How to Avoid 7 Costly Car Insurance Shopping Mistakes

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 lead to a fall.

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

To recognize a good deal on car insurance, you must shop 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, let a third party such as Gabi 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 Found $546 in Car Insurance Savings in Under 10 Minutes.”

2. Deciding based on price alone

Basing an auto insurance decision on price alone can 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. Such a poor decision could leave you on the hook for thousands of dollars.

If you find an inexpensive policy, make sure it has all the protection and features you need. Stacy explains how to do this step by step in “How to Get 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 can be woefully insufficient.

For example, take 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 financial assets like your savings. You could end up paying tens of thousands of dollars from your own pocket after your policy pays out.

4. Not checking for complaints against insurers

Before you buy a policy, check with your state department of insurance to find out if there are complaints against an insurer you’re considering.

Ask about enforcement actions, and find out if your state publishes complaint ratio reports. These reports tell you whether an insurer receives more consumer complaints than average.

You can also search for complaints against insurers through the National Association of Insurance Commissioners’ website.

5. Not making side-by-side comparisons

Once you narrow choices to a few policies, compare them closely to be sure the one you choose has the right coverage.

For example, you may want uninsured motorist coverage, which helps pay for accidents caused by uninsured drivers. You also may want comprehensive and collision coverage, which pays for damages that you cause to your own car, and pays if your car is stolen or vandalized.

6. Buying more coverage than you need

Just as you can buy too little coverage, it’s possible to buy too much. Excess coverage is a waste of money.

If you have few assets, you probably don’t need as high of a liability limit as someone with a lot to lose. If your car wouldn’t be expensive to replace, you might be able to get by with less collision or comprehensive coverage or drop that coverage entirely.

Beware of unnecessary policy add-ons as well. If you already belong to an auto club that provides roadside assistance, you don’t need a policy that offers the same service.

7. Sticking with the same insurer year after year

Car insurance is highly competitive. It’s possible to reduce costs by hundreds of dollars a year by simply switching to another carrier.

When your next bill arrives, note the coverages you have and seek quotes from other insurers to find out if you would save by switching.

You can do this by contacting insurance agents directly, filling out forms on insurers’ websites, or letting a service like Gabi or The Zebra get the quotes for you.

If you find a better deal but want to keep your present carrier, tell your agent. Your insurer might match or beat the other company’s offer.

Have you ever made an insurance shopping mistake that cost you? Share it with us by commenting below or over on our Facebook page.

How to find cheaper car insurance in minutes

Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

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