5 silly car insurance mistakes

Everybody wants car insurance protection, but nobody wants to deal with having car insurance. Insurance can be extremely frustrating because it only pays off when something bad happens. You pray that you never need it, thus, in a way, you are praying that you waste every dollar ever spent on car insurance coverage. The same can be said for term life insurance, homeowners insurance, and disability insurance. You need it, you may not want it, and you hope you never use it.

However, there are good financial decisions and bad financial decisions to be had when selecting car insurance coverage. What is the point having inadequate insurance coverage? Don't be dumb. You need to pay attention to this stuff. Some of it saves you money on your premiums. And some of these tips make your life easier if an accident ever were to happen. Below you will find what I find to be the five silliest car insurance mistakes.

1. Having too low of a deductible- I have only filed one car insurance claim in the last 15 years. In addition, if I were to have an accident, I have plenty of money to pay the deductible whether it's $500 or $1000. Since this is the case, I see no reason in paying the additional premium necessary to secure a low deductible. As you may or may not know, a deductible is the portion of money you are responsible for if you were to file a claim. In other words, if you have a $500 deductible, then you are responsible for the first $500 of costs associated with making you whole. As you can see below in the example below (provided by my friend Todd Curry at The Curry Agency, switching the deductible from $500 to $1000 saves you $86 per year. If you don't file a claim for ten years, then you've saved at least $860. Why waste money on a lower premium when you've got the means to handle an emergency?

2. No rental car coverage- If you do get into an accident and lose the use of your car, you may be in trouble. Many people lack free access to another vehicle. So for practicality's sake, having rental car reimbursement coverage on your auto policy can prevent your life from getting crazy-hectic while your car is getting repaired. You don't necessarily need this coverage if you have access to another vehicle or you can seamlessly carpool. I find that most people should strongly consider rental car reimbursement coverage.

3. Having too low of liability limits- Auto insurance helps you repair your car, in the event of an accident. But auto insurance also protects your assets, if you were to cause serious damage to someone else. If your liability limits are too low and you are subject to a judgement higher than your limits, then your personal assets can be seized. That's as awful as it sounds.

4. Not getting competitive quotes- Every car insurance company has its own secret recipe of herbs and spices. This is to say that every auto insurance company calculates premiums differently. Some companies put more dependency on your age, gender, driving record, and/or credit score than another company might. This means there is an auto insurance company that happens to match up with you and your characteristics, and your job is to figure what company it is. If you choose to have the same insurance company for years on end, just know that you are likely paying way too much for car insurance. This isn't to say you should switch ever year, but you should periodically check and see if you can save money on comparable coverage.

5. Filing too many claims- Look, I know this advice is not what you want to hear, but filing claims can be a really bad idea. Your insurance premium will go up if you file an insurance claim. In fact, if you file too many claims, you may get dropped by your insurance company. I know. I know. What's the point of insurance if you can't use it? You need to think of your car insurance as catastrophic coverage. Don't file stupid little claims that your deductible would absorb anyway. Be smart. This requires restraint, math, and a healthy dose of reality.

Car insurance is a necessary financial tool. Don't get in such a hurry that you neglect to make wise decisions in regards to your coverage choices. It also pays to have a great agent who can explain these concepts to you.