Car insurance is more than a legal formality, it’s a financial safety net. Yet, many drivers make avoidable mistakes that cost them money or leave them underinsured. Car insurance is more than just a legal requirement — it’s your safety net during life’s unexpected turns. Yet, millions of drivers make costly mistakes when buying a policy, either out of haste, lack of knowledge, or misunderstanding of what they truly need.
Whether you’re a first-time buyer or renewing your policy, this guide outlines the 7 most common mistakes people make when buying car insurance and more importantly, how you can avoid them.
1: Choosing the Cheapest Policy Without Looking at Coverage
Cheaper isn’t always better. Low-cost plans often have limited protection, leaving you vulnerable in an accident. Many buyers zero in on the lowest premium without considering what’s actually included in the coverage. A barebones policy might save you money now but cost you thousands later during an accident.
How to Avoid It
- Compare coverage details, not just price.
- Look for liability, collision, and comprehensive coverage.
- Read the fine print and exclusions before purchasing.
📝 Pro Tip: Ask the insurer what is not covered — this reveals more than what is covered.
Tip: Compare what’s included — not just the price. Look for collision, liability, and comprehensive coverage.
2. Failing to Compare Multiple Quotes
Prices vary across insurers. Skipping comparisons may lead you to overpay. Sticking with the first quote you get (or your current insurer) might mean you’re overpaying. The insurance market is highly competitive and prices vary widely.
How to Avoid It
- Use comparison websites like NerdWallet, Policygenius, or Compare.com.
- Request at least three quotes from different companies
- Check for discount eligibility (good driver, student, military, etc.)
Tip: Use comparison tools like Policygenius or The Zebra to evaluate options side-by-side.
3. Underestimating How Much Coverage You Need
Minimum legal coverage might not cover major accidents, leaving you financially exposed. State minimum coverage might be legal but it’s usually not enough. In serious accidents, you could end up paying out-of-pocket for medical bills or car damage that exceeds your limits.
How to Avoid It
- Evaluate your assets and risk level. If you own a home or have savings, higher liability coverage protects you better.
- Consider uninsured motorist coverage, especially in areas where many drivers are uninsured.
- Understand collision vs. comprehensive and decide based on your car’s value.
Tip: Consider your assets and driving habits. Opt for higher limits if you own a home or drive frequently.
4. Misunderstanding Deductibles
High deductibles mean lower premiums but more out-of-pocket costs if you file a claim. Your deductible is the amount you pay out of pocket before insurance kicks in. A high deductible means lower premiums but more financial risk during a claim.
How to Avoid It
- Balance deductible vs. premium based on your savings.
- If you rarely file claims and have an emergency fund, a higher deductible may save you money.
- If you drive frequently or live in a high-risk area, opt for a lower deductible for peace of mind.
Tip: Choose a deductible you can comfortably afford in an emergency.
5. Ignoring Discounts and Bundles
Missing out on discounts for safe driving, bundling, or low mileage costs you money. Many buyers overlook available discounts or don’t bundle policies (home, life, renters) — missing out on hundreds of dollars in potential savings.
How to Avoid It
- Ask about discounts for:
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- Good driving record
- Low mileage
- Multi-car or family plans
- Safety features (anti-theft, airbags)
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- Bundle policies with the same insurer for up to 25% off.
Tip: Ask your insurer about every discount. Bundle with home or renter’s insurance for savings.
Real Example: Bundling car and home insurance could save the average U.S. customer $300–$500 annually.
6. Not Updating Your Policy When Life Changes
Big life events like moving, getting married, or buying a new car can affect your premiums. Your insurance needs can change as your life evolves yet many people keep the same policy year after year without adjustments. This can lead to overpaying or under-protection.
How to Avoid It
- Update your insurer when:
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- You move to a new area
- You get married/divorced
- You buy a new car
- Your credit score improves
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- Annual policy reviews can reveal new discounts or coverage needs.
Tip: Update your policy yearly or after major changes to ensure it still fits your needs.
7. Not Reading the Policy Carefully
Policy documents contain critical details. Ignoring them may lead to surprise exclusions during a claim. People often sign up for insurance without understanding what their policy actually includes. This can result in denied claims, hidden fees, or gaps in coverage.
How to Avoid It
- Read your declarations page — it summarizes key details.
- Understand terms like:
- Liability limits
- Exclusions
- Add-ons like roadside assistance
- If confused, call the agent and ask specific questions.
🧠 Knowledge is power: The more you understand your policy, the better you can make it work for you.
Tip: Always read the declaration page and call your agent if anything is unclear. Bonus: How to Choose the Right Car Insurance Company
When shopping for car insurance, the insurer’s reputation and customer service matter just as much as the price.
- Have strong financial and stable ratings (e.g., A.M. Best, Moody’s)
- Excellent customer reviews
- 24/7 claims support
- Provide mobile apps for claims and policy management
Final Checklist Before Buying
Use this quick list to avoid mistakes and make an informed decision:
Step-by-Step Buying Guide:
- Evaluate your needs – car type, driving habits, budget
- Gather at least 3 quotes
- Compare coverage, not just premiums
- Ask about all available discounts
- Check the company’s reputation
- Read the policy documents
- Decide on your deductible
- Bundle policies if possible
- Sign up and set reminders for annual review
Smart buyers save more and protect better. Don’t rush your decision—do your homework and drive covered with confidence.
Be Smart, Not Sorry
Buying car insurance shouldn’t be rushed or taken lightly. The right coverage can be the difference between a small bump in the road and financial disaster.
By avoiding these 7 common mistakes, you can drive confidently knowing that your policy truly protects what matters most.
Need Help Choosing the Right Insurance?
Here are some helpful tools:
- NerdWallet Car Insurance Comparison
- Policygenius Car Insurance Wizard
- The Zebra Auto Insurance Quotes