Being insured protects you as a driver from the high costs of repairing collision damage to being reimbursed for theft. With so much at stake you want to be sure you get the right car insurance the first time.
The following are seven common mistakes to avoid when buying car insurance.
1. Avoiding Research
Aside from watching a TV commercial or two, you may have no information about auto insurance. It isn’t taught in schools and the topic isn’t brought up until somebody buys a vehicle or gets into an accident.
It’s important to research car insurance to make the right decision about the best policy to get. Fortunately, the Internet is full of websites devoted to the subject.
One that isn’t skewed toward a particular provider is the Insurance Handbook of the Insurance Information Institute. In clear and easy-to-understand language, the organization lays out the lingo of car insurance coverage.
2. Buying the Minimum
Every state has passed laws that define the minimum car insurance coverage that each driver needs. Unfortunately, in our lawsuit-crazy society, that insurance may not be enough in worst-case scenarios.
For example, the minimums may not cover the cost of replacing an expensive vehicle, such as a BMW or Mercedes-Benz. You need to strike a balance between the cost of monthly premiums and the amount of coverage that is needed to protect your assets. A frank discussion with an insurance agent can help determine that balance.
3. Choosing the Wrong Deductible
The deductible is the amount that you have to pay during a claim before money from the insurance company kicks in. One way to lower the cost of monthly premiums is to increase the deductible. The higher the deductible, the lower the monthly premium.
You should try to choose deductibles that you can afford to pay out-of-pocket in the event of an accident. A wise approach is to save money in a bank account for the deductible and use that savings only during a claim. You can then select a deductible that matches those savings.
4. Not Shopping Around
Many consumers buy their policies from the first insurance ad that they see or on recommendations from their friends and family. That coverage may not be the best but without shopping around, you will have no way of knowing.
To ensure that you’re getting the best policy for your needs, you should compare quotes from at least three car insurance companies. Most allow you to get free quotes online or by phoning the insurer.
In addition, because prices change constantly, you may also consider comparing your rates every 12 to 24 months..
5. Fudging Facts
Applications for car insurance must be filled out accurately for an accurate quote on car insurance coverage. Sadly, to save money on the premiums, many applicants fudge the following facts or outright lie about them:
- Number of miles driven.
- Storage location of the car.
- Number and names of all drivers.
- How the car is used, such as for commuting, pleasure, or business.
- History of DUI or DWIs..
At best, a company that discovers the error will raise rates. At worst, it can cancel the policy or deny coverage during a claim, which ends up costing the consumer more.
6. Overlooking Discounts
A better way to gain lower premiums is to take all the discounts that you’re entitled to. These vary by insurer but commonly include the following:
- Low mileage or use.
- Bundled policy discount.
- Multi-car discount.
- Taking a defensive driving course.
- Good driver with no accidents.
- Status discounts such as being in the military, a professional, or being a senior citizen.
- Electronic billing.
The only way to get these discounts is to ask for them. Companies will not know otherwise what discounts the applicant is entitled to.
7. Ignoring Credit Score
A credit score is a number between 300 and 850 that mortgage lenders, credit card companies, big-box stores, and car-rental companies, among others, use to judge how you manage money.
Credit scores above 800 are considered excellent and receive the best terms. Scores below 600 are considered poor.
Over 90 percent of insurance companies now consider an applicant’s credit rating when determining premiums. Research has shown that relying on these scores can predict insurance losses.
If you don’t know what your credit score is, you can view it by asking your credit card issuers, lenders, or other financial institutions. The numbers are also available for free from websites like Credit Karma, which does need registration.
Credit reports, which determine credit scores, are also available for free, once a year, from each of the major credit bureaus: Equifax, Experian, or TransUnion. These reports reveal such factors as payment history, amount of debt, and names and addresses of creditors. They may also show ways to improve your credit rating, such as by paying your bills on time and reducing your debt.