Two highway signs on the New Jersey Turnpike.

Common Mistakes When Purchasing Personal Auto Insurance

Car insurance is an important part of responsible driving. Though nearly everyone pays for coverage, not all policies are equal. In fact, there can be substantial differences in coverage from insurer to insurer — even among customers who have similar premiums. There are some common mistakes when purchasing personal auto insurance that NJ drivers make, which can prove costly in the long term.

Choosing State Minimum Coverage

Car insurance is mandatory in New Jersey. If you live in NJ and are planning on driving,  you should know what is required of you and what mistakes you should avoid when getting car insurance. The state has established requirements for all drivers, including at least $5,000 in property damage liability coverage and $15,000 in personal injury protection per person, per accident. Although most drivers never need to file a claim that reaches policy limits, some do. And, for those who have only minimum coverage, any medical and liability expenses not covered by their insurance policy remain the financial responsibility of the policyholder. Instead of choosing state minimum coverage, drivers should determine if higher liability amounts, as well as collision and comprehensive protection, are right for them.

Shopping for the Lowest Premium

One of the biggest (and common) mistakes consumers make when shopping for car insurance is purchasing coverage based on premium price alone. Affordable insurance can be found at rock bottom prices, but it usually offers minimum coverage and inadequate customer service. Instead, consumers should purchase an auto insurance policy that is not only affordable, but also designed to meet their needs. When the time comes to file a claim, most drivers want an insurer that will pay it quickly. 

Purchasing Low Liability Limits

It’s a little known fact that the liability limits and deductibles you have in place right now with your current company can be held against you when you move to another insurer. That’s right: even if you opt to purchase higher limits in the future, you can be charged more for carrying lower limits in the past. Insurance premiums take into account dozens and dozens of variables, ranging from obvious things like your driving record to much less obvious factors like your zip code. One of the least well-known variables that can be used to determine your premium is something known as “prior limits.” Most car insurance carriers factor in the coverages that you had with your last company. When you call for a quote or speak with an agent, you will likely be asked about what coverages and limits you currently carry.

This may seem strange, but calculating the value and risk of a prospective policyholder is central to determining insurance prices. Your prior limits are a tried and true factor in predicting future risk. But when it comes to all of the dozens of factors that go into making up your rate, there are some that you can control and some that may be beyond your ability to change easily. Fortunately, this particular factor is something that you can control fairly easily. Don’t make the mistake of purchasing minimum liability coverages. This may be the cheapest way to go in the short term, but you will likely be penalized for having purchased low limits going forward.

Not Comparing Apples to Apples

When you are comparing prices between brands for an important purchase, whether it be a TV, a new car, or a smartphone, you probably go to the trouble of comparing the features on various models. Smart car insurance purchasing is not much different in that respect. When you are getting quotes from various companies, be sure that you compare prices that are based on policies with the same or equivalent features. For instance, be sure that the quoted premiums being compared are for the same coverages with the same limits and deductibles. If you simply look for the lowest quoted price, regardless of coverages and limits, you could very easily end up choosing a policy that is less valuable than one or more of the other products in your comparison set. You don’t want less for less; you want more for less.

Switching Car Insurance Companies Too Frequently

Insurers care a lot about how long you’ve been continuously insured by your prior carrier and will reward you with better rates if you have a proven long tenure with a prior carrier. The length of your previous tenure with a carrier can weigh heavily in the calculation of your new rate. Been with your current company for less than 6 months? That’s not going to weigh in your favor. How about three years or more? You should expect this to put you in a markedly better category. Have you been with your carrier for five years or more? You will be a very attractive prospect for your next carrier relative to the driver switching after just a few months or a year. Staying put may still be a more expensive option for you, but you should know that changing insurance companies too often can hurt you. Think twice about switching often to save only a few dollars. You could be costing yourself money over the long run. (Again, it’s important to remember that your tenure with a prior carrier is only one among many complex rating factors.)

Not Keeping an Eye on Your Credit Score

While insurance companies are not looking at your credit score to assess your ability to repay a loan, they do look at several parts of your credit report that have been correlated with insurance risk. These aspects of your credit score contribute to what is called an “insurance score.” Believe it or not, the health of your credit can factor heavily into what you will pay for car insurance. Your ability to get the best rates (given all of your other risk factors) will be helped by tending to your credit “hygiene”: paying your bills on time, keeping your debt to available credit ratio in a healthy range, and so on. These are long-term behavior patterns that can put you in good stead with a future insurer. Of course, if your credit score has been compromised by fraud or other impacts that are not your fault, you can help your insurance score indirectly by working to repair your credit prior to shopping for car insurance. You can also read more information about the importance of having a policy and what you have to do to insure a new car

Call 855-993-4470, get your free quote online, or find an agent and learn more about common mistakes when purchasing personal auto insurance. If you need additional information it can be found on our Contact Us page.