Five mistakes to avoid when shopping for auto insurance
You are almost certainly paying too much for car insurance.
If you think that’s a pretty bold claim, we’re inclined to agree. But we also think it’s 100% accurate. Why are we so confident?
Because car insurance is incredibly complex. Getting the best rate isn’t as simple as finding the cheapest bottle of vintage wine, or even tracking down a great deal on airline tickets. There are any number of mistakes that most people can (and do) make when comparing different insurance policies. And these small, costly mistakes can add up to a small fortune.
So how do you save money when you’re shopping around for a new car insurance policy? It’s not rocket science. You just have to learn the pitfalls be careful to avoid them. Here are 10 of the most common insurance-shopping mistakes.
1. Settling too quickly
The first rule of shopping is “shop around,” right? It seems obvious, but you’d be surprised how many people get a quote from two or three different insurers and then simply… give up. If you want to get the lowest price, you can’t just look at a few big name brand carriers. You have to compare as many quotes as possible.
This is crucial because every company operates differently. Insurers use different algorithms to calculate your rate, which can put more or less weight on your driving record, your address, your type of vehicle, your driving habits, etc. This means that while you’ll usually get a cluster of similar quotes, there’s almost always an outlier in the bunch.
Use an insurance comparison site to shop around and really dig through your options. The time you invest will pay for itself - and then some.
2. Buying the bare minimum
Of the 50 states, 48 require that you get some kind of car insurance. These requirements are legal minimums - the very lowest amount of coverage you need.
But just because you can get on the road in Florida with nothing more than a $10K policy for personal injury protection (PIP) and property damage liability (PDL) doesn’t mean you should. After all, a serious accident could easily create financial costs 10X or 20X greater than that. Opting for a bigger policy might create higher premiums in the short term, but in the long term it could help you avoid crushing debt or bankruptcy.
Similarly, you should consider which types of insurance coverage you need. Your state may only require liability insurance, but what happens if someone vandalizes your car? Or if your car is struck by an uninsured driver? Again, getting additional policies (e.g. comprehensive car insurance and uninsured motorist protection, respectively) to cover these scenarios can protect you from financial ruin.
The lesson here is that saving money in the long run doesn’t always mean paying the lowest premium upfront.
3. Neglecting discounts
It may not seem like it, but insurance companies want to give you a good rate. The lower the quote they give you, the more likely you’ll choose them over a competitor. But to help them find those low rates, you need to show them why you’re a great, low-risk driver. Fortunately, there are countless little tidbits of information you can give insurance companies to snag these discounts.
Do you use an anti-theft device like OnStar or LoJack? Many insurers will reward you with a lower rate. Are you a student? If you’re maintaining a ‘B’ average or better, you might be eligible for a ‘Good Student Discount.’ Are there some days of the week you don’t drive at all? Are you a doctor, lawyer, engineer, or other professional? Can you afford to pay in full instead of breaking up your policy into incremental payments?
The list goes on and on. All of these discounts can get a few dollars knocked off your premium. Sometimes, saving money on your car insurance is just matter of asking!
4. Being too loyal
Many businesses reward you for your loyalty. Auto insurance is simply a different story.
As time passes, insurers routinely raise their customers’ premium rates. It’s a standard practice across the insurance industry, and it means that the longer you’ve been with your carrier, the more you stand to gain from jumping ship. In fact, one JD Power study found that the average consumer saved $300 by switching carriers. And drivers who had been with the same company for 11 years or more saved $426 on average.
So the next time your insurance policy is up for renewal, don’t just sign up - shop around! In fact, you don’t even have to wait for the current policy to expire. If you change carriers sooner, you’ll typically be reimbursed for any unused coverage. And even if you want to stay with your current carrier, getting a lower quote from their competitor might help you negotiate a discount.
Whatever you do, don’t let your coverage lapse between insurance policies. Going for one month without insurance - or even a single day - can dramatically spike your future premium costs.
5. Sharing incomplete data
Like we discussed in a previous post about getting real quotes for car insurance, comparison services sometimes ask you for a lot of information. And if you’re like most people, you’ll be tempted to cut corners, ignore questions, or skip over items that seem irrelevant. Our advice to you is: Don’t.
When it comes to your background information, every little bit of information matters. For instance, you might not think to mention an old traffic accident. But to insurance companies, it still matters - even if you weren’t at fault, and it took place nearly 5 years ago. Similarly, you might think the make and model of your car are enough - but without the vehicle identification number (VIN), you’re not getting an accurate quote. And of course, getting accurate quotes is crucial if you’re going to find the lowest one!
The Bottom Line
Finding the right insurance - the one that gives you the lowest-cost coverage and the most long-term financial protection is tricky. But it isn’t rocket science. Here are the five guidelines to follow:
Shop around, and compare as many insurers as possible. Don’t always opt for the bare minimum coverage (which can cost you more in the long run). Read up about discounts you may qualify for, and don’t hesitate to ask your insurance company. Be willing to switch insurers, even (or especially) when you’ve been with the same company for a long time. And give the most thorough, accurate information you can when you’re shopping for insurance quotes.