Buying car insurance is a necessity. States require it in some form almost anywhere in the United States. Many people are still confused about what kind of car insurance is right for them, how much coverage they need, and how they can make it affordable.

It is common to make mistakes, but with just a little research and preparation, car insurance customers can avoid the pitfalls and end up with the right policy.

Not Asking About Discounts

Most car insurance companies offer several discounts. These vary from one company to another, but some common ones are:

  • Good driver discount
  • Good student discount
  • Multi-policy or multi-car discount
  • No accident discount

There are many more, but not every car insurance company offers the same discounts. On top of that, companies often offer a different percentage discount. For instance, two companies might both offer a good student discount, but one company offers a 10-percent discount, while the other offers a 15-percent discount.

A good insurance agent can help walk a buyer through all the available discounts to ensure they are getting the best possible price for their policy.

Ignoring the Credit Score

Many insurance companies see credit scores as a way to determine how responsible a potential policyholder is. A lower credit score may reflect poor bill-paying habits and indicates that the person is a financial risk.

Car insurance companies incorporate a person’s credit score when building a quote for a car insurance premium. A score that goes up or down can affect a person’s premium even if they are already a customer with the insurance company. It is important for people to know their credit score and actively work to rebuild it if things happen to damage their score.

Not Comparing Car Insurance Rates

Car insurance companies take into account many factors when charging premiums. There are so many variables that affect the price. A car insurance company can be the least expensive choice in one town and the most expensive choice in another.

This is why it is vital to compare car insurance rates by getting multiple quotes. Customers should never assume they are getting the best rate.

Lying on the Application

Car insurance can be expensive. Some people feel tempted to lie about their information when applying for car insurance. This is not a good idea for several reasons.

Car insurance companies can access all the documents they need to verify personal information, so they can spot discrepancies during the application process. They may ask the person if they can correct the information, or they may decline to issue a policy.

Sometimes companies do not spot the issues during the application but find out later. They may cancel the insurance policy, leaving the driver without insurance, which can lead to penalties. Other times, they may discover the discrepancy after the policyholder submits a claim and could deny coverage for damages.

Not Updating the Policy

Things change. People buy new cars, their driving habits change, or they move to a new city or state. It is very important to keep the car insurance policy updated on these life changes, as they affect the cost of the premium and the ability of the company to insure the car and driver.

Sometimes, these changes can cause the cost of the policy to go up or down. If the policyholder does not discuss the changes with the insurance company, they could be in for an unpleasant surprise when the bill goes up, or they find out they are no longer covered.

Buying Too Much or Not Enough

The amount of coverage a person needs changes. Some people have newer cars or drive a lot. They might need more coverage. Only getting inexpensive liability coverage for a brand new car is very risky.

Others don’t drive as often or have a car that isn’t worth as much. They could be overpaying if they have full coverage on an older car. Some companies may advertise coverage that isn’t right for all drivers. It’s okay to say no to aggressively marketed coverage.

The Takeaway

No one wants to overpay for car insurance, but getting the right coverage takes a little time and legwork. Making a mistake upfront could be very costly down the road and cause long-term financial problems. Having open discussions with an agent and going through all options are part of practicing good personal finance. Avoid making common car insurance mistakes by being honest and asking thoughtful questions.