Home Car Tips 7 Mistakes to Avoid When Buying Car Insurance

7 Mistakes to Avoid When Buying Car Insurance

by Frank
buying car insurance

If you reside in America, buying car insurance to operate a motor vehicle is mandatory if you want to drive on public streets. Most states require drivers to carry a minimum amount of liability insurance. If you cause an accident that injures another driver or damages their property, liability insurance will pay for the expense of medical treatment and property repairs.

Different auto insurance policies, however, have different purposes, and it is important to pick the perfect policy and plan based on your requirements. This article reveals seven major mistakes to avoid when buying car insurance.

See also: How to Check if Your Car Has Been Recalled

What to Avoid When Buying Car Insurance

Traffic accidents in America cost more than $1 trillion, according to the National Highway Traffic Safety Administration (NHTSA). When a driver gets into an auto accident for which he or she’s responsible, liability insurance will pay for the expense of medical treatment and property damage to the affected person or people.

Buying car insurance can be confusing, but with many drivers picking the wrong coverage for their driving needs. Here are seven significant mistakes to avoid when purchasing auto insurance.

Related: Q&A Guide on Muscle Car Insurance

Buying State-Required Minimum Coverage

According to the Department of Motor Vehicles (DMV), the majority of states require drivers to have at least $10,000 to $50,000 of property damage liability and $10,000 to $50,000 of bodily injury coverage per person, per accident. Unfortunately, this does not always cover the cost of the complete price of a car crash.

If you’re responsible for an auto crash that totals another driver’s $20,000 vehicle, for example, and you have $10,000 worth of property damage liability insurance, you can be held responsible for the remaining difference of $10,000. Buying a car insurance policy with at least $20,000 of liability coverage, however, means that your insurance will cover most of the expenses, thereby relieving you of any obligations.

Overlooking Gap Coverage on New Car

When buying car insurance, if you are still paying back your auto loan, consider adding gap coverage to your insurance plan. This optional add-on will compensate you for the difference between your car’s actual cash value and the amount you owe on the loan if you are in an accident.

In accordance with CARFAX, the average new car loses about 10 percent of its value when it is originally driven off the lot. If you purchase a $30,000 new car, its value will fall to $27,000 when you drive it. And if you get in an accident that totals your new vehicle, a collision insurance program is only going to compensate you for its actual cash value, $27,000, which means that you’ll still owe $3,000 on your loan.

Gap coverage ensures your car loan is paid off if you get in an accident by bridging the gap between your car’s actual cash value and the amount owed on the loan.

See also: 8 Shrewd Ways to Save on Car Expenses

Buying Comprehensive or Collision Coverage for Low-Value Car

When buying car insurance, ask yourself whether you need collision or comprehensive coverage. In-depth coverage compensates you for theft or damage to your car caused by fire, flood, a fallen tree, vandalism, hail or flood.

Collision coverage pays for damage to your car in accidents for which you’re at fault. To determine if a collision or comprehensive policy is well worth it, compare the value of your car into the complete cost of those policies. If the combined yearly premium cost of collision and comprehensive insurance is higher than 10 percent of your auto’s worth, stick with liability-only insurance to save money.

Not Listing All Drivers on Application

It’s not unusual for there to be a couple of individuals (or more) that drive the same car. If you let a friend or relative drive your vehicle, you must mention that when applying for auto insurance.

Some insurance companies charge higher premiums when other drivers are added to your coverage as it raises the overall risk of collision. However, failure to include all drivers on your insurance application can leave you liable for all costs if you cause an accident.

Be honest and name everyone who’ll drive your vehicle on the insurance program. And if someone moves into your house and starts driving your car after you have already obtained insurance, then you want to contact your insurance company to notify them of the change.

Buying Comprehensive or Collision with the Wrong Deductible

Most auto insurance companies provide collision and comprehensive policies in many different deductible options. One policy might have only a $100 deductible, while it is $1,000 for a different plan from the same insurance provider.

Why does this matter exactly? The deductible affects two things premium costs and the amount you pay when you file a claim. A policy with a $100 deductible means you will pay just $100 when you file a claim, but your monthly premiums will be higher than it would be for a policy with a $500 or $1,000 deductible.

If you are a secure, exceedingly cautious driver, selecting a plan with a high deductible can save you money on your monthly premiums. On the other hand, if you tend to get to fender benders, choose a policy with a low deductible to minimize the fiscal effect of submitting a claim.

Not Asking About Discounts

The typical cost of auto insurance in America is about $125 per month, based on Business Insider. While many factors influence the whole cost of premiums, you can often save money on auto insurance by taking advantage of discounts.

Auto insurance companies offer an assortment of cuts, but it is the driver’s responsibility to maintain them. By way of example, a car insurance carrier may provide a 10 percent reduction for low-mileage usage. If you work at home and just drive your car on the weekend, you might qualify for this discount.

Many auto insurance companies offer safe driving or accident-free reduction of 5 percent to 10 percent. When you haven’t been in an accident in many years, you might qualify for this discount. Make the most of all discounts for which you’re qualified to minimize the expense of car insurance.

Assuming All Insurance Companies Are the Same

Finally, do not assume that all automobile insurance companies are the same. The value of a car insurance company does not get measured in its cost, but rather, in the business’s capacity to handle claims fairly and expeditiously. When you submit a claim, the insurance carrier should quickly fix it so you can get back on the road.

If an insurance provider drags its feet by delaying or rejecting your claim, you may be left with no car to drive. Search for previous customer reviews online to obtain a better comprehension of a car insurance company’s ability to deal with claims.

Final Thoughts

Driving without car insurance is a severe liability that exposes your cash and private assets to forfeiture in the case of an accident. Most of all, it is illegal to drive without auto insurance in America. If you are caught doing it, then you might receive strikes on your driver’s license, a fine, suspended license and other penalties. Just make sure you avoid making the seven errors above when buying car insurance.

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