Avoid These 5 Mistakes When Shopping for Auto Insurance

Auto insurance isn't cheap these days. The average annual premium was $3,017 in 2023, and inflation is expected to drive these costs even higher in 2024. But there are still plenty of drivers that manage to score a great rate on their coverage.

If you want to join them, you need to avoid common, but costly mistakes. Here are five you definitely don't want to make this year.

1. Not shopping around

Every auto insurer has its own proprietary risk assessment formula that it uses to set premiums. That's why the same driver gets vastly different quotes from different providers. But the only way to know which one offers the best rates is to compare them side by side.

Most auto insurers enable drivers to get quotes online and to save those quotes for later viewing. The process doesn't take long. Drivers will need to know key details, like their vehicle identification number (VIN) and the dates of any accidents or traffic violations. Then, they just enter their information and wait for their quote.

2. Buying too little coverage

Nearly every state requires its drivers to have some auto insurance to get behind the wheel -- usually bodily injury liability coverage and property damage liability coverage. Some states require a few others too. But state-minimum limits are often very low. This reduces premiums, but it might leave drivers in serious trouble if they are at fault for an accident.

Insurance companies are only required to pay up to the policy's limits for covered claims. If a driver has just $25,000 of bodily injury liability coverage but they injure someone to the tune of $30,000, they'll have to pay the remaining $5,000 out of their own pocket, plus their policy's deductible. It's best to purchase higher coverage limits when possible. Drivers may also want to investigate optional car insurance protections as well.

3. Going with a low deductible without understanding the tradeoff

Low deductibles are nice in an accident because drivers won't have to pay as much out of pocket. But they also bring higher monthly premiums. And often, this isn't a great tradeoff for drivers.

Compare premium costs for low- and high-deductible options before deciding which way to go. If choosing a higher deductible results in significant savings, it could be more affordable in the long run. However, drivers may wish to save for their deductible in their emergency fund so they're prepared in the event of an accident.

4. Lying or failing to update crucial application details

Certain things, like accidents or living in areas with high rates of auto theft, increase car insurance premiums. Some drivers might quietly omit these things from their application to avoid the premium hikes that come with them. But this isn't a good idea.

First of all, those details may not stay secret. Insurance companies have ways of learning about a driver's record and if they discover they've been lied to, they can hike rates or deny coverage. And if a driver files a claim after lying on their application, the claim could be denied.

5. Focusing only on price

Price is obviously one of the biggest factors when shopping for auto insurance, but it's not the only one to consider. Drivers also need to think about coverage options, especially if they're seeking rare protections. For example, those who work for ride-hailing companies will need coverage that protects them while they're working. Not all companies have this, though it is becoming more common.

Customer service is also important. Having a helpful claims representative can take some of the sting out of an accident while a poor claims representative will just make everything worse. So it's important to weigh these other factors as well when evaluating auto insurers.

Try to keep a long-term focus when shopping for car insurance. Consider not just the monthly costs but how a particular policy would help or hurt in the event of a claim. It's always possible to change auto insurers down the line, but it's much easier to choose one you're happy with from the start.