5 Common Mistakes when Choosing an Auto Insurance
Published on May 5th, 2015 | by Joan Makai
Auto insurance products are a mystery to most people. The insurance companies never seem to pay the expected amount. People buy these insurances because the State stipulates such coverage. Otherwise, many automobile owners would completely avoid purchasing auto insurances. But auto insurance is not so bad. In fact, most of these insurance products are designed for particular needs. It is up to people to find a product that covers their needs.
Here are 5 common mistakes that people make when choosing an auto insurance.
1. Inadequate Research for the Right Auto Insurance Coverage
People do not spend much time to study the auto insurance product. In fact, most car owners are not aware of the coverage they need. Therefore, they purchase only the amount of coverage that the State stipulates.
While buying any such car insurance, the owner should keep in mind
- Insurance amount stipulated by any automobile finance provider;
- How much money can be spared from personal funds in the event the insurance is inadequate
- How much auto insurance the state requires the automobile owner to purchase
- Any outstanding loans, which can be easily be covered by paying additional sums.
2. Failing to Bargain
Many auto owners are not aware that they can bring down their auto insurance premium by bargaining for discounts from the insurance company. Auto insurance companies reduce premium based on superior automobile and garage locking arrangements, driving record of the family members, and age of the vehicle. Personal habits of the family members such as smoking and drinking are also considered by automobile insurance companies. Smoking increases the chances of fire accidents. Excellent quality locking arrangements bring down the possibility of theft. Older vehicles are not targeted by car thieves.
Moreover, insurance businesses prefer to have customers who purchase multiple insurance products from them. It is, therefore, possible for the entire family to buy auto insurance for their vehicles from the same insurance company.
3. Discounts are Ignored
Most auto insurance purchasers would hesitate to pay $500 upfront as a premium for such insurance products. Instead, they are comfortable paying a sum of $50 per month towards auto insurance premium. Effectively, they pay a $100 more for the same amount of cover. If cash flows are not a constraint then opting to pay $500 upfront towards premium is considerably cheaper.
4. Buying the Cheapest Available Product
Auto insurance purchaser should also search for an insurance product which would cover all possible automobile related eventualities and liabilities arising from such eventualities. Many car owners are not aware that there are optional coverage products available to supplement the coverage in the primary policy.
Collectively, all these insurance products may seem pricey, but in the long run, they are the best. It is also necessary to compare auto insurances offered by different auto insurance businesses and opt for cheaper of the lot, provided the insurance company has a reputation of paying money promptly. Cheaper auto insurance policy may have several exclusions mentioned in fine print. Reading and understanding the fine print is necessary.
5. Choosing Wrong Deductible
Every auto insurance product mentions deductible. Higher amounts are promised by the insurance company for higher deductibles. People buying auto insurance do not understand what these deductibles are all about. If a person purchases coverage of $22,000, the deductible may be 10 percent of the accepted claim. If the claim taken by the company is $22,000, then the person would have to spend $2,200 from his pocket to get the balance amount from the insurance company. Insurance companies insist on such deductibles so that the person would not be overconfident or careless because he or she too would have to spend something from personal funds.
The above-listed mistakes make auto insurance expensive. According to a study made by insurance.com, Americans spend approximately $84,000 or so in their lifetime on auto insurances. However, most of that money is not utilized well by the insured because they have not bothered to understand how to make optimal use of auto insurance products.