Buying auto insurance isn’t really a fun purchase like shopping for shoes or a new video game system. But it is one of the most important purchases any person can make, because getting the right coverage provides crucial protection for assets. Without the proper insurance in place, an accident or other incident could leave drivers with an empty bank account.
Unfortunately, many people make big mistakes when getting covered. In fact, here are four huge errors it’s critical to avoid when buying auto insurance.
1. Setting the policy limits too low
Every auto insurance policy has a maximum coverage limit. For example, an insurance policy may cap payments for injuries caused to others at $20,000 per person and $40,000 per accident, or at $50,000 per person and $100,000 per accident.
Drivers get to choose how high their coverage limits are, although states typically require a certain minimum amount of liability coverage to make sure drivers can pay if they harm others. Some drivers opt to just buy the minimum coverage their state requires in order to keep premiums low.
Unfortunately, a policy limit that is too low could mean there’s not actually enough money to pay for all the losses that occur in a crash. That could lead to disaster, as a driver who harms others could be sued and required to personally pay for any injury-related damages an insurer won’t pay for.
Drivers who don’t want to find themselves facing court judgments they have to pay on their own should be sure to get much more than just the minimum coverage. It’s a good idea to set policy limits no lower than $100,000 per person and $300,000 per accident — or more for those who have a substantial amount of assets to protect.
2. Skipping out on coverage that’s important to have
Drivers also get a choice of what kinds of coverage to buy beyond what’s required by their state. Unfortunately, those who don’t opt to purchase certain kinds of optional coverage could come to regret it.
Specifically, most people should be sure to get collision insurance and comprehensive insurance. Optional collision coverage will pay for crash-related losses to the policyholder’s own vehicle when another driver wasn’t at fault. And comprehensive coverage will pay for any losses not from a car accident, such as damage due to a hail storm.
Without these optional kinds of coverage, drivers could find themselves paying personally to repair or replace their entire vehicle — a huge cost most people can’t afford.
Sticking with the same auto insurance company for a long time, or buying the first coverage that a driver comes across, can be another huge error. That’s because there can be huge differences in price from one insurer to another.
It’s important to get multiple different auto insurance quotes from both national insurers and regional insurers. Drivers who shop around can save anywhere from 15% to 40%, and with average insurance premiums coming in at $3,017, that could be as much as $1,206.80 a year in savings for those who manage to knock 40% off their bill by shopping around.
Drivers can get multiple auto insurance quotes online and should do so at least once a year before their policy renews.
4. Choosing an insurer based on price alone
Finally, looking only at price is another major error to avoid. While it’s worth shopping around to get a good deal, it’s important to remember that the purpose of insurance is to be there in case something goes wrong. No one wants to deal with an insurer that denies a legitimate claim or lowballs the amount they’ll pay for a car.
Check J.D. Power rankings and Better Business Bureau reviews to find out if an insurer is bad news before signing up to get covered.
Fortunately, it’s pretty easy for drivers in the know to avoid these insurance mistakes. So, be sure to shop around, look at insurer reviews, and get the right coverage to avoid being left with regrets.
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