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User's Guide To Car Insurance

Car Insurance: Do You Makes These 5 Mistakes?

By Ara Rubyan

Here are the 5 common mistakes many  insurance policyholders make.  See if you recognize yourself:

1. You assume the insurance salesman is your friend.

Insurance salesmen are exactly that -- salesmen.  And they do get compensated with bonuses and other rewards for selling certain types of policies.  Those policies are not always the policies that are best for you.  Remember that the next time you are shopping for auto insurance. Generally speaking, insurance salesman are rewarded for selling the smaller policies that leave the insurance company less exposed in the event that you want to make a claim.  These are the policies that are most profitable for the insurance company.  So, as surprising as it might sound,  you may actually be underinsured. 

To make sure this doesn't happen to you, make  sure that you have the basics: liability coverage, comprehensive coverage and collision coverage (see below).

2. Your deductible is too small.

Many consumers think that they need to protect themselves against every little scratch and dent.  That's a bad idea.  You should only insure yourself for those things that you cannot afford to lose.  If your car is only worth a few thousand dollars, don't spend that much on premiums for collsion coverage by buying a small deductible.

Another reason this is a bad idea is that you'll be tempted to nickel and dime your insurance company with every little thing that happens to your car.  Eventually, your premium will go up or they could say, "we're declining future coverage."

So seriously consider getting a much higher deductible -- maybe even as much as $1000. You'll save money and your coverage will probably extend to a much higher


3. All your cars have the same insurance coverage.

If one of your cars is an old beater, don't cover it the same way that you cover your other cars.  For example, if you have an old pickup truck that you use to transport building materials and you don't care if it gets dented or scratched or whatever, just get the minimum amount of coverage on it.  Who knows?  Maybe you just drive it a few miles a year.  Get insurance that is appropriate for that vehicle and cover your other vehicles in ways that are appropriate for them.

4. All your cars are jointly owned.

There's really no reason to own a car jointly.  If you share ownership with your spouse, it's possible that you could be exposed to liability if your spouse causes an accident.  In other words, both of you could be sued.  Similarly, when your child buys a car, or if you buy them a car, put the car in your child's name.  That way, you can avoid liability for any accidents caused by your child.

5. You forgot your umbrella

Here's how umbrella coverage works: if you're in a very bad car accident that causes a lot of property damage that is beyond which your insurance policy covers,  you may have to pay massive amounts of money out-of-pocket. This is what umbrella policies are for: to protect you from liability that is way beyond the limits of your standard auto insurance policy.  These umbrella policies are usually pretty cheap (a couple of hundred dollars) and can give you important coverage.


Hopefully this article has showed you some things that you can do, that will help you avoid common mistakes that car owners make when they buy auto insurance.

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