Car Insurance Mistakes & How They Could Cost You

Jul 9, 2020

When it comes to auto insurance, most people want to save money. Who doesn’t? Some ways to save on insurance are straight-forward, like discounts that you’re eligible for. However, car insurance can be a complicated product with many factors that affect your premiums and coverage. So what car insurance mistakes can you make that could end up costing you? We’ll talk about some mistakes in car insurance that many might not be aware of.

This is the first part of our series. Check out our post on common home insurance mistakes, so you can be a smart shopper!

Buying the Wrong Vehicle for Insurance Purposes

We are often asked by customers: “Which cars are the cheapest for insurance?” The answer we provide usually surprises them.  Many people think the more expensive the vehicle, the more it costs to replace, the more the insurance will cost.  That’s partially correct.  Yes, if your vehicle is stolen, damaged or a total loss, expensive cars cost more to replace and repair.

However, in Canada and especially in Ontario, the largest part of your premium is Accident Benefit Coverage.  In other words, the cost to repair your own body physically.  Liability, rehab, medical expenses, long term care, etc. are the most expensive part of your policy.

Safer vehicles will have reduced Accident Benefit Premiums.  For example, Volvos are renowned for their safety, but they are expensive cars to purchase.  We have seen instances where Volvos are cheaper to insure than an equivalent Mazda or Toyota, which sell for less. When new drivers ask which is the best vehicle for them to buy, they often think of a lower-cost sedan like a Corolla or Civic.  They are shocked to learn that it costs less to insure a larger, sturdier late model Ford F150 or similar pickup truck.

Takeaway: Don’t make the car insurance mistake of buying a cheap car thinking it will be cheaper on insurance.  Compare rates on several options you may have online and then get some advice.  Not doing your research can cost you hundreds or thousands of dollars. Get an auto insurance quote to see!

Becoming a High Risk Driver

This one seems obvious: don’t drive poorly.  Right, we get it!  But that aside, what are some other ways you can end up in a high-risk insurance category?

One mistake is getting multiple tickets in one traffic stop.  You could get pulled over for speeding and limit it to one minor ticket.  Conversely, you could get a speeding ticket, not have your seatbelt on and forget your pink slip at home.  This quick escalation to three tickets could throw you into a high risk category and cost you thousands of dollars.

It’s all about risk mitigation or limiting your mistakes.  If you make one mistake it’s generally okay.  If you forget your paperwork, drive without insurance, don’t pay your monthly payment, forget to renew your license or registration, you can quickly compound your mistakes.

Takeaway: Slow down, drive defensively, have your paperwork in order.  Don’t make simple car insurance mistakes that can cost you.  Don’t give the police a reason to give you another ticket.

Not Paying Your Premiums or Cancelling Your Policy Improperly

Most people know that you need to pay your insurance premiums or else your policy will get cancelled for non-payment.  If you miss three payments within a year, you’ll have to pay the year in full or else get cancelled for non-payment.  These cancellations go on your record for three years and can certainly affect your eligibility to purchase insurance with the best companies.

What most people don’t know is that cancelling your policy improperly is one of the biggest insurance mistakes you can make.  It’s worse than getting a speeding ticket!  If you decide to change insurance providers, whether on renewal or mid-term, you must sign off on your cancellation with your current company.  There are no exceptions here.  If you do not do so and just let your policy lapse for non-payment and do not give proper notification, your policy will get cancelled for non-payment and you can become high risk.  This is not the case in many other countries where just letting your policy go unpaid is not an issue.  Similarly using other utilities such as cell phone, heat & hydro, etc. do not have similar penalties.

Takeaway: Avoid the insurance mistake of not cancelling properly and paying your bills promptly.  This will save you hundreds of dollars; we promise you.

Paying for Too Much Coverage

Did you ever buy or lease a newer car and your premiums never go down as the car gets older and loses value? Well, there are a lot of factors which go into pricing including market cycles, your driving record, where you live, etc.  One thing you can control as your car gets older is how much coverage you have.

Is your car only worth $5000 but you pay $1000 per year protecting it from theft or collision?  Maybe you have too much coverage and don’t need Collision or Fire and Theft Coverage.  Maybe you can raise your deductible from $500 to $1000 and save some money by taking on more risk yourself.  If you can afford to cover yourself out of pocket and buy a new car if needed to, then don’t make the mistake of having too much coverage.

Takeaway: Check to make sure your coverage aligns with your car’s worth and what you can afford to pay out of pocket. It’s often an easy car insurance mistake to fix when you speak with a broker!

Moving to an Urban Area

Insurance premiums are much higher in urban areas like Toronto and the GTA. This part is often out of your control. If you work or go to school downtown, you can’t just live somewhere in the suburbs or in a remote area.  

However, the mistake you can avoid is: living downtown, not driving very much, and still paying an arm and a leg for car insurance.  Either decide to take public transit and remove the driving coverage (Liability Coverage) from your policy to save lots of money, or else get stuck overpaying for everything.  There is a third option, pay as you drive or Usage Based Insurance programs give you large discounts, up to 25%, for NOT driving your car.

Takeaway: The insurance mistake here is living downtown and paying full price for car insurance.  Don’t do it; there are better options.  This is similar to solutions for the COVID 19 crisis.  If you’re not driving much, there are ways to pay less.

Not Applying All Your Discounts

Not applying all of your discounts is mostly your broker’s or agents’ fault; however, not doing your due diligence is a mistake which can cost you hundreds of dollars.  Do you have winter tires installed?  Did you reduce your commute?  Do you have property insurance with another provider?  Mistakes like these are costly and not always the responsibility of your insurance broker.

Takeaway: Don’t be shy about asking about discounts. Your broker loves to give them to you, trust us.  We want you to pay less in the hopes you’ll stay our client for the long term!

Not Shopping Your Renewal

We often hear clients say something like, “I’ve been with my broker for 20 years and never changed.”  While this is often a good story and I fully understand why some clients value service over price, it may be a mistake not to put some feelers out there.

If you’ve stayed with the same company for 5, 10, 20 years, you might have left hundreds or thousands of dollars on the table.  Is it worth a trip to the Caribbean to shop online once in a while?  It could be!  There are over 100 insurance companies in Ontario, and the best brokers will deal with 10 or more companies that you can compare with.  It only takes a minute and you could save quite a bit of money.

Takeaway: Loyalty and good service are to be rewarded; however, avoid the mistake of not checking the market. You owe it to yourself.

Taking Matters Into Your Own Hands

So, we’ve just told you to check the market; check online, in fact.  Why is it a mistake to take matters into your own hands? Insurance is a complicated product.  The vast majority of people don’t know enough about their insurance coverage and options at their disposal.  This is not the public’s fault.  The industry hasn’t done enough to simplify the products they are selling.

It is best practice now to go online, get some indications about pricing, and then talk to a professional who knows how to tailor a solution for you.  An insurance brokerage like Begin Insurance has professional brokers with certifications and multiple insurance offerings. Our brokers are trained to guide you long-term. We are not a call centre that only represents one company.

Takeaway: Don’t make the mistake of trying to do it all yourself. You’re not buying socks on Amazon! You are buying an important and pricy financial instrument.  It’s a big decision; seek advice.

We all make mistakes!  Insurance is all about risk mitigation, the spreading of risk and peace of mind.  Make sure you are limiting your mistakes, and when you do make a mistake, have the right insurance in place to save you money and put you at ease. Give us a call at 1 (844) 774-6340. We can help you out. Or get a quick quote:

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