In Plain English

Ranking as the third highest expense of owning a car, auto insurance can cost a pretty penny. And that means no one can afford to make mistakes that will result in raised insurance rates. So read on, and start saving.

Posted on: Aug 05, 2015

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You’ve heard it before: What you don’t know can’t hurt you. Well, we don’t want to cause a stir, but when it comes to auto insurance, that adage is dead wrong. That’s why we’ve compiled a list of five blunders that are detrimental to your wallet’s well-being—and how you can avoid them.

1. Sticking to the Legal Minimum

It’s no surprise that this is a common mistake. No one wants to spend more than they need to, especially when it comes to paying for something that is, dare we say, less than exciting. And while a car insurance premium may never reach the excitement level you feel when budgeting for a much-awaited vacation, that doesn’t mean you shouldn’t give it the same amount of thought. Some things to consider: How much money will you be liable for if you are involved in a fender-bender with a luxury vehicle like a Tesla Model S and only have the minimum amount of coverage required in your state? And how much will you be liable for if you’re rear-ended by an uninsured driver? Or if you’re vehicle is damaged in a hailstorm? If those numbers invoke nightmarish visions of exorbitant bills, then you might benefit from additional coverage.

2. Not Researching Discounts

There is a surprising amount of car insurance discounts that are offered for all manner of things, from the safety grade of your vehicle to how many A's have graced your (or your child’s) report card. You may not qualify for all of them, but it is likely you will qualify for a least one discount. Have a family member in the military? There’s a discount for that. Same goes for owning a home, completing a defensive driving course, or purchasing a hybrid vehicle. All discounts vary based on carrier, so ideally you should research which carrier has the type of discounts that will most benefit you before deciding where to buy your next policy. And don’t stop thinking about discounts there: If you add a new anti-theft feature, your commute to work shortens, or some other significant change happens to your vehicle or driving behavior, give your agent a call and see if you qualify for additional savings.

3. Canceling Your Previous Insurance Coverage Too Soon

When it comes to switching car insurance carriers, it is extremely important to avoid a lapse in coverage. You will be asked about your previous coverage for any quote you obtain, and a month without a policy will cause a spike in premium prices and may make you ineligible for discounts. Even a single day without coverage can raise the cost of your next policy significantly. On the flip side, almost all carriers can offer reduced prices for customers with continuous coverage. So this is a tip to file away, whether that means committing it to memory or jotting it down on a post-it: Always maintain your existing policy until you’ve successfully obtained a new one.

4. Focusing Only on Price

What is the main focus in a commercial for auto insurance? In most TV ads, the answer is strikingly similar: how much lower a car insurance company’s prices are than the competition. And, sure, that makes sense, because who doesn't want to save money? But if price is the only determining factor when you decide on a car insurance company you will ultimately be doing a disservice to yourself.

A car insurance policy is meant to protect you, and you want a company that will deliver that protectionunfailingly and without a hassle. That's why when shopping for car insurance, you should not only consider the coverage benefits (and limits), but also consider the reputation and claims histories of any company you look into. Not sure where to find those details? We recommend looking to A.M. Best, J.D. Power and the Better Business Bureau for ratings on a company’s financial strength, handling of claims, and customer service/business practices, respectively.

5. Automatically Renewing Your Existing Policy

This is an easy mistake to make, and one that often happens before you even realize it. Blame the way time flies or the ease of sticking to what you know, but either way: Staying in your policy comfort zone can cost you. And according to a J.D. Powers study, that cost can add up to $300. The longer you’ve been with an insurer, the greater your savings may be if you pack your bags and take your business elsewhere. This is because older policies are likely to have acquired more annual premium increases and are more likely to be raised due to price optimizationEven if you don’t want to switch carriers, obtaining lower quotes from competitors can provide an incentive for your current insurer to offer a reduction in price. When your renewal time nears, experts agree that you should compare a number of competing quotes to ensure the best deal. So, why not compare hundreds at