10 Costly Auto Insurance Mistakes

Vehicle insurance is legally required but most people buy it for the peace of  mind it offers. That is why it is important to pay attention to detail and get the right coverage, carrier and pay a fair price. Insurance is a product that needs to be bought beforehand and cannot be bought after realizing you needed it. That is why people need to consider their needs, budget, value of their automobiles and other drivers who may drive the automobile and arrange coverage accordingly.

Otherwise, they may not have the coverage when they need it, their claims can be denied and they may be accused of hiding the truth to gain monetary advantage. In such cases, all the premiums they have been paying would be wasted because they cannot benefit from the coverage. Also, there are many ways of making sure you don’t overpay so there is no need to skimp coverage or be scared to talk to your vehicle insurer.

Here are 10 costly car insurance mistakes and how to avoid them;

  1. Having insufficient coverage

Driving uninsured is probably the biggest mistake drivers can make. It can have huge monetary consequences because drivers have to pay for damages and injuries they cause to third parties and their own damages out of pocket when they don’t have any coverage. Also, there are fines, vehicle impoundments, suspension of driver’s license and vehicle registration and even jail sentences for repeat offenders.

And just buying the minimum legally required Liability auto insurance coverage isn’t often enough in the light of current costs. Minimum requirements are not a recommendation but the absolute lowest allowed. Motorists are advised to increase liability coverage to at least $50,000/$100,000/$50,0000 levels for it to be relatively comfortable.

Also, you need to insure your automobile properly to avoid ending up without a car. Full coverage policies can be much more expensive than liability only policies but they offer a lot more protection and plenty of peace of mind. You shouldn’t drop coverage if you cannot afford to pay its benefits out of pocket. But it may not be cost effective to insure a ten years old automobile and pay premiums for it when it is more likely to face an engine failure than an accident and require replacement. You may need savings to replace it shortly.

  1. Not being honest with the car insurer

It is one of the essential requirements to provide honest and accurate information when you are filling out a car insurance application or giving details to your agent. Lying to get cheaper rates is insurance fraud and a criminal offence. Not only can your claims be denied for misrepresenting the truth but also you may be charged for trying to gain financial advantage by lying.

  1. Not knowing enough about your policy

Automobile insurance isn’t cheap for most people. So, it is best to know exactly what your policy covers and consider if it is enough or too much. Often people don’t take the time to have a good look at their policies and start assuming. If you don’t have the coverage, you cannot make a claim for your losses. Insurance isn’t like any other product you can go back and buy if you missed it. So, read through at least the declaration page of your policy and ask for clarification from your agent or insurer if you are not sure about anything.

  1. Not updating your details and coverage

Policyholders are also required to update their details. Many things happen over time that affect car insurance rates. For example, not telling them about a child coming to driving age can be considered the same as lying by many carriers because it can significantly affect the premium and increases the risks for the company. Also, it can work the opposite direction and people may be missing out on discounts they can qualify for.

For example, policyholders can start getting about a 5% discount for being a homeowner. And they can get over ten percent more savings if they bundle home and auto insurance, providing they do their homework and shop around for the cheapest overall provider. Doing a quick vehicle insurance assessment each year can reveal possible discounts and saving opportunities like that.

Policies may also need to be adjusted every so often to meet your requirements or avoid paying for things that aren’t relevant any more. For example, you may still be insuring a partner you are no longer together with or it may be time to drop Collision and Comprehensive coverage or add Accident Forgiveness because you just qualified for it.

  1. Choosing wrong level of deductibles

If you do not have the cash reserves, a car insurance policy with high deductibles may be a problem. A few extra dollars additional premium per month to have a lower deductible could save you from spending hundreds of dollars each time you have a claim. On the other hand, you may need to pay a little bit more for a policy with lower deductibles. If you are confident that you are unlikely to make claims in the near future because you have a good history you may not worry about the out of pocket payments. Deductibles work as a tool to balance costs with coverage and policyholders should be aware of their function.

  1. Getting too comfortable with auto-renewals

People are generally trusting and don’t like to change their providers. However, getting too comfortable with your auto insurer and letting your policy renew automatically term after term leads to not asking questions and not questioning the price. Even if policyholders don’t shop around and switch carriers, they should call their providers at least once a year and especially after price increases and enquire about the possibility of reducing their premiums. Usually companies have special discounts or they can have a good look at your details again and see if they can put you on a lower rate.

  1. Buying an expensive to insure car

It is highly recommended to check the cost of insuring a new car you are considering. It is too late if you go ahead and pay for an auto and find out the premium for it will be very high compared to another model. It is easy to get quotes for it beforehand.

  1. Ignoring to mention car modifications

If you have a vehicle that has been modified with special parts or carry essential equipment and you have not informed your vehicle insurance provider, they will not pay for them to be repaired or cover them if the vehicle is totaled. If they are performance enhancing parts like a more powerful engine, they may even deny a claim on the basis that they didn’t know about it and the powerful engine is the cause of the accident.

There are millions of disabled drivers with modified cars. People make alterations to automobiles for other medical or age related conditions too. These alterations should be covered with a Custom Parts and Equipment endorsement on the policy to make sure they are included in the coverage. Whether you have an expensive hobby requiring you to transport expensive equipment or you have a health condition, you can add equipment coverage as well. Replacing wheelchairs or other equipment can get quite expensive.

  1. Not shopping around

Shopping around and checking to see if you have better offers keeps automobile insurance companies honest. Otherwise, policyholders can stay with an expensive carrier simply because it was recommended by parents and end up paying a lot more than a fair premium for years. So, motorists should always get alternative quotes and compare them with each other and their renewal terms and switch if they can save enough money.

  1. Buying insurance for rental cars

Standard policies extend the same coverage you have to cars you rent for a short period too. So, check your coverage and rental car provisions on your policy because you may not need to buy expensive insurance offered at rental counters since your policy covers the hire car. You still need to check about the type of vehicles you can rent with your policy because it usually doesn’t cover high end and sports cars, when you have a minivan at home.