Shopping for car insurance can be tedious and tiresome. But cutting corners with this process can mean wasting money at best, and risking your savings at worst.
You absolutely don’t want to skip out on auto insurance as a driver, but when picking the right company or policy, even a small misstep can have costly consequences.
The following insurance-buying mistakes can easily set you back hundreds of dollars a year — and potentially shave tens of thousands of dollars off your net worth.
1. Failing to shop around
You have to shop around to find a good deal on car insurance — and to know a good deal when you see one.
Policy pricing can vary widely from one insurer to another, and you stand to save hundreds of dollars a year simply by comparing prices.
It’s easier than ever to do that, thanks to online rate comparison tools, such as this one from FinanceBuzz. With just a few clicks, it streamlines the car insurance shopping process and shows you rates from companies in your area.
2. Deciding based on price alone
Basing an auto insurance decision on price alone can be a costly mistake.
Saving hundreds of dollars a year in premiums won’t matter if you’re responsible for a car accident and discover afterward that you have inadequate protection. Such a poor decision could leave you on the hook for thousands of dollars.
If you find an inexpensive policy, make sure it has all the protection and features you need. Money Talks News founder Stacy Johnson explains how to do this step by step in “How to Get the Best Possible Deal on Car Insurance (I’ve Saved Hundreds Doing This).”
3. Buying the minimum coverage required by state law
The minimum amount of coverage that your state requires is just that — a minimum. It can be woefully insufficient.
For example, take liability coverage, which pays for damage that you cause to other people or their property. Stacy has described it as “one area of your car policy where you don’t want to scrimp.”
If a court rules that you’re responsible for an accident involving serious injuries or significant property damage, the minimum amount of liability coverage probably won’t be enough to protect financial assets like your savings. You could end up paying tens of thousands of dollars from your own pocket after your policy pays out.
4. Not checking for complaints against insurers
Before you buy a policy, check with your state department of insurance to find out if there are complaints against an insurer you’re considering.
Ask about enforcement actions and find out if your state publishes complaint ratio reports. These reports tell you whether an insurer receives more consumer complaints than average.
You can also search for complaints against insurers through the National Association of Insurance Commissioners website.
5. Not making side-by-side comparisons
Once you narrow choices to a few policies, compare them closely to be sure the one you choose has the right coverage.
For example, you may want uninsured motorist coverage, which helps pay for accidents caused by uninsured drivers.
You also may want comprehensive and collision coverage, which pays for damages that you cause to your own car and pays if your car is stolen or vandalized.
6. Buying more coverage than you need
Just as you can buy too little coverage, it’s possible to buy too much. Excess coverage is a waste of money.
If you have few assets, you probably don’t need as high of a liability limit as someone with a lot to lose. If your car wouldn’t be expensive to replace, you might be able to get by with less collision or comprehensive coverage or drop that coverage entirely.
Beware of unnecessary policy add-ons as well. If you already belong to an auto club that provides roadside assistance, you don’t need a policy that offers the same service.
7. Sticking with the same insurer year after year
Car insurance is highly competitive. It’s possible to reduce costs by hundreds of dollars a year by simply switching to another carrier.
When your next bill arrives, note the coverage you have and seek quotes from other insurers to find out if you would save by switching.
You can do this by contacting insurance agents directly, filling out forms on insurers’ websites, or using a service like FinanceBuzz to do the legwork for you.
If you find a better deal but want to stick with your current company, tell your agent. Your insurer might match or even beat the other company’s offer.
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