Shopping for auto insurance isn’t typically the highlight of anyone’s day. Yet, the decisions you make when buying a policy can have a big impact on your finances and peace of mind. It’s more than just picking a provider and paying a premium; there are many details to consider that can trip you up if you’re not careful.
Whether you're buying insurance for the first time or renewing your existing policy, it’s easy to make mistakes that could leave you underinsured, overpaying, or both. To help you get it right, here are the top eight mistakes people make when buying auto insurance and how you can steer clear of them.
1. Not Comparing Quotes from Multiple Providers
One of the biggest missteps people make is choosing the first insurance provider they come across. While it might save you time upfront, it could cost you more in the long run. Insurance rates aren’t one-size-fits-all. Different companies calculate premiums based on varying factors, and some might offer better discounts or lower rates for your specific profile.
How to Avoid This:
Take the time to shop around and compare quotes from at least three different providers. Many comparison tools online can help you easily pull multiple quotes in minutes. Be sure to compare not just the price, but also the coverage options and limits.
2. Underinsuring (Going for the Lowest Coverage)
Lower premiums are tempting, but opting for minimal coverage can backfire. Many people choose state-minimum liability insurance, which may not fully cover the costs of an accident, leaving you to pay out-of-pocket for damages or injuries.
Why It Matters:
If you’re found at fault in an accident and your liability limits aren’t high enough, you could be sued for the difference. Medical bills and property damage add up fast, potentially creating a financial disaster.
How to Avoid This:
Assess your needs and aim for coverage that protects both your current assets and your ability to earn in the future. Talk to your agent about recommended liability limits, and don’t forget to include uninsured/underinsured motorist protection.
3. Overlooking Discounts
Did you know you might qualify for several discounts on your policy? Many people miss out on savings just because they don’t know to ask.
Here are some common discounts that drivers often overlook:
- Multi-policy discounts (bundling home and auto insurance)
- Good student discounts (for students with high grades)
- Defensive driving course discounts
- Low-mileage discounts if you drive less than average
How to Avoid This:
Always ask your insurance agent about any discounts you might qualify for. Even small savings can add up over the lifetime of your policy.
4. Misunderstanding What’s Covered
One of the easiest mistakes to make is assuming your policy includes coverage it doesn’t. For example, many people believe their insurance covers their own car in an accident, only to realize too late that they needed collision coverage, which isn’t included in basic liability policies.
Other common misunderstandings include:
- Assuming personal belongings in your car are covered (they’re often not).
- Believing flood or hail damage is standard (it usually isn’t unless you have comprehensive coverage).
How to Avoid This:
Go through your policy line by line with your agent to understand exactly what’s covered. Ask about optional coverage types like collision, comprehensive, and rental car reimbursement if you want more protection.
5. Choosing a Deductible That’s Too High (or Too Low)
Your deductible is the amount you pay out-of-pocket when you file a claim. Choosing a high deductible can reduce your premiums, but if you can’t afford to pay that amount in an emergency, it defeats the purpose of having insurance in the first place. On the flip side, a very low deductible increases your premiums.
How to Avoid This:
Strike a balance. Pick a deductible that aligns with your budget and financial situation. For many, a deductible between $500 and $1,000 is a good middle ground.
6. Failing to Update Your Policy After Major Life Changes
Life happens, and when it does, your insurance needs might change. Unfortunately, many people forget to update their policies when their circumstances shift, which could leave gaps in coverage or higher-than-necessary premiums.
Common life changes that should trigger a policy update include:
- Moving to a new address
- Switching jobs and driving less
- Paying off your car loan (you may no longer need certain coverages)
- Adding a teen driver to your policy
How to Avoid This:
Review your policy at least once a year or after any major life change. Notify your insurer about new details to ensure your coverage reflects your current situation.
7. Not Checking Your Credit Score
Believe it or not, in most states, your credit score can impact your car insurance rate. Many insurers use credit-based insurance scores to determine how likely you are to file a claim. A lower score could mean paying significantly higher premiums.
How to Avoid This:
Before shopping for insurance, check your credit report to ensure there are no errors dragging your score down. If your score is lower than you’d like, focus on improving it over time by paying bills on time and reducing outstanding debt.
8. Failing to Read the Fine Print
It’s easy to skim through a policy agreement and sign on the dotted line, but failing to read the fine print can lead to nasty surprises. From exclusions to policy limits, what you don’t know could cost you in a big way when it’s time to file a claim.
How to Avoid This:
Take the time to read your policy thoroughly or have your agent walk you through it. Pay close attention to terms like exclusions, cancellation fees, and limits on coverage. If something isn’t clear, don’t hesitate to ask questions.
Buying auto insurance may not be the most exciting task, but it’s one of the most important when it comes to protecting yourself and your finances. By avoiding these common mistakes, you’ll set yourself up for better coverage, fewer headaches, and potentially significant savings.
