Choosing the right insurance company is a big decision. But choosing the right insurance coverage is the most important issue you face when buying insurance. Here are the top five mistakes people make when buying car insurance.
1. Not Buying Enough Liability Coverage
Each state sets minimum liability limits for the purchase of automobile insurance. The limits range from three states (Alaska, Maine, Wisconsin) with mandated limits of 50/100/25; to one state (Florida) with limits of 10/20/10. The first two numbers refer to bodily injury limits and the last number refers to the property damage limit. So in Alaska, for instance, if you are involved in a car accident, your insurance company will cover you up to $50,000 for any one person injured in the accident and no more than $100,00 for all persons injured. Your insurance company would cover you up to $25.000 in property damage you cause to other vehicle owners.
The sad fact is that too many people opt for minimum limits because that translates into the lowest insurance premium. The problem occurs when you seriously injure someone and that $10,000 limit doesn’t look so good. The injured party may not want to settle but sue you for an amount above your policy limit, leaving you exposed to an excess judgment.
ADVICE – Buy the highest insurance coverage you can afford, especially in low-minimum states. You would be surprised how a few extra dollars per month can get you higher limits with the resulting benefit of peace of mind. Protect your assets!
2. Not Buying Uninsured/Under-Insured Motorist Coverage
Uninsured/Under-Insured Motorist coverage is mandatory in some sates, optional in others. What UM/UIM coverage does is protect you if you are involved in an accident where the other vehicle is uninsured or doesn’t carry enough liability insurance to pay for your injury.
ADVICE – Even if the coverage is optional in your state, you should seriously consider adding this coverage. According to a study published by the Insurance Research Council in 2011, approximately one out of every seven drivers on the road is uninsured. Protect yourself!
3. Not Buying Collision Coverage
This is an important option, especially for owners of newer cars. With this optional coverage, your own insurance company pays you, without regard to fault, for damage to your car caused by a collision with another car or any other object or your car overturning.
ADVICE – While this coverage can be pricey, if you’re the owner of a new or expensive car, the protection is well worth it. Protect your car!
4. Not Being Truthful When Applying For Insurance
In trying to get a low rate, drivers often fudge on their policy application. Drivers often are not truthful on who drives their car, what the car is used for, or even where it is parked at night.
This type of behavior is not only shortsighted but also very dangerous. If your misrepresentations ever come to light, it could jeopardize your insurance coverage.
ADVISE – Make sure you provide your insurance company with accurate information, whether on your application or during a claim. Protect your coverage!
5. Not Shopping Around For The Best Rate
In a world where 15 minutes can save you 15% on car insurance, it surprising how few drivers shop around for insurance coverage. According to JD Powers & Associates, in the last 12 months, only about 1/3 of all policyholders shopped around for coverage; almost 70% just let their policies automatically renew.
A small caveat here … while it is important to choose a company with competitive prices, you also want a company that is financially sound and provides good customer service.
ADVICE – Insurance experts suggest you review your insurance policy every year. Don’t be lazy and allow your policy to renew without question. Protect your wallet!
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