What mistakes to avoid when buying car insurance?

When you own a car, buying insurance can feel like one more annual bill you need to clear in order to renew your road tax and stay on the road. It is easy to see it as an administrative task, click on the first link that looks affordable, and move on with your day. Yet car insurance is not just a piece of paper or a digital certificate. It is a contract that decides who pays, and how much, when something goes wrong. A careless choice can leave you underprotected, out of pocket, or shocked by exclusions you did not realise were there. Understanding the common mistakes people make when buying car insurance helps you avoid turning a routine renewal into a long term financial headache.

One of the first pitfalls is treating car insurance as a pure price competition. When you receive several quotes, your eyes naturally zoom in on the lowest premium. This instinct makes sense because the annual cost can be significant, especially for younger drivers or owners of newer cars. The problem is that two policies with similar labels can be built very differently under the surface. A cheaper policy might cut costs by limiting workshop options, increasing your excess, or shaving down benefits in ways that only appear in the fine print. On paper it is still a comprehensive policy, but in practice you may have to pay much more out of pocket if you need to claim. Instead of asking only which policy is cheapest, a better question is how each policy balances premium, coverage limits, excess, repair options, and claim conditions. A slightly higher premium can be better value if it offers stronger protection where it matters most.

Another mistake is underestimating the importance of third party liability limits. Many drivers know that car insurance must cover liability for death or injury to other people, because that is a legal requirement. Fewer people pay close attention to the actual dollar limits for third party property damage or bodily injury. In a serious accident that involves multiple vehicles, injured parties, or high value cars, the total cost can rise far beyond what feels intuitive. Medical bills, legal fees, and compensation for loss of income can stack up quickly. If your policy’s liability limit is low and the claim amount exceeds that limit, the excess may fall on you personally. Often, increasing third party limits costs less than people expect. The real error is ignoring this part of the policy and assuming that any standard limit will do, when in reality it is the backbone of your protection against severe financial loss.

The way you handle the policy excess is another area where small decisions can have big effects. The excess is the amount you must pay yourself whenever you make a claim. Many insurers let you choose a higher excess in exchange for a lower premium. For a careful driver with strong savings, that trade off can be reasonable. Trouble begins when the excess is raised purely to bring the premium down, without thinking about cash flow. If your excess is a few thousand dollars, you are effectively saying that you are comfortable paying that amount upfront if the car needs repairs after an accident. For households juggling mortgage payments, childcare, or eldercare expenses, that may not be realistic. Before you agree to a high excess, it is worth asking yourself if you could pay that sum tomorrow without creating stress. If the honest answer is no, then a more moderate excess with a slightly higher premium may be better aligned with your financial reality.

Many drivers also underestimate the value of protecting their No Claim Discount, or NCD. Over time, as you go without making claims, your NCD can grow to a substantial percentage of your premium, often as high as half of the base cost. Losing that discount after a single at fault accident can significantly increase what you pay at the next renewal and sometimes for several years after that. NCD protection is usually an optional add on, and because it appears as a small extra charge, some people remove it to shave a bit off the total. That decision can be shortsighted if you already enjoy a high NCD. The smarter approach is to compare the cost of protecting your NCD against the extra premium you would pay if you lose it after a claim. For many drivers with a strong claim free record, NCD protection is a sensible way to stabilise premiums over time rather than gambling years of discounts on one incident.

Honesty and full disclosure are also critical when you buy or renew a policy. Insurers ask about who will be driving the car and whether the vehicle has been modified in ways that affect its performance. A common mistake is to skip these details or decide that certain things do not matter. For example, a parent may regularly let a younger driver use the car but avoid listing them as an additional driver to keep the premium low. Or a car owner might install performance parts and assume they are too minor to mention. The risk is that if an accident happens and the undisclosed driver or modification is involved, the insurer may adjust, delay, or even reject the claim. Insurance works on the principle of fair and accurate information. Saving a small amount in premiums by keeping quiet can backfire badly later. Declaring all regular drivers and relevant modifications ensures that your coverage reflects the real risk profile of how the car is used.

The choice of workshop arrangement is another detail many people overlook in their rush to secure a lower premium. Some policies allow repairs at any workshop, while others require you to use a panel of authorised workshops. Panel arrangements can help control repair costs and maintain consistent standards, but they can also be inconvenient if your preferred mechanic is not on the list or if the authorised workshops are far from your home or workplace. The mistake is to ignore this condition and only discover it when you need repairs urgently. At that point, you may feel forced into using a workshop you do not fully trust or travelling across the island to comply with policy terms. When you evaluate policies, it is worth checking how many panel workshops are available, where they are located, and whether you have the flexibility to choose your own workshop if you value that freedom.

Beyond the basics, some drivers also fail to account for special risks such as flood damage or overseas driving. Heavy rain and flash floods have become more visible in many cities, and parked cars in affected areas can suffer serious damage. Similarly, many car owners cross borders for day trips, holidays, or family visits. Not all policies automatically cover every type of natural disaster or overseas driving scenario in the same way. Assuming that “comprehensive” means “everything under the sun” can leave you exposed. If you frequently park in low lying open areas, or if you often drive into neighbouring countries, it is worth checking exactly what the policy includes, what the exclusions are, and whether any top ups are needed. The additional premium for peace of mind in these situations is usually modest compared to the cost of a major incident.

Another subtle but common mistake is to renew your car insurance on autopilot even when your lifestyle has changed significantly. Over the course of a year, you might start a new job, move to a different neighbourhood, change your driving habits, or welcome a new family member. Perhaps you now work from home most days and drive less, or maybe you drive late at night more frequently and carry your children or elderly parents in the car. Each change affects the pattern of risk, your cash flow, and your protection priorities. If you treat the policy as something that simply rolls over, you may end up with coverage that no longer reflects how you actually use the car. Taking a little time at renewal to think about how your life has shifted can help you adjust your coverage more meaningfully, whether that means exploring lower mileage options, enhancing third party limits, or adding benefits that support passengers.

There is also a tendency to rely heavily on hearsay when choosing an insurer or policy. Friends and relatives often share their experiences, and online comments can be persuasive, especially when they are emotional. While real stories are useful, they usually reflect very specific situations. A good claim experience for one person does not guarantee the same outcome for you, and a negative review may be tied to exclusions that were clearly written but not read. The error lies in basing your decision entirely on such stories without reading at least the key parts of the policy yourself. At minimum, it helps to understand what is covered, what is excluded, how the excess works, whether workshops are restricted, and what the claim process looks like. If any clause is confusing, asking the insurer or your adviser for clarification before buying the policy is far safer than making assumptions.

Finally, a deeper mistake is to treat car insurance as something separate from the rest of your financial planning. It is easy to file it mentally under “car costs” along with fuel, parking, and maintenance. In reality, it is a part of your household’s protection strategy. The level of cover you choose, the excess you are willing to bear, and the add ons you accept should all make sense when viewed alongside your emergency savings, your other insurance policies, and the dependents who rely on you. If you have a strong financial cushion and multiple income sources, you might accept a higher excess or fewer extras because you can comfortably absorb unexpected costs. If your budget is tight and your family depends heavily on the car for daily routines, you may prefer more predictable out of pocket costs and stronger third party protection even if that means paying a little more each year. Seeing car insurance in this broader context helps you avoid overinsuring in one area and leaving gaps in another.

Buying car insurance may never become an exciting task, but it does not need to be a blind one. By avoiding the common mistakes of focusing only on price, ignoring liability limits, choosing an unrealistic excess, neglecting NCD protection, hiding information, overlooking workshop terms, forgetting special risks, renewing without reflection, relying solely on hearsay, and treating the policy as separate from your wider finances, you can make calmer and more deliberate choices. The aim is not to find a perfect policy, but to find one that fits the way you live, drive, and manage money. When you do that, car insurance stops being a yearly chore and starts becoming a thoughtful part of your overall financial safety net.