It’s easy to avoid the most common mistakes people make when buying auto insurance.

Mistake: Paying too much attention to discounts—and not looking at the bottom-line cost. Some companies with significant discounts have high costs.
It is also a mistake not to use all the discounts to which you are entitled. You can save hundreds of dollars by claiming all of the appropriate discounts. Examples:

  • You can receive about 20% off the cost of insuring two or more cars if you buy coverage from one insurance company.
  • Good drivers—ones who haven’t had an accident or moving violation in the last three to five years—often qualify for insurers’ lowest preferred rates.
  • Teenage drivers can get discounts of as much as 20% if they take drivers’ education classes.
  • A car alarm can still shave the cost of your theft coverage by about 20%.
  • Airbags can produce large discounts for bodily injury coverage.

Mistake: Buying the wrong car. If you’re in the market for a new car, find out what the cost of insuring it will be before you purchase it. Some less glamorous models can be costly to insure if they’re frequently stolen for parts.

Expensive cars with safety features, such as antilock brakes and airbags, which have done well in crash tests often are less costly to insure for collision than cheaper cars that do not have such features.

Mistake: Buying coverage you don’t need—and skimping on the coverage you do need. The most important coverage is bodily injury liability. It pays for another person’s medical care, rehabilitation or funeral costs when you’re found at fault in an accident. At the very least, you need coverage of $100,000 per person and $300,000 for any single accident. The most affordable way to protect against a successful liability claim is with an umbrella policy from your auto or homeowner’s insurance company. It pays for losses above and beyond what’s covered by an auto or homeowner’s policy.

Where to cut back: Most drivers have too much collision and comprehensive insurance.

Collision pays for the cost to repair or replace your car if it is in an accident, regardless of who is at fault.

Comprehensive provides similar coverage if your car is stolen or damaged by fire, flood or wind. If your car is old—seven years or more— the cost of collision and comprehensive may not be worth it.

Rule of thumb: When collision and comprehensive coverage costs more than 10% of the car’s market value, drop it.

Mistake: Setting your deductibles too low. While low deductibles may be appealing, they’re usually not a good idea. You pay a lot for protection that is often unnecessary since you can afford to pay the amount yourself. Insurance is to protect you against financial catastrophe.

Examples: Raising your deductibles from $100 to $250 can save about 15% on your collision and comprehensive premiums. Raising them to $500 can save about 25%. Raising them to $1,000 can save about 33%.

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