4 mistakes to avoid when buying an auto insurance
Purchasing car insurance is never considered necessary unless a mishap takes place. Despite people’s aversion to spending some additional bucks on car insurance, one cannot deny that they constitute an essential component of driving costs. Having acknowledged this fact, customers are only required to avoid specific costly mistakes so that only those car insurances are purchased, providing maximum coverage for a nominal price. This article discusses the common mistakes to avoid while buying auto insurance.
Mistakes to avoid when buying auto insurance
While selecting suitable car insurance is as essential as choosing an appropriate car, the two decisions are intricately linked. The ambit of one’s car insurance options depends on what vehicle one chooses. On the other hand, the insurance budget determines the range of cars one can afford to drive.
Besides, it is illegal to ride without being insured on the roads of most states. So, to choose the right auto insurance plan, here are a few mistakes one must try to avoid at all costs:
Purchasing state-mandated minimum coverage
As per state mandates, all drivers should get an insurance cover of at least $10,000 to $50,000 for physical injury per accident per person and $10,000 to $50,000 for damages caused to property. However, in practice, the said amount can hardly pay off all the expenses of such crashes.
For instance, if a driver is liable for the damage caused to another person’s car, costing about $20,000, and the driver gets insurance of only $10,000, the remaining amount will have to be paid from the concerned driver’s pocket. Coverage of more than the state-mandated amount is essential to avert such situations.
Neglecting gap coverage on a new vehicle
For customers still paying off their auto loans, adding gap coverage to their existing insurance cover will solve many of their problems in case of a crash. CARFAX estimates that, on average, a new vehicle costing, for instance, $30,000 loses about 10 percent of its value, that is, $3,000 when it is first driven.
Eventually, when that new vehicle crashes in an accident, collision insurance pays off only the remaining car value after it was first moved, which is $27,000. This means the owner still faces a loss of $3,000 after the compensation has been paid off.
This is precisely where a Gap Coverage Plan plays a vital role by paying off the leftover expenses of the damaged new car. Therefore, neglecting a Gap Coverage plan after purchasing a new vehicle is not a good idea.
Purchasing collision or comprehensive coverage for low-cost car
Collision coverage pays for the damage caused to a vehicle due to accidents where the owner is at fault. While comprehensive coverage compensates for a car in case of theft or damages caused by flood, hail, vandalism, fire, or fallen tree. However, they are not worth the effort if the concerned vehicle is low-cost and the premiums of such coverage surpass the 10 percent mark of the car’s actual value. In such situations, sticking to liability-only insurance coverage plans is far more beneficial.
Not including the names of all drivers in the application
Nothing is surprising about the fact that two or more people may drive a particular vehicle. However, it is essential to mention their names on the insurance application. Specific insurance companies charge more if a car is expected to be driven by more than one person, which is pretty apparent as the risks are heightened in such cases. However, it is essential to remain honest and mention the name of all the drivers. Otherwise, the insurance company may refuse to pay for the loss if the concerned vehicle was being driven by a person whose name is not mentioned in the application. If the owner has already insured their car when a new person has started driving it, it is vital to update the insurance company about the changes accordingly.
