12 Bad Moves That Jack Up Your Car Insurance

Save Money by Avoiding These Common Car Insurance Mistakes 

No matter how much you pay for car insurance, it’s one of the few products you buy that you don’t really want to use. You buy insurance in case you need to file a claim. Minus a few companies that boast “accident forgiveness,” filing a claim will almost always make your rates go up – and make it harder to find affordable insurance in the future.

We’ve compiled a list of 12 mistakes that could jack up your rates by thousands of dollars a year. Keep in mind that if you do have a claim, or run into other problems, shopping around can help. It won’t erase bad incidents from your record, but you may find an insurance company that is more forgiving of the particular problems you’ve encountered. 

Don’t Buy Too Much (or Too Little) Insurance

Every state, except New Hampshire, requires drivers to carry liability insurance to cover injury and property-damage costs to others you might hit. (New Hampshire only requires you to prove you have the financial resources to cover such expenses, yet it has among the lowest rates of uninsured motorists in the country.)

Most insurance companies quote rates by default based on coverage limits higher than the law requires. That can be a good idea, since the law in most states requires only a shadow of the coverage that you may need to cover rising medical costs from a major accident. Still, it’s worth reviewing your personal financial situation and risk tolerance so you don’t pay for more coverage than you need, or wind up in a pinch after an accident. If you want more or less coverage than the insurance company quotes, just ask for a quote based on different limits.

Other types of optional insurance coverage are even more expensive: Collision insurance, which pays for damage to your own car if you cause an accident, and comprehensive insurance, which pays for damage to your car from any other type of problem. The more expensive your car, and the higher-risk an area you live in is, the more expensive these optional coverages will be.

If you have a loan on your car or if it’s leased, the bank will require you to carry collision and comprehensive coverage. Once your loan is paid off though, it’s worth revisiting how much coverage you want to keep on an older car. 

Don’t Skimp on Deductibles

Most insurance companies will quote policies with a low deductible, such as $100 for any claim. This may make sense if you’re short on cash, but it can dramatically heighten your insurance rates because, from the insurance company’s point of view, it can dramatically increase the number of claims you might file.

There’s no reason to make a claim for any problem that costs less than your deductible. So if you cut it too close pulling out of the garage and knock the mirror off your car, you could file an insurance claim and get a new mirror for the price of the $100 deductible. File a few of those claims, though, and the insurance company is bound to raise your rates.

If you had a $500 deductible, it wouldn’t be worth filing a claim. You’d be on the hook for the whole cost of replacing your mirror yourself, but that might be cheaper over a few years than the higher insurance premiums you might incur after filing a claim for such a minor incident.

So if you have a solid rainy-day fund, consider asking for a quote with a higher deductible. It can have a huge effect on the cost of collision and comprehensive insurance coverage. If you get in a major accident, paying a $250 or even $500 deductible is likely to be the least of your problems. 

Don’t File Too Many Claims

If you have to file a claim, do it. That’s why you have insurance after all. However, there’s often a fine line between filing a claim when you need to and filing too many claims.

Consider covering small costs out-of-pocket or living with a small dent in your fender. The savings could be significant.

If your rates go up after filing a claim, you can often shop around to find rates that are at least a little lower. You’ll be doing yourself a favor in the long run by making insurers keep their rates competitive.

Avoid Traffic Violations

This should go without saying, but, don’t get a ticket. Customers with good driving records pay lower insurance premiums. Getting a ticket adds points to your license. One of the first things insurance companies consider when setting rates is the number of points on your license.

Drivers who have had repeated infractions over just a few years have the highest propensity for accidents, according to the claims data that insurance companies keep.

Of course, the only way to ensure you don’t get a ticket is to obey all traffic laws, including speed limits, stop lights and stop signs, and yielding to other drivers when it’s their turn. If everybody followed the rules to get lower insurance rates, the road would be a much friendlier place. 

Don’t Buy a High-Risk Car

Beyond individual claims rates, certain types of cars are assigned higher rates because more of the people who drive them get into accidents, or because the accidents they get into are more severe or expensive.

Sports cars are an obvious example. Any car with only two seats or two doors is seen by the insurance industry as a sports car, which they then assign a higher rate for liability insurance. Insurance industry spokespeople say such cars have higher incidents of crashes because their drivers are often more aggressive. (Perhaps because they’re usually not driving their families around in them.)

This phenomenon was so prevalent with muscle cars in the 1970s that high insurance rates essentially eliminated them from the market because no one could afford to insure them anymore.

Some types of cars also have very high collision and comprehensive premiums because they’re complicated, luxurious, and expensive to fix. 

Don’t Use Your Car For Work

How you use your car can be as important as what type of car you drive. Even if you wheel a sedate sedan, you’ll pay higher rates if you use it to deliver pizza, newspapers, or packages, or if you sign up to drive for Uber or Lyft.

Insurance companies figure – not unreasonably – that if you drive your car for business that you’ll spend more time on the road and thus have more exposure to potential accidents of all kinds.

Don’t Drive Too Much

Speaking of driving too much for work, insurance companies don’t like it when you drive a lot of miles every year, for whatever reason.

Extra miles means extra time on the road and more chances of getting in an accident. Not only will insurance companies offer discounts for low-mileage drivers, they also have special high-rate brackets for high-mileage drivers. 

Don’t Move To a Bad Neighborhood – or Too Far Off the Beaten Track

Where you live can have a huge effect on your insurance rates. For many people, this may not be totally in your control. If you’re moving or thinking about moving, it’s worth checking out insurance rates in the various neighborhoods you’re considering.

Something as simple as how many houses in the neighborhood have garages can have a dramatic effect on your insurance rates. If few homes have garages and the neighborhood is covered with trees, more cars are likely to be lost to trees falling on them.

Bigger factors include crime, which can affect your premiums for comprehensive coverage, and whether the location is far from any urban center, which can lead to a lot of urban driving.

Don’t Park Outdoors

One of the first questions you will be asked, before being offered a quote, is whether your car is garaged. Cars in garages are much less susceptible to a wide variety of claims including theft, vandalism, and even falling trees.

If you have a driveway, that helps reduce the likelihood that your car could accidentally get hit on the street by a drunk driver or as a result of some other incident, but there’s no substitute for having a garage to park in. 

Don’t Pay Anything Late

Believe it or not, your credit score is a big part of what determines your insurance rate. Insurance companies are extending you credit just like a credit-card company because premiums are charged annually from the moment you sign up for your policy, but you only pay the premium by the month.

Insurance companies also have to cover claims from the moment you start your policy, even if you haven’t made any premium payments.

If you have a solid payment history and aren’t overloaded with debt, you will qualify for the lowest possible rates. If you have a history of late payments, foreclosures, or bankruptcy, an insurance company will put you into a higher-risk bracket. 

Don’t Let Your Coverage Lapse

Once your insurance lapses, any number of things can go wrong before you renew it. And insurance companies don’t want to get hit with the bill for problems that occurred when you were uninsured.

Just like when you miss a payment on a credit card, not paying insurance premiums over the course of months or years can lower your credit score because it makes you a financially riskier client. All of that will bring higher rate quotes when you go to restart insurance coverage. 

Don’t Neglect Your Grades or Drop Out

If you’re a student, keep your grades up! Likewise, if you have a student in your household, make sure they have adequate incentive not to slack off in school. Insurance companies offer discounts on car insurance for good students. If students pay their own car insurance bills, they will feel the difference.

There is some internal claims data that shows that good students take fewer risks behind the wheel. Perhaps they paid more attention in driver’s education as well as their other classes. To be eligible, students generally have to keep their grade-point average above 3.0.

Don’t Get Divorced

Granted, if you’re getting divorced, you have bigger things to worry about than your insurance rates. Unfortunately, higher insurance premiums will be but one of many added costs you’re likely to face.

Insurance claims data show that married people have lower risk than either single or divorced people. Maybe they have their families on their minds everywhere they go. Maybe they’re just more likely to have better credit scores with multiple incomes. Whatever the reason, getting divorced is a good way to drive up your insurance premiums.