Common Car Insurance Mistakes You Should Avoid

Insurance can help protect your finances in case of an emergency. But you shouldn't pay more than you have to for this protection. Whether you're buying a policy for the first time or have had coverage for years, you can keep insurance costs under control by avoiding these common mistakes.

Car Insurance Mistakes You Should Avoid
Keeping Your Car Insurance Deductible Too Low 
Simply put, the lower your deductible, the higher your auto insurance rates. Consider raising your deductible from $250 to $500 or even $1,000. The cost of an accident will be that much more expensive, but you could save up to 40 percent on the comprehensive and collision portion of your policy.

Not Combining Your Car and Home or Renters Policy with the Same Insurer
With a multi-line insurance policy, you purchase both your auto and homeowners or renters insurance from the same carrier. According to the Insurance Information Institute, a multi-line policy can save you up to 15 percent on both premiums.

Not Taking Advantage of Discounts
Most insurance companies provide discounts for a variety of things, including:
  • Having a good driving record
  • Being a long-time customer (loyalty discount)
  • Driving a vehicle with specific safety features (e.g. Vehicle Stability Control (VSC))
  • Driving a vehicle with specific security features (e.g. audible alarm, Lojack)
  • Driving a low number of miles per year
It's up to you to make sure you're getting all the discounts you're eligible for, so make sure you ask your company or agent.

Paying Your Car Insurance Premium in Installments
Extra "convenience" fees are often applied to payments when you split your premium into installments (e.g. monthly, quarterly, etc.). A monthly fee of even $7 can add up to almost $100 a year! So if you can afford it, pay your premium in one lump sum.

Not Shopping Around for Car Insurance Once a Year
If you don't shop around for coverage at least once a year, you simply won't know if you're getting a good deal.

Focusing only on price
Why we make it: Thanks in large part to the marketing efforts of various companies, consumers have been conditioned to focus mainly, if not entirely, on how much a car insurance policy will cost us as opposed to how well it will protect us--while shopping for car insurance.

What we should do instead: Look at the big picture, while examining the various car insurance products in front of you. Yes, price should be included in your calculations, but so should the types of coverage, benefit levels and limits, and even the reputations and claims histories of the companies offering the policies you're considering.

Not fully understanding the coverage you need, or not understanding the coverage you're buying (or you've just bought)
Why we make it: Both of these common mistakes usually result from people not doing enough research, or not asking their insurance agents or brokers enough questions, before they "seal the deal," so to speak, and buy a particular car insurance policy.

What we should do instead: First, don't be shy about reaching out to a company representative for a little assistance early on in your decision-making process. They'll be able to go over information like the legal minimum amount of car insurance for your state and they'll also be able to help you figure out how much coverage you should buy over and above those base amounts. Second, write down all of the information you gather during these interactions and then refer to those notes when it comes time to weigh all of your options move ahead with a purchase. Both of these activities should keep you from being surprised by your lack of coverage after an accident, too.

Believing that just because you have some amount of auto insurance, you and your vehicle are covered in any situation
Why we make it: This mistake probably owes its existence to the ease with which people like to toss terms like "full coverage" into discussions about car insurance. As a result, some folks think that just because they send a check to Allstate or Geico or State Farm every month or every six months, they're protected from anything that may happen to their cars.

What we should do instead: Here's another situation where it pays to have a conversation with someone at the company that sold you your car insurance policy. He or she will be able to tell you if there are any gaps in the coverage you're currently paying for such as if you're not protected from damage that's caused by certain natural disasters, or if you'll still owe a ton of money to your financial institution should your car be totaled.

Buying just the minimum amount and types of coverage required in your state
Why we make it: Who wants to spend more than they have to on anything, especially these days? Pretty much no one. So, it shouldn't be too surprising that a lot of people want to keep their car insurance premiums as low as possible, or that to accomplish that feat they opt for the minimum amount of coverage that's required in their state.

What we should do instead: Do a bit of research or, again, pick the brain of your insurance agent or broker and figure out things like, if all you have is the least amount of coverage required in your state, how much money you could be on the hook for if you get into or cause an accident. The latter is especially important to consider because if you rear-end a pricey car like a BMW, for example, it's a pretty good bet the "legal minimum" won't even come close to covering the bill that's sent your way.

Not considering add-ons or extras
Why we make it: In a way, this mistake is closely aligned with the one above, which has to do with buying only as much car insurance as is legally required. This mistake goes a bit beyond that, though, by also encompassing all of us who fail to look into how they may be able to benefit from having more than one insurance policy (such as homeowners and car, or health and car) with the same company. A related mistake a lot of us make: we fail to see if our existing policy, or one we're thinking of buying, will pay for a rental if our own car is damaged or totaled in an accident.

What we should do instead: Review all of the documents related to any car insurance policy you're considering purchasing. Also, carefully review and consider any add-ons or extras that are offered to you during this process. And if you have questions about them, don't be afraid to ask.

Failing to shop around
Why we make it: Laziness or maybe "inertia" would be a better word to use here probably is responsible for some of this, although nearly as responsible is the widely held notion that "all insurance companies are the same," or "all similar car insurance policies cost the same."

What we should do instead: If you're shopping for car insurance, check out the rates of at least three or four companies before you make a decision. Each of them may offer similar policies or services, but they're unlikely to be identical and even if they are, carriers can charge very different rates to insure the same driver. If you already have car insurance, you should still shop around, by the way. In fact, many experts will suggest that you obtain a number of competing quotes whenever your policy is up for renewal as opposed to automatically renewing your existing one, which is what many consumers do.

Choosing a deductible that's too low
Why we make it: Most of us choose a low deductible (or even no deductible at all) because we want to avoid handing over too much cash in terms of a payout--if we're involved in a crash. The problem with that is it'll likely cause us to pay more for premiums than we could recover in claims or than we would if we raised our deductible a bit.

What we should do instead: Give some serious thought to going with a higher deductible, especially if you have a history of driving safely. Why? According to, increasing your deductible from $200 to $1,000 could cut as much as 40 percent from your car insurance bill. Doing this also will increase the out-of-pocket expenses you'll have if you have a claim, but if you shift all or most of those savings to some sort of emergency fund, you should be able to minimize that problem.

Paying your premiums monthly instead of bi-annually
Why we make it: There are all sorts of reasons someone might choose to pay their car insurance premiums on a monthly basis rather than every six months or even just once a year. One of them is that most of us are used to paying bills monthly. Another is that it's easier for some folks to budget for smaller bills that have to be paid regularly rather than bigger ones that have to be paid less often.

What we should do instead: If you can swing it, pay your premium "in full" which probably means paying every six months or once per year. The reason: some insurance providers charge interest or other service fees if you make monthly payments, while others will lower your premium rate by as much as 10 percent if you pay in full.

Ignoring discounts
Why we make it: Sometimes it's because we don't know a particular discount exists, and other times it's because we haven't specifically let an insurer know that we qualify for a discount--such as when you get good grades, your daily commute shortens, or you add some sort of safety feature to your vehicle.

What we should do instead: Ask your agent which discounts his or her company offers, and then let them know if you qualify for any of them. Also, if you find yourself in the market for a new type of coverage maybe you're thinking of buying life insurance for the first time consider purchasing it from the same company that provides your auto coverage, as it may offer you a discount for doing so.

Lying on your application (or leaving out certain details)
Why we make it: A couple of possibilities here: some of us may simply forget to include certain information on an application, or we may assume it isn't important. That said, some folks purposely leave out various details of their history while filling out these applications because they think they'll "put one over" on the company in question and pay less for their car insurance as a result.

What we should do instead: Tell the truth. Failing to mention relevant information like accidents, DUIs, and traffic violations, either intentionally or accidentally, on your application may earn you a great quote, but that's likely to change if and when the insurer digs into your background in order to finalize your premium payments. Plus, even if you get away with your lies or forgetfulness, your coverage could be called into question if they come to light after you make a claim.

Not considering a company's claims history
Why we make it: This kind of thing probably just isn't top of mind for most people when they shop for car insurance. Even when it is, it's likely that a lot of folks wouldn't know where to look to find details about a particular company's claims history. That's too bad, though, because knowing how an insurer will react if you file one or more claims can be useful information when you're comparing and contrasting a bunch of different policies.

What we should do instead: The most obvious piece of advice related to this mistake would be to flat-out ask someone who works at the insurance company you're considering going with what will happen if you make a claim and ask that person, too, if that response will change at all if you cause an accident rather than just being involved in one.