Common Car Insurance Mistakes to Avoid

Every state has its own particular guidelines dictating car insurance and what type of coverage you need. For example, car insurance rules in Pennsylvania may differ from Florida, which may vary from California.

In general, no matter the state you’re in, having the right amount of coverage is critical.

Car insurance provides you with compensation if you’re in an accident, and it can protect you if you hurt someone else in an accident that’s your fault.

The most common types of car insurance include:

Liability coverage, which pays for other people’s expenses if you’re in an accident. Liability coverage is required in almost all states.
Comprehensive coverage will take care of damage to your vehicle as the policyholder if it comes from something other than an accident. You’re only required to have this if your car is financed or leased.
Collision insurance will pay to repair or replace your car after an accident, no matter who’s at fault. Like comprehensive coverage, it’s usually only required for a vehicle that’s financed or leased.
Personal injury protection covers the cost of your direct and indirect medical expenses following an accident, and more than a dozen states require it.
Uninsured/underinsured motorist coverage is for vehicle damage and the cost of medical bills after an accident with someone who is either entirely uninsured or doesn’t have enough coverage—it’s required in around 20 states.
Medical payments or MedPay is to cover your medical costs if you’re the policyholder after an accident.

With those things in mind, the following are some relatively common car insurance mistakes to avoid to ensure you have the best car insurance company for you.

Cutting Your Coverage to Lower Your Costs

You might think that to get cheap car insurance, your only option is to buy only the minimum required amount of coverage. Yes, in the short term, this might mean you spend more, but the risks of doing this are high.

If you’re in an accident, for example, and you’re found to be at fault, what happens if your insurance doesn’t cover the damages? The injured party could end up suing you.

You need to make sure you’re balancing the right amount of coverage for your financial situation with what you’ll have to pay on premiums.

Not Comparison Shopping

When you’re buying insurance and especially car insurance, you need to shop around. You can find a great deal that offers you the coverage you need, but it can take time. You might work with a single insurance agent who will get you quotes from different companies, or you can do the research online.

Give yourself plenty of time to research your options and compare them so that you don’t have to make a rush decision.

In some states, you can’t buy a new car and leave the dealership until you show proof of insurance, so remember this as you’re planning. Most lenders will require that if they finance your vehicle, you have insurance on it as well.

When you’re shopping around, another big mistake is not making the right kind of comparisons.

You need to break down every element of a policy on its own, and you also want to ensure as you’re looking at quotes that each one has the same coverage level and deductible.

Not Knowing What You Need

If you aren’t clear on what you need as far as state laws as well as your personal needs, then you’re going to be at risk of overbuying or underbuying insurance.

Every state has its statutory limits, so keep this in mind and know these are only minimums.

If you have an older, less expensive car, you may not need a lot of comprehensive coverage. However, if you have, let’s say, an expensive car or a lot of assets that someone might think they want to come after if you were in an accident, think about having more liability coverage.

If you aren’t sure of what you need, an insurance agent can help.

Buying Too Little or Too Much Coverage

We touched on this briefly above, but the two biggest car insurance mistakes people make is buying too much or too little coverage.

If you’re only buying the minimum required in your state, you might be putting yourself at risk financially.

For example, even if your state doesn’t require it, it’s a good idea to have at least uninsured/underinsured motorist coverage, personal injury protection, and MedPay. If you have a car loan, you’re probably going to need comprehensive and collision coverage, which protects your lender not only if you’re in an accident but if something else happens like your car is stolen.

Your liability policy only covers you up to whatever the limit of it is. If you’re sued for more than that and you’re at fault, you could end up losing your personal property and even your home.

There’s also the potential to buy too much coverage and be over-insured. If you don’t have many assets, you’re less likely to need a high liability limit. If your car doesn’t have much value, you might be wasting your money if you’re paying for expensive collision and comprehensive coverage.

Not Taking Deductibles Into Consideration

Finally, if you have a low deductible, that’s ideal if you’re actually in an accident. If you’re not in an accident and you’re paying your premiums, it’s expensive. A low-deductible policy is more costly than a high-deductible option.

If you have an emergency fund or some cash set aside that would cover a higher deductible, then it’s probably better to go with that option. If you don’t have the money, on the other hand, then you should probably go with the lower deductible.

Finally, don’t think you have to stay with the same insurance company forever—you shouldn’t. There’s usually no benefit to doing so, but you might be stuck on autopilot with your current company. When it’s time to renew, you should always shop around to ensure you aren’t overpaying.