is enough, or if you’ll want more.
Getting hit by an uninsured motorist can change your life, and it might be worth it to you to buy more insurance than the minimum to take care of your family after a serious accident. If you cause an accident, you might need to settle damages with personal assets after your insurance money runs out.
If you are insuring a company car or leased vehicle, make sure you know your responsibilities and needs for insuring it before you start contacting insurers.
Not Considering Extras
You can get blindsided by costs you didn’t expect after an accident, especially if you have low-cost, low-benefit insurance. For example, if someone else damages your car, you might need a rental car.
Check to see if policies you’re considering pay for that cost, and for how long. Some might provide a rental car for 10 days, others for 30 days. The value of your car will probably decrease after a serious accident, even after it’s repaired. For this reason, you might want a policy that pays you for diminished value.
This gives you cash after an accident to reimburses you for the estimated loss you’ll have when you eventually sell your car. Ask what happens if you miss a payment or are late with one. If you carry other insurance, such as homeowner’s, you might get a bundling discount, so check with your insurer.
Lack of Comparison Shopping
If you limit your insurance shopping to one or two insurers, especially low-cost insurers, you won’t know what you’re missing by not contacting other companies, including those that can’t match low bids you’ve received.
Contacting a wide variety of insurance companies might seem like a pain, but if you start shopping after you’ve done your homework, you can quickly provide each potential insurer with the coverage and benefits you want, making the process easier.
This means having information such as the age, make, model and mileage of your car handy, letting the insurer know if you have any anti-theft devices, who will be driving the car and their ages, where you will park it and if you will use if for work.
Not Comparing Deductibles
Raising and lowering your deductible changes your out-of-pocket risk, as well as your protection. Each time you get a bid, ask for quotes at different deductible levels.
Raising your deductible will decrease your premium payments, but you’ll pay more when you have an accident. Lowering your deductible increases your out-of-pocket premium expense, but can save you hundreds after an accident.
Misunderstanding Claims Results
Some insurance companies significantly raise your rates after a claim and cancel you after you’ve made multiple claims. Even if someone else hits you and agrees to pay the claim, you might find your rates increasing, depending on your insurer. Ask each insurance company you contact what happens after an accident, including the exact scenarios after an accident you cause and one someone else causes.