1   Having an Insurance Policy with Minimal or Insufficient Limits

Your state may require that you have only minimum limits. For example, you may only need a $15,000 per person/$30,000 per collision policy. However, counting on other drivers to have sufficient insurance in the event of an accident can cost you money. While you may save money on a monthly basis by waiving or reducing coverage, the possible consequences are not worth the risk of having less insurance. If your actions contribute to a collision while you are driving, you will want your friends or family members who might be severely injured in a wreck to have their medical expenses and other costs covered. While it might seem cost effective to get the minimum amount of insurance required by law, if the cost of a wreck is over your policy limits, other parties could bring a lawsuit against you.

 2   Paying an Insurance Bill Late

Don’t wait until the last minute to pay your car insurance bill. If you are late on your bill and are involved in a collision, your insurance company is not obligated to cover you, or to pay any claims on your behalf. Setting up automatic payments through your bank or credit card may assist in avoiding this common pitfall.

 3   Neglecting Potentially Important Types of Insurance

Medical payment insurance and gap insurance could be helpful in the event of an accident. Even if you have excellent healthcare insurance, you should consider medical payment insurance on your automobile policy. Medical Payment coverage can be used to cover co-pays, prescriptions or health insurance deductibles. Gap insurance will pay off the full amount of the car loan if the car is totaled and you are “upside down” on the value of the vehicle, meaning you owe more than the fair market value. Many people forgo umbrella policies, thinking they are only for those people who have many assets to protect. Umbrella policies come into play when a severe car accident involves significant damage extending beyond what a solid insurance policy covers. These policies are usually inexpensive, and a hundred dollars over the course of a year might buy $1 million in coverage. Again, keep in mind that a passenger may benefit if you are the driver and a collision is your fault. If you travel as a passenger in your own vehicle, and are driven by a friend who makes an error, you would have coverage up to the limits of your umbrella policy.

 4   Missing out on Potential Discounts

You may be eligible for discounts such as low-mileage driving, or for multiple policies through the same insurance carrier. Younger drivers may qualify for “good student” discounts, as studies show that young people who are good students typically make better drivers. Insurance companies may not be quick to offer these discounts, so be sure to ask.

 5   Neglecting the Impact of Major Life Changes

Be sure to keep your policy current. Forgetting to add your teen driver can be extremely costly in the event of a collision. If you retire, get married, get divorced, move, start a business or purchase another vehicle, contact your auto insurance company promptly.

 6   Not Understanding the Scope of Portable Coverage

Insurance policies can be complex, and it is important to understand the full scope of coverage. Medical payment coverage and uninsured/underinsured coverage is portable. This means if you are a pedestrian, a passenger in someone else’s vehicle, or a bicyclist, you will have coverage for yourself if you are hit by a motor vehicle. Family members who live with you have this portable coverage as well, even if they are minors and do not drive.

 7   Not Understanding What Coverage Is Needed

You may be an excellent driver, have a car that is paid off and/or not driven often, and therefore decide that paying for insurance on the vehicle is a waste of money. However, insurance on the vehicle also covers theft, fire, and hail damage. Keep in mind that some cars may still not be worth a full insurance package. Drivers always need liability insurance, but when it comes to damage insurance on your vehicle, an old and heavily used vehicle may not be worth the expense.