It is not uncommon for consumers to buy insurance policies that either don’t meet their needs or are too expensive, in some cases both apply. Whether you are getting life insurance, disability insurance, health insurance, home insurance, long-term care insurance, or auto insurance, it can be a daunting task. Always do your research before buying any insurance policy.
Here are the top five common blunders to avoid when purchasing auto insurance:
1. Avoid a small deductible, lower your monthly premium
If you want to lower your car insurance premium, don’t get a low deductible. Many people believe that they need a low deductible, in case they get a scratch or a ding in the parking lot; hence have the insurance company cover majority of the cost.
But that can be a costly long-term mistake. Why not pay for low-cost scratches and dents yourself? If you forgo the $250 or $500 deductible and get the $1000 deductible, you can see the big difference in your insurance premium. Avoid filing small claims (under $1000) trying to win battles but ultimately losing the war. You lose the war when a fed up insurance company jacks up your premium or drops your coverage.
Any increase in the premium by the insurance company will be a lot more expensive in the long-term than the small damage you could have paid out of pocket.
2. Be prepared and know your needs ahead of time, avoid falling for sales talk.
Know why the insurance rep is trying to sell the least amount of insurance coverage that is justifiable and charging more in premiums at the same time. The insurance company wants you to inherent more of the risk instead of transferring more risk to it. It is much more profitable to sell you less insurance and charge you more than provide you more insurance and inherit more risk.
It is important that you have proper liability, comprehensive, and collision coverage.
3. Not all cars are equal, each car has different needs
If your car isn’t worth much anymore, conserve your monies and avoid getting full coverage. For one thing, you don’t need a $1000 deductible if your car is worth less, just get the lowest deductible. Also, revaluate the individual coverage components of the policy.
4. Be single, avoid certain car ownership options
Just because you are in a relationship and share everything equally; it doesn’t mean that you should share joint ownership on the auto. This can open you and your significant other to liability, instead of just you.
Also, depending on your faith in your children’s driving abilities, you may want to consider transferring car title to them at the age of 18.
5. All-inclusive coverage can be worth it
Umbrella insurance policies give you added liability protection beyond the limits of regular policy. An umbrella policy, depending on the insurance company, can provide an additional $1 - $5 million in liability protection.
The main benefit of umbrella protection is to cover your costs, once your existing policies have been exhausted. As umbrella policies protect you against only the most terrible accidents, they seldom pay out. Hence, due to the infrequency of payout for umbrella policies, insurance companies can offer seven figures worth of coverage cheaply.