understanding your insurance policy

3 Common Car Insurance Mistakes That Can Seriously Cost You

25 September 2015 by Tuĝba Van Den Heijkant

Car insurance is something that everyone needs to legally drive, yet many people make serious mistakes when purchasing it. If you think about the car insurance options you choose, you might realize that you don't even know exactly what they all cover. You need to understand exactly what your car insurance policy means so you can make the best choices for the coverage that you need. Here are 3 common mistakes that people make when purchasing car insurance.

Low/High Deductible

One mistake that is easily made is setting the deductible too low or too high. The deductible is the amount of money that you have to pay out of pocket before that particular coverage will kick in and cover your accident. For example, if you get in an accident and your deductible for collision insurance is $500, you have to pay the $500 at the time of the claim and your insurance will cover everything after that.

Many people set the deductible too high because it results in a lower monthly rate. If you have a $1,000 deductible, you might only pay a few bucks a month for that coverage. However, if you ever get in an accident, you won't be covered if you don't have $1,000 to pay when you make your insurance claim. Others set the deductible too low. It might seem like a good idea to only have to pay $100 after your accident so your insurance flips most of the bill. The problem is that your insurance premiums will be so high, you'll spend way more than necessary before an accident ever happens.

The best thing to do is choose the highest amount that you could reasonably pay if you were to get in an accident. This way, you are spending the least amount each month as possible, but you will still be able to file your claim after an accident.

Liar, Liar

Another mistake people make when shopping for insurance is lying on the insurance application. You can't pretend like you haven't received a ticket or haven't been in an accident to get a cheaper rate. After you receive your quote and start your policies, the underwriters go through your application and run your driving history. If they see that you lied, they can raise your rates, resulting in a large payment the following month, or they can cancel your policy altogether without any warning. It's important to be honest. Being honest could result in a lower rate than if they find out after the fact.

Focusing on Price

On top of adjusting your deductibles to the highest amount, you might find yourself opting out of certain coverage and add-ons to make your premium as low as possible. It's an easy thing to do if you don't have a high income, but it will hurt you in the long run. Opting out of comprehensive is an easy way to take a large chunk off of your monthly payments, but comprehensive insurance is extremely important, because it will cover your vehicle when anything other than a vehicular accident happens. If a tree branch falls on your car, you hit a deer, someone breaks into it, or it catches on fire, your vehicle is covered.

Add-ons such as roadside assistance and rental reimbursement are too important to skip. You never know when you'll blow a tire, run out of gas, or your car simply won't start. When this happens, roadside assistance will tow your vehicle for free up to a certain amount of miles depending on your insurance provider. You don't want to be stranded because you wanted to save a couple bucks a month. Rental reimbursement will reimburse you for the cost of a rental car if your vehicle ends up sitting in the shop for a while.

Car insurance saves you a lot of money if you do it right, but it will cost you a lot of money if you don't choose carefully. Make sure you focus on coverage, not price, and know what each coverage option means. You can click here for more information on auto insurance options in your area. 

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