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Common Auto Insurance Mistakes: #1 Paying For Collision Coverage On An Old Car
Collision coverage is a common expense people pay for without reason a good reason to do so. Especially with older cars, consumers are caught paying more than the value of the car within just a few years of ownership. When deciding the amount of collision coverage you pay for, measure the coverage cost against the value of the car itself.
There are many websites that are helpful in valuing your car. Kelly Blue Book is one of the better known tools for finding or calculating your car’s value.
A common number to use as a measuring stick is basing collision coverage payments on 20% of the value of your car or less. Meaning, if the insurance costs more than 20% of your auto value you are likely overpaying. The extra coverage might not be worth it.
To make this concept more digestible, consider a car worth $5,000. If the cost for collision insurance for your car is roughly $830 and your deductible is in the same range. A case where the car is totaled, the insurance company will pay $4170 – the value of the car less the deductible. Over the course of 5 years you will end up paying the entire value of the car in collision coverage if your car retains its full current value. If the car depreciates, which is more than likely, you will cover the cost of the car even sooner.
Common Auto Insurance Mistakes: #2 Neglecting To Update Insurance Based On Life Events.
There are many real life experiences that may affect your insurance rate. Moving and buying a home or apartment are common examples. Often, consumers forget to contact their insurance agency to let them know that a change is taking place. As an example, moving, can impact insurance rates because of one’s commute to work.
If you move, and reduce your commute there is less risk and therefore may decrease your monthly payments. Essentially shorter drive = shooter distance for accidents = less money paid. Other life events may also render you eligible for discounts on rates. Many insurance companies consider homeowners less risky than renters thereby decreasing the payments. Discounts will vary, and not all life events will lower your rates so be sure to research and notify your insurance company accordingly.
Common Auto Insurance Mistakes: 3 Purchasing And Retaining Too Much Or Too Little Coverage
Research and shopping around will help you find the right balance between too much and too little coverage. Over coverage can be a costly budget item. As mentioned above collision coverage on old vehicles can be an example of over coverage and spending money that you don’t need to.
One of the most common mistakes people make is having overlapping coverage. Insurance is expensive enough simply by covering you, your loved ones and the necessary items without paying double for coverage. Many items on the insurance coverage list are complicated and not necessarily written line by line. It is important to review the coverage lists to be sure you do not pay for the same coverage more than once. Common examples include other insurance types, such as health, homeowners or renters insurance which may cover some auto insurance principles and vice versa.
Too little coverage can be just as financially damaging simply in the reverse. Instead of paying too much for coverage you don’t need or use you open yourself up to unnecessary liability. Many drivers immediately opt for the minimum coverage, in the event of an accident you may end up paying many times the amount that proper insurance would have cost.
Many agencies believe that minimum coverage simply does not protect the driver in case of bodily harm to others. The minimums were established when there were fewer cars around, medical costs were lower and other societal differences. The coverage has not effectively adapted to our times.
Not having enough coverage may force you to pay large amounts out of pocket. Some research and comparison can help find the sweet spot to not over cover or under protect.
Common Auto Insurance Mistakes: 5 Not shopping rates or comparing rates.
There are two key points to this section. They sound simple and are in some respect, but need to be taken seriously. Shopping rates with different companies is necessary even if it may take more time than you want to spend. There are many factors that impact your rates. It is commonly suggested to seek quotes from 5 insurers.
The second key point with shopping for quotes is comparing properly. Make sure you compare apples to apples. Each piece of information you share impacts the final rate and policy. Being sure that the coverage is the same from quote to quote is a must. You wouldn’t compare the price of a 30 inch tv to a 13 inch laptop and expect to find the best deal on the tv. If the coverage is for different items it is the same as comparing tv prices to computer prices to find the best tv deal. Price shop, compare prices and protect yourself.
Common Auto Insurance Mistakes: 6 Paying For Auto Insurance On A Rental Car
Switching gears from personal vehicles to rental cars. There are many car insurance policies that cover rental car insurance. Additionally, a large number of credit cards include a perk of covering rental car insurance.
Check your personal car policy for coverage and review your credit card perks. It could be as easy as booking the car on the right card and to protect yourself and the car. The insurance policies that the rental car agencies offer are generally overpriced and don’t cover you properly. In the relationship between a rental car company and you, the one looking out for your best interest is you.
When checking coverage from your own policy or credit cards be sure that the car type that you rent is protected.
Common Auto Insurance Mistakes: #7 Not Considering The Company’s Reputation
Customer service is not simply a luxury. At the end of the day if you need to speak to the insurance carrier/company/agency it is likely because you need their help. Double check the company has a reputation of helping their clients.
Some companies are best known for finding loopholes to help consumers as little as possible. Priorities may be their bottom line. Others are known for going above and beyond to make sure their customers are protected. Make sure you are on the right side of the customer service experience.
Keep in mind, a good reputation and strong customer service does not mean the premiums, deductibles and overall policies are more expensive. J.D Power and Associates do yearly reviews of companies on the buying and customer service experience.
Common Auto Insurance Mistakes: #8 Deductible v Premium: finding the sweet spot.
There is a delicate balance between deductible and premium price points. Lower deductible often means higher premiums. In case of an accident you may want to pay as little out of pocket costs before the agency covers the rest. The issue there is that the monthly premium may be sky high.
In the reverse case of looking to pay a low monthly premium the deductible in case of an accident might be very high. Consider your budget and what you can afford to find the balance between monthly payments and the unfortunate scenario of being the responsible party in a car accident.
Keep these 8 mistakes in mind before buying a car insurance policy and your policy should fit your needs at a competitive price point.