4 Expensive Car Insurance Mistakes You Can Easily Avoid


Of course, nobody wants to pay more for car insurance than they need to. However, like many different areas of personal finance, there are right ways to save money on car insurance, and some mistakes that should be avoided.

With that in mind, here are some of the car insurance mistakes that could end up costing you far more than you could hope to save, as well as a good way to save money that is often overlooked.

1. Increasing your deductible when you aren’t prepared to

One of the easiest ways to save money on your car insurance is to choose a higher deductible. According to Progressive, the typical cost difference between collision insurance with deductibles of $500 and $1,000 is about 28%.

While choosing a higher deductible can certainly be a good way to save money, that’s only true if you’re financially prepared for the additional risk. At a minimum, you should have enough in emergency savings to be able to cover your entire deductible if you must pay it.

2. Providing false information

It’s a bad idea to falsify insurance documents, but it happens too often with car insurance policies. As one example, if the application asks if you’ve received any traffic tickets and you omit one from your total to keep your insurance costs low, it can be a big problem. The same can be said if you’re asked how many miles you drive each year, whether you park in a garage or on the street, and other questions.

To be sure, claiming that you only drive 12,000 miles per year when the real number is closer to 20,000, or “forgetting” to mention a ticket can result in a lower insurance premium. But it also could result in cancellation of your policy if the inaccuracies are discovered, and it could also cause your insurer to deny a claim if you’re in an accident, leaving you on the hook financially.

Read more: check out our picks for the best car insurance companies

One of the most common car insurance mistakes people make is obtaining a single insurance quote and buying coverage. Many drivers mistakenly believe that all insurers use essentially the same underwriting process, and therefore your premium won’t vary much between insurance companies.

Nothing could be further from the truth. Different auto insurance companies consider factors like your age, marital status, credit score, and driving record differently. And you shouldn’t just shop around once, buy a policy, and be done with it — it’s important to get a few auto insurance quotes every couple of years. According to J.D. Power, only about one-third of car insurance customers shop for quotes each year — but those who do shop around save more than $350 per year, on average.

4. Buying too little coverage

Most states have a mandated level of coverage that all drivers need. For example, in my state (South Carolina), drivers must carry liability and uninsured motorist coverage with limits of $25,000 bodily injury per person, $50,000 bodily injury per accident, and $25,000 property damage per accident. If you have an auto loan, your lender will also typically require you to carry collision and comprehensive (collectively known as “full coverage”).

One key point all drivers should know is that the minimum coverage limits are almost never sufficient to actually protect you. For example, what happens if I get the minimum limit of $25,000 for property damage and I end up at fault in an accident that totals a $70,000 SUV? And, the cost difference between minimum coverage and coverage with realistic limits can be smaller than you think. As a personal example, I maintain limits of $100,000/$300,000/$100,000 for my liability insurance, which gives me peace of mind as I drive.

The bottom line

Of course, you’d rather pay less for auto insurance if you can. But there are right ways to save money, such as shopping around for coverage and using higher deductibles if you’re in a financial position to do so responsibly. There are also bad ways to save money, such as not buying enough coverage or lying on your insurance application. Avoiding the mistakes discussed here can help keep your costs low while also making sure you’re well-protected.

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