Shopping for car insurance can be tedious and tiresome. But cutting corners with this process can mean wasting money at best and risking your savings at worst.
With a financial product as expensive yet indispensable as auto insurance, even a small misstep can cost you big-time.
The following insurance-buying mistakes can easily cost you hundreds of dollars a year — and potentially shave tens of thousands of dollars off your net worth.
1. Failing to shop around
You won’t be able to recognize a good deal on car insurance until you’ve shopped around. Policy pricing can vary widely from one insurer to another. You stand to save hundreds of dollars a year or more simply by comparing prices.
Consider quotes from several companies so you don’t limit your options.
If that sounds like too much hassle, you could let a third party such as Gabi Personal Insurance Agency or The Zebra do it for you. These companies specialize in streamlining the car insurance shopping process.
Money Talks News founder Stacy Johnson details his own experience using Gabi in “How I Saved $546 on Car Insurance Without a Single Phone Call.”
2. Deciding based on price alone
Basing an auto insurance decision on price alone could be a costly mistake.
Saving hundreds of dollars a year in premiums won’t matter if you’re responsible for a car accident and discover afterward that you have inadequate protection, leaving you on the hook for potentially thousands of dollars.
If you find an inexpensive policy, make sure it has all of the protections and features you need. Stacy explains how to do this step by step in “The Complete Guide to Getting the Best Possible Deal on Car Insurance.”
3. Buying the minimum coverage required by state law
The minimum amount of coverage that your state requires is just that — a minimum. It could be woefully insufficient.
Take for example liability coverage, which pays for damage that you cause to other people or their property. Stacy has described it as “one area of your car policy where you don’t want to scrimp.”
If a court rules that you’re responsible for an accident involving serious injuries or significant property damage, the minimum amount of liability coverage probably won’t be enough to protect your financial assets like your savings. You could end up paying tens of thousands of dollars from your own pocket after your policy pays out.