Top 5 Common Mistakes People Make When Purchasing Auto Insurance

Having adequate and affordable car insurance is an essential part of vehicle ownership. However, many people pay too much or need to be more insured because they make common mistakes when purchasing policies. Avoiding just a few critical errors can save you hundreds of dollars annually and give you much-needed peace of mind.

The Five Common Mistakes People Make When Purchasing Auto Insurance drivers tend to make, along with expert tips on avoiding them. Reviewing your car insurance needs using the advice below can maximize your savings and ensure optimal coverage.

Mistake #1: Failing to Compare Quotes from Multiple Insurers

The most costly mistake people make when insuring their vehicles is failing to invest time shopping around. Auto insurance rates can vary dramatically from one company to another, even with identical types of coverage.

How majorly do premiums differ across providers?

According to industry data, drivers can save an average of $356 per year simply by comparing three quotes instead of sticking with one company. Rates for the exact driver often fluctuate by hundreds of dollars or more between insurers.

This happens because insurance carriers utilize proprietary formulas and methodologies to assess risk levels and determine appropriate premiums. Factors like your driving history, credit score, location, vehicle type, and more get weighed differently by each insurer. The only way to find the “sweet spot” best rate for your situation is to cast a wide net and get multiple quotes.

Benefits of Gathering Multiple Quotes

Experts recommend comparing at least three premium estimates from national companies and a few regional insurers. Local and regional providers offer the most competitive pricing due to lower overhead costs. Getting five or more quotes gives you an accurate snapshot of rates so you can choose the lowest option.

Using online rate comparison tools for quick and easy estimates

Using online rate comparison tools makes gathering multiple estimates quick and convenient. Enter your particulars once to see a range of quotes side-by-side instantly. Policies regarding coverages and limits may appear similar, but premium prices will vary significantly.

Key Takeaway: Shop extensively and compare quotes across insurers to avoid overpaying hundreds of dollars per year on equivalent coverage.

Mistake #2: Focusing on Premium Price Alone

In their quest to find the “cheapest” auto insurance, it’s common for people to focus exclusively on the premium charged and ignore aspects like deductibles, coverage limits, and exclusions. This penny-wise but pound-foolish strategy leads to inadequate protection, leaving drivers vulnerable in an at-fault accident or another claim.

What to Analyze Instead of Just Premium Prices

While locking in budget-friendly premium payments seems attractive initially, there is often a steep trade-off in out-of-pocket costs if you ever have to file a claim. Those lower premiums come with sky-high deductibles in the $2,000 to $5,000+ range. Critical coverages like rental car reimbursement or roadside assistance are excluded under bare-bones policies.

Rather than sort policies strictly according to the lowest premium quoted, carefully compare coverage specifics first. Analyze:

  • Deductibles for collision, comprehensive, property damage, and bodily injury claims
  • Specific dollar limits for property damage liability, bodily injury liability, uninsured/underinsured motorist bodily injury, medical payments, and injury protection
  • Inclusions or exclusions of add-ons like rental reimbursement, emergency road service, loss of income from missed work, and accident forgiveness

Crunching numbers to see total potential out-of-pocket costs under various scenarios gives better insight than premium prices alone. Paying a $5,000 deductible plus rental car fees due to slim coverages can undermine any upfront premium savings.

Ultimately, it’s best to choose moderate deductibles in the $500 to $1,000 range. This hits the sweet spot between premium affordability and out-of-pocket risk. Bolstering protection for worst-case claims via umbrella insurance also makes good financial sense for many drivers.

Key Takeaway: Remember to let premium prices distract you from reviewing deductibles, coverage limits, and exclusions, which determine total out-of-pocket costs.

Five Common Mistakes People Make When Purchasing Auto Insurance
Five Common Mistakes People Make When Purchasing Auto Insurance

Mistake #3: Dropping Comprehensive or Collision Coverage Too Soon

When an older paid-off vehicle declines in resale value, a common question is whether to retain comprehensive and collision coverages. Some see removing these optional coverages as a way to save money on premium payments.

The Danger of Prematurely Dropping Coverage

However, dropping collision and comprehensive prematurely leaves you unprotected from damaging claims. Fender benders, vandalism, weather events like hail storms, and more would all come straight out of your pocket without those coverages.

Many experts recommend keeping collision and comprehensive intact until your vehicle is worth only around $3,000 or less. Total loss scenarios become likelier as cars age. Having those coverages helps buffer you from major repair bills and allows for a payout to help replace the vehicle if it gets totaled.

For instance, dropping a collision on a car worth $5,000 is a premium-cutting move. But just one at-fault accident resulting in a few thousand in repairs can more than offset years of higher insurance costs. The peace of mind of retained coverage is hard to overstate as cars age.

Crunching numbers utilizing “break-even” analysis gives guidance on optimal timing. For example:

  • The 10-year-old sedan has a current resale value of $4,000
  • Comprehensive and collision coverage adds $50 per month cumulatively
  • It would take six years of $50 payments to equal the $4,000 resale value of the vehicle

In this scenario, going at least six more years before removing those coverages makes solid financial sense and prevents you from paying hefty repair bills out-of-pocket. Revisit this analysis yearly as the value drops to determine the next best steps.

Key Takeaway: Wait to remove comprehensive and collision coverage until vehicles are worth only a few thousand dollars or less to retain protection from significant repair costs.

Mistake #4: Not Reviewing Policy Annually for Savings Opportunities

The last time you likely reviewed your auto policy in depth was when you initially obtained coverage. However, failing to reassess needs and shop rates annually leaves significant money on the table.

Why does an annual policy review matter so much? For a few key reasons:

Your Driving History Fluctuates

When renewal periods hit, insurers re-evaluate your driving record every 6 to 12 months. Any changes in accidents, speeding tickets, or other infractions get factored into new rate quotes. One recent speeding citation can increase your premium by 30% or more. Conversely, another year of clean history merits you a discount.

Life Circumstances Change

Major life events like marriage, moving, adding teen drivers to your policy, or purchasing new vehicles impact rates and optimal coverages. Communicating these matters to providers promptly during renewal cycles. Small changes like moving zip codes necessitate a new round of comparison quotes anyway.

Insurers Adjust Base Rates Yearly

Auto insurance carriers annually examine macro market trends and micro customer loss data. They then adjust baseline premium rates heading into each new period. State insurance departments also approve providers’ requested rate hikes or decreases periodically. Shopping around helps you take advantage of insurers passing savings to customers when it happens.

New Discounts Get Introduced

Lastly, insurance companies are constantly rolling out new ways to reduce premiums via discounts tied to usage-based data, increased safety features, pay-per-mile programs, and more. Existing discounts you claimed before can be adjusted or discontinued, too. You must inquire and supply any required verification to capitalize on annual savings.

Setting a policy review reminder when renewal paperwork hits your inbox prevents overspending. Compare revised quotes reflecting your latest driving history and life circumstances, plus newly introduced discounts. Switch providers or policies freely to lock in the best rate based on your present needs.

Key Takeaway: Review auto insurance coverages, rates, and discounts annually as driving records and life situations evolve to avoid overpaying.

Mistake #5: Incorrect Information on Application

How application errors create major issues down the road

Getting an initial auto policy makes it easy to provide an inaccurate address, birth date, vehicle model year, or other application information by mistake. However, even minor application errors get magnified later on through issues like:

Claim denials

  • Claim denial due to misreported garaging address
  • Suspension of license and registration over listed vehicle not matching DMV
  • Spike in premium from birthday incorrectly showing young driver as older

Supplying incorrect details when applying, no matter how accidentally, constitutes providing false information to an insurer. Attempting claims down the road can result in non-payment due to application inaccuracies, which voids protections.

Wrong birthday results in inquiries

Plus, oversights like flipping a few digits in your birthday can lead to insurance department inquiries over mismatched customer records. Clearing up the confusion adds tedious administrative hassle for multiple parties.

That’s why carefully double-checking all application details for precision protects you down the road. Also, inform your insurance company in writing as soon as possible about any application mistakes you identify later – keep them from discovering errors only when reviewing a claim. Timely corrections keep your policy enforceable.

Key Takeaway: Verifying all personal and vehicle details for 100% accuracy on initial insurance applications prevents future claims issues and administrative headaches.

Top Five Common Mistakes People Make When Purchasing Auto Insurance
Top Five Common Mistakes People Make When Purchasing Auto Insurance

Avoid the Top 5 Auto Insurance Mistakes and Save

Car insurance buyers commonly undermine their bottom lines by making critical errors. Failing to shop quotes around, focusing too much on premium prices over coverage adequacy, dropping collision/comprehensive coverage prematurely, not reviewing policies annually, and providing inaccurate application details all set people up for financial distress.

The bright side? Sidestepping just one or two of these all-too-common mistakes can minimize losses by hundreds of dollars annually. Avoiding all five sets you up for even more dramatic savings, plus gives you essential peace of mind through sufficient protection.

What should I do next to leverage the advice here? Take these practical action steps:

  • Catalog your current auto policy details — deductibles, liability limits, and coverage inclusions. Also, note any active discounts.
  • Use online comparison tools to check quotes from at least five other top-rated insurers based on your situation. Look for opportunities to get better coverage at equal or lower pricing.
  • Review any newly introduced discounts from insurers — snapshot usage-based options, home and auto policy bundling, etc. See what you may recently qualify for.
  • Correct any past application errors with your insurer immediately to avoid future claim denials. Also, inform them of significant life changes like moving addresses promptly.
  • Set a yearly reminder to reassess policy pricing and coverages as renewal periods approach. Shop rates as needed to maximize value.

Investing a little time upfront to understand coverages and regularly review your policy pays off exponentially. You gain peace of mind while avoiding financial pitfalls caused by typical auto insurance mistakes. Please don’t hesitate to consult unbiased agents or experts for guidance when needed — they keep your best interests in mind.

Additional Auto Insurance Tips and Considerations

Beyond avoiding the five critical mistakes outlined earlier, a few additional best practices help you make wise decisions when insuring vehicles:

Bundle Home and Auto Policies Whenever Possible

Insurers typically offer 10 to 15 percent discounts when purchasing home and auto bundles. Combining policies streamlines billing and retains you as a customer, too. Always query agents about bundled pricing before renewing individual home or car policies. Ensure the insurer has strong financial ratings so coverage remains solid despite the multi-policy discount.

Increase Liability Limits as Assets Grow

Review liability coverage minimums compared to your net worth over time. Texas requires just 30/60/25 minimums, which translates to $30,000 per injured person, $60,000 per accident, and $25,000 in property damage per accident caused. However, if you become an at-fault driver, damages easily exceed those amounts – average auto injury claims top $18,000.  

Consulting with financial advisors and potentially boosting liability limits to 100/300/100 or beyond better protects assets like homes and retirement accounts when judgments arise. The premium difference is generally inexpensive compared to million-dollar umbrella policies.

Compare Rates After Any At-Fault Accidents

Being deemed at fault in an accident by insurers substantially spikes premiums due to now being labeled high-risk. This affords a prime opportunity to compare rates more widely after such an incident because different carriers apply various accident surcharges. Quoting right after accidents helps offset hikes: some insurers penalize incident history less severely.  

Maintain Proof of Prior Insurance

Having a coverage lapse because you switched insurers or policies can needlessly inflate subsequent rates. Always request proof of prior insurance documents from providers when canceling, then share with new carriers. This demonstrates continuous coverage and prevents gaps that insurers count negatively. Getting quotes with a lapse vs. proof of constant coverage creates hundreds of dollars in difference.


Avoiding common mistakes when arranging auto insurance saves drivers significant money every year. Comparing many quotes, understanding full coverage implications, retaining collision/comprehensive appropriately, regularly reviewing policies, and providing accurate info upfront makes your dollar go much further. Check out additional educational resources from trusted organizations like the National Association of Insurance Commissioners to learn more tips about maximizing insurance value for your household. Investing a little effort into informed policy decisions pays dividends for years by preventing overpayment and gaps in protection.

Frequently Asked Questions (FAQs)

Here are some frequently asked questions (FAQs) about “Five Common Mistakes People Make When Purchasing Auto Insurance”

Q: How many auto insurance quotes should I compare?

A: Experts recommend getting at least 5-6 quotes from a mix of national and regional insurance providers to find the best rates. Rates can vary dramatically, so more quotes give you a better picture.

Q: When can I drop collision and comprehensive coverage?

A: Only remove collision/comprehensive when vehicles are worth $3,000 or less in resale value. Keeping this coverage longer protects you from major out-of-pocket repair expenses, even on older vehicles.

Q: Does my credit score impact auto policy pricing?

A: Yes, insurers often use credit-based insurance scores as a factor in setting premiums. Maintaining a good score saves you money. Check scores a few months before renewal for maximum savings impact.

Q: Can I negotiate better rates with agents?

A: While base rates get set by insurers, agents have wiggle room with applied discounts. Ask them to review your situation if opportunities exist, like bundling other policies or occupational associations that merit additional rate reductions.

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