Five mistakes consumers make when buying auto insurance

Auto insurance policies contain a variety of required and optional coverages and deciding what your policy should cover and how much you should pay can be daunting. Here are five common mistakes consumers make:

  1. Buying only the legally required liability minimums
    While buying only the legally required liability minimums is arguably the cheapest option, it puts your assets (current and future) at considerable risk. In Pennsylvania, the minimum requirements are extremely low:

    • Bodily Injury Liability: $15,000/$30,000 – if you injure someone in an accident, this pays damages such as medical and rehabilitation expenses. $15,000 pays for one person, and $30,000 is the total available for one accident. Even a minor injury can run up bills of more than $15,000.
    • Property Damage Liability: $5,000 – if you damage someone’s car or property and you are at fault, this coverage pays for repairs. $5,000 will not cover the repair or replacement of many cars today.
    • The cost of additional liability limits is reasonable: buy them.
  2. Not having uninsured (UM) and underinsured motorist (UIM) coverage
    UM and UIM protects you, your family, and passengers in your vehicle against at-fault drivers who don’t have insurance or have low limits that do not cover your medical expenses. The insurance company will only pay out the amount purchased by the other driver.
    Be sure to add both UM and UIM.
  3. Not assessing the need for optional coverage
    Optional coverages are valuable, but they do add to the cost, so it’s best to assess what you need. Some popular selections include:

    • Collision — pays to repair damage to your car as a result of an accident.
    • Comprehensive – pays for theft or damage to your car from hazards such as fire, flood, vandalism, and striking an animal.
    • GAP – Guaranteed Asset Protection pays the difference between an insurance company’s payment for a totaled vehicle and the balance of a loan on the vehicle.
    • Stacked vs. non-stacked uninsured/underinsured motorist liability – if you have several vehicles covered, you can combine the coverage limits for bodily injury for a minimal fee
    • Funeral benefits
    • Rental reimbursement
    • Towing coverage
    • Income loss
    • Medical payments
    • Physical damage on rented vehicles
    • Business use
    • Full glass coverage
    • Accidental death benefit
  4. Not knowing how to save
    Here are some smart ways to save on your policy costs:

    • Increase your deductible. The deductible is your out-of-pocket costs. Generally, the higher the deductible, the lower the premium.
    • For older, low-value cars, drop the collision and/or comprehensive coverage. Insurers will never pay out more than the vehicle’s cash value, less the deductible, so weigh this against the cost of the policy.
    • Maximize discounts. Insurance companies offer discounts for safe drivers, mature drivers, bundling with home insurance, good student discounts, paying in full, insuring more than one vehicle, low mileage, and others.
    • Full tort or limited tort. Full tort means you can sue other drivers for pain and suffering if you are injured in an accident. Limited tort, which is less expensive, does not allow you to sue, except in very limited situations. An auto accident can be life changing. Protect your right to sue by choosing full tort.
  5. Not updating coverage with life changes
    Getting married or divorced, having a child, a teen driver going to college, buying a new car, moving to a different neighborhood can have a significant impact on your coverage needs and costs.