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Car Insurance: Mistakes & Myths

 Car Insurance: Mistakes & Myths

Car Insurance: Mistakes & Myths
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  1. Introduction
  2. Car Insurance Mistakes
  3. Car Insurance Myths


Not having any coverage is clearly the biggest mistake you can make in auto insurance. Also, purchasing the first insurance policy you come across is not the best decision either.

Since buying a car is an expensive purchase, it is unwise to leave such a huge investment unprotected. Additionally, car insurance is mandatory in all states, except for New Hampshire and Virginia, and you risk heavy fines and, in some places, jail time, if you don't have auto insurance.

Learn how to avoid common auto insurance mistakes when shopping.

So don't make the same mistakes, check out these fatal mistakes people make when purchasing auto insurance.

We've exposed common car insurance myths so you can make sure you're protected while driving and off the road and make smart decisions about your insurance options.

What you don't know about auto insurance may hurt your rates.

Common car Insurance Mistakes to avoid

These are some of the mistakes people make when purchasing car insurance coverage and learn how to avoid these mistakes.

1. Not knowing what insurance coverage you need

2. No comparison between insurance companies

3. Not telling the truth about the car insurance request

4. Forget about updating your insurance policy

5. Choose the wrong deductible amount

6. Do not search for car insurance online

7. Buy only the minimum insurance coverage

8. Buy excessive coverage

9. Don't ask questions

10. Do not look for auto insurance discounts

1. Not knowing what insurance coverage you need

Every state has its own minimum coverage requirements, but you shouldn't base your decision on just that. Each person has unique protection needs based on many other factors, including:

The type and model of the vehicle

• The price of the car

• Experience behind the wheel

• How much you drive

• Driving and weather conditions in your living area and commuting

Of course, everyone wants full coverage. However, it is usually quite expensive. Therefore, your best bet is to find the right balance between cost and coverage. 

If you are not sure what kind of coverage you need - whether that be a comprehensive, collision, personal injury protection, or anything else - you can always consult your insurance agent.

2. No comparison between insurance companies

People usually compare the prices of retail items every time they shop. You should apply the same principle when shopping for car insurance to increase your chances of getting a good deal.

Therefore, always try to get at least multiple quotes from different companies when shopping for auto insurance. For example, Geico usually provides lower insurance rates for good drivers. However, if your driving record includes accidents or an increase in speed, you may need to tour around to determine which is the best and cheapest option for you.

3. Not telling the truth about the car insurance request

The worst thing you can do when filling out your car insurance application or claim is to lie. Don't lie about your information. Insurance companies will have access to driving records and other personal data and can easily spot discrepancies. 

Accordingly, they can deny insurance to you and deny your application. But this is not the greatest danger.

If an accident does happen and they find out that you lied, they can refuse to pay your claim and cancel your policy. Also, many companies will not be willing to insure you if you notice cancellation on your record. So be completely open about your driving habits and the condition and value of your vehicle.

4. Forget about updating your insurance policy

Although forgetting isn't the same as lying, it is one of the most common auto insurance mistakes and some insurance companies treat both of them the same way. 

For example, if you do not add your teen driver to your current policy but allow them to drive your car, you may face some serious consequences.

However, updating your policy isn't always a bad thing. If you get married or move to a safer neighborhood, your insurance rates are likely to drop.

5. Choose the wrong deductible amount

An important part of your car insurance policy is the deductible amount. Generally, a lower discount means a higher insurance rate but less out-of-pocket expenses in the event of an accident. 

On the other hand, a higher discount saves money in your policy but makes you pay more if you have an accident.

However, it is normal to be hesitant about discounts.

6. Do not search for car insurance online

Online comparison sites are one of the best ways to shop for auto insurance. Nowadays, everyone is online and companies have to adapt. You can even compare car loans if you wish.

There are many online platforms that can get multiple insurance offers after you fill out one application and it doesn't take much time if you have all the necessary documents on hand. 

Do keep in mind that some of these sites provide estimates while others provide real quotes. However, either way, you can get a good overview of the current prices that are available to you.

Also, most insurance companies offer quotes on their websites so that you can do so instead of visiting or calling the office.

7. Buy only the minimum insurance coverage

It can be tempting to just have minimal insurance coverage. But this isn't always very smart. This is why it puts together a list of common auto insurance errors. In nearly 100 percent of cases, minimal coverage is simply far from adequate.

What is usually required is liability coverage, which in reality does not protect you but mainly the other person you bump into. Moreover, the limits of liability are usually low, which leaves room for the other person to sue you for much more than your policy covers.

Also, if you are driving an expensive vehicle, it is a good idea to consider getting comprehensive collision coverage. Otherwise, you run the risk of significant financial loss in the event of an accident or if your vehicle is stolen.

8. Buy excessive coverage

It is possible to buy just as much coverage as you can buy very little. For example, if you have an old car, it makes no sense to purchase an expensive insurance policy or full coverage. Aggressive ads should not make you change your mind.

Moreover, you should generally not pay more than a tenth of the value of your car for insurance.

And if you can't find a policy at a good price, it may be time to consider looking for a new car.

9. Don't ask questions

Whether you get auto insurance through an agent or a specific company, always ask questions if something is not clear. Agents and companies often use fancy words and industry jargon to distract you and seal the deal. But when you don't understand a term or what they're trying to say, have them stop and explain to them.

Although you think you might sound rude or silly, this is not the case. After all, their job is to help and educate clients to make informed decisions. There is nothing to be afraid of.

10. Do not look for auto insurance discounts

Last but not least, you can always make good savings if you keep your eyes open for car insurance discounts. It is one of the common mistakes in car insurance because it can be updated annually and sometimes people not request it.

There are some popular ways to save, such as pooling your home and car insurance with the same company or insuring multiple cars with the same provider. There are many other discounts available.

You can always ask your insurance company what kinds of discounts they offer. For example, there might be a good student discount or discounts on safety equipment. Having an affinity membership for AAA or similar organization can save you money.

Car Insurance: Mistakes & Myths 1
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Common Car Insurance Myths to Know About

Myth 1: Red car insurance is more expensive

Your car affects how much you'll pay for car insurance, but its color doesn't drive your prices. Instead, insurance companies look at things like zip codes, security features, and more.

What insurance companies consider:

• The value of the car

• The cost of repairs

• Engine size

• Vehicle safety features

• The possibility of theft

• Risky driving behaviors

In other words, insuring a red station wagon could be cheaper than a shiny red convertible.

Myth 2: Comprehensive insurance covers everything

Don't be misled by the word "all-inclusive" when it comes to insurance. Comprehensive insurance does not mean that it provides full coverage. Alternatively, comprehensive vehicle insurance is sometimes referred to as 'non-collision' insurance. 

It can cover damages like fire, vandalism, deer collision, robbery, or falling objects.

Instead of equating universal coverage with full coverage, keep in mind that your car cap requires a few different coverage options.

The general rule is:

• Comprehensive coverage can pay for the repair of the vehicle when the damage is not related to an accident.

• Collision coverage can pay for the repair of a vehicle after an accident.

• Liability insurance pays the expenses when an accident is caused.

Myth 3: You just have to worry about car insurance for you and your family

Uninsured motorists are a huge problem on the roads. If an uninsured driver causes an accident and damages you and your car, you may be unable to pay the resulting medical bills and repair the car.

Laws vary by state regarding coverage for uninsured and uninsured drivers, and some states require this type of insurance. 

Check your insurance options and find out what coverage you need, including bodily injury coverage and property damage coverage.

Policies usually cover hit-and-run incidents where the person at fault cannot be identified.

If someone borrows your car, find out if your insurance covers this type of situation.

Myth 4: The short time interval in auto insurance coverage does not matter

Personal car insurance rates can be affected significantly due to the interruption of auto insurance coverage. 

Whether you let your insurance expire by mistake, or voluntarily cancel the plan for a short period, the result is that you will likely pay more when registering for a backup.

Many insurance companies have a grace period, so you may be able to avoid penalties if you are within this window. 

However, if your sloppiness extends beyond the grace period, you will be classified as a high-risk driver, and there could be financial consequences.

You may encounter many situations where you may not have been driving the car for a while. 

For example, you may not drive after surgery, spread abroad, travel for an extended period of time, or move to a city where you will use public transportation. Usually, keeping your car insured is a better financial option than leaving it parked and unlocked.

Check with your insurance agent to compare the numbers for your situation.

Myth # 5: You don't need to worry about car payments after your car has had an accident

This is another common myth about auto insurance - you don't have to worry about car payments. Even after not driving anymore, you are not necessarily free and clear about loan payments. 

Insurance companies determine your financial impact only after completing assessments and comparing balances.

After insurers total a vehicle, you can receive payments from Comprehensive or Collision Coverage. Your insurance officer will determine the amount that is calculated from the current value of the vehicle minus your deduction. 

The problem is that cars can depreciate quickly, so if you owe a loan of $ 15,000, your insurance company might say the value of the car is less after the accident.

According to the Insurance Information Institute, the diminishing value loss may or may not be covered. Since the states regulate insurance, it also depends on where you live. For example, if you live in Georgia, laws require insurance companies to pay the difference.

If the state and insurance don't cover the difference in value, you can consider covering the loan or rent gap. Also, some lenders will require this as well if you finance your car, so check your policy.

Myth 6: Your money has no effect on insurance costs

Similar to a financial credit score, the insurance industry uses what it has called a credit-based insurance score to determine the insurance rates for your vehicle, according to the Insurance Information Institute.

Insurance companies improve the scores using information from your credit history, including whether you paid your bills on time, your outstanding debts, and the length of your credit history. 

Your degree of insurance does not take into account your income, age, gender, or any other discriminatory category. 

Instead, insurers focus on patterns of financial behavior as a way to predict which drivers are most at risk and most likely to file a claim.

Not all states allow your credit history to affect your vehicle insurance rates. Check with your insurance agent to find out the policies in your state and which insurance providers are best for those with low credit scores or those without credit.

These are ways to reduce the costs of your car insurance if you think you are overpaying for the costs of the car. With some easy hacks, you can lower your insurance premiums and reduce your monthly bills.

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