Buying car insurance for the first time can feel overwhelming. With confusing terms, price differences that don’t make sense, and a flood of ads promising the lowest rates, it’s easy to make decisions that lead to regret later.
This article highlights the most common mistakes new drivers and first-time shoppers make when choosing auto insurance. You’ll learn what to avoid and how to make smarter choices that protect both your wallet and your vehicle.
Mistake #1: Choosing the Cheapest Policy Without Looking at Coverage
It’s tempting to go with the lowest quote, especially if you're on a tight budget. But the cheapest option often comes with limited coverage, high deductibles, or gaps that leave you financially exposed.
Why It’s a Problem
A bare-bones liability policy may meet your state’s legal requirements, but it won’t pay to repair or replace your own vehicle. If you’re hit by an uninsured driver or cause the accident, you could be stuck paying thousands out of pocket.
Real-World Example
You buy a 2016 Hyundai Sonata and select a liability-only plan because it’s $45/month cheaper. Three months later, you rear-end another driver. Your policy pays for their car, but you’re on the hook for $5,300 in repairs to your own.
Had you paid just $540 more annually for full coverage, your repair costs would have been covered (minus the deductible).
Pro Tip: Always weigh the potential financial risk of an uncovered claim against the monthly savings of a cheaper policy. If your car still holds value or you drive regularly, full coverage often pays off. Following cheap car insurance tips can help you strike the right balance between affordability and protection.
Mistake #2: Not Understanding What You’re Actually Buying
Many first-time buyers think “full coverage” means everything is covered no matter what. Others assume that liability protects their car too. This is one of the most common car insurance mistakes to avoid, and it can leave you dangerously underprotected. These misunderstandings can lead to serious surprises when it’s time to file a claim.
What You Might Be Missing
Policies often include:
- Liability coverage – Pays for damage or injuries you cause to others
- Collision coverage – Repairs your car if you hit another vehicle or object
- Comprehensive coverage – Covers non-collision events like theft, fire, or weather
- Uninsured/underinsured motorist – Protects you if the other driver doesn't have enough coverage
- Medical payments (MedPay) or personal injury protection (PIP) – Helps cover your medical bills regardless of fault
If you don't know what's in your policy, you may not realize key protections are missing until it's too late.
Real-World Insight
A driver in Florida buys a "standard" plan from a call center without asking questions. They assume they're covered for everything. When a hurricane floods their car, they find out their policy had no comprehensive coverage.
They're left replacing their totaled vehicle out of pocket.
Pro Tip: Ask for a breakdown of what each part of your policy covers, and what it doesn't. If something doesn't make sense, press for clarity before you buy.
Mistake #3: Not Comparing Quotes from Multiple Carriers
Many first-time shoppers go with the first insurer they see or stick with the one their parents used. But rates can vary widely between companies for the exact same coverage, and not shopping around is one of the easiest car insurance mistakes to avoid.
Smart Tip: Use a quote comparison tool that shows multiple providers side by side. Comparing car insurance quotes this way can save you hundreds per year just by switching.
For a 30-year-old driver, insurance quotes vary by provider. Provider A offers the lowest rate at $122 per month. Provider B charges $139 per month, $17 more than the lowest, while Provider C's quote is $178 per month, $56 higher than Provider A. This highlights how rates can differ significantly between insurers.
Even if all three offer the same liability and full coverage options, the price you pay can vary due to how each company weighs your risk factors—like driving record, ZIP code, vehicle type, and credit score.
Pro Tip: Don't just compare the price. Review customer service ratings, claim satisfaction, and any available discounts to find the best overall value.
Mistake #4: Overinsuring an Older or Low-Value Car
It's easy to assume that full coverage is always the safest bet, but that's not always true. This is especially important if your car has little resale value. Many first-time shoppers continue paying for collision and comprehensive coverage long after it makes financial sense.
If your car is worth $3,000 but your annual premiums for full coverage are $1,200, you're spending nearly half the car's value every year to protect it. In a total loss, the insurer won't pay more than the actual cash value (ACV) minus your deductible.
Smart Tip: Check your car's market value using tools like Kelley Blue Book or Edmunds. If the car isn't worth much and you could afford to replace it out of pocket, switching to liability-only could save you money.
The value of full coverage depends on the age and worth of your vehicle. For a 16-year-old car valued at $2,800, the $1,150 annual full coverage cost is likely not worth it. An 11-year-old vehicle worth $5,000 may see marginal benefit from $1,000 in full coverage. In contrast, a newer 3-year-old car valued at $21,000 makes full coverage at $1,350 per year worthwhile.
Sticking with full coverage out of habit or fear is a common mistake. Reassess annually whether the extra protection is worth the cost.
Mistake #5: Ignoring the Deductible Details
When shopping for car insurance, many first-time buyers focus on premiums without considering how deductibles affect their total financial risk. But your deductible plays a major role in how much you pay out of pocket after an accident.
A low monthly premium often comes with a high deductible. That means if you file a claim, you'll need to pay more before your insurance kicks in. For someone with limited savings, this could create a financial shock during an already stressful event.
Smart Tip: Choose a deductible that balances affordability with your ability to cover sudden expenses. If you can't comfortably pay a $1,000 deductible tomorrow, it's not the right fit.
The choice of deductible affects both your monthly premium and potential out-of-pocket costs. A $250 deductible results in a $132 monthly premium, with $250 owed after a $4,000 repair. A $500 deductible lowers the premium to $115 per month, but you would pay $500 out of pocket for the same repair. A $1,000 deductible further reduces the monthly premium to $97, though you would then be responsible for $1,000 after a $4,000 repair.
Understanding how deductibles work ensures you're not caught off guard when it matters most.
Mistake #6: Underestimating How Credit and Driving History Affect Rates
Many first-time car insurance buyers assume their rate is based only on their age or the car they drive. But your credit score and driving record can have a massive impact on your premium — in some states, even more than your actual driving habits.
Insurance companies use credit-based insurance scores to predict how likely you are to file a claim. A lower score can lead to higher rates, even if you've never had an accident.
Smart Tip: Check your credit before getting quotes. Improving it by even 20–30 points could qualify you for a better tier with most insurers.
Monthly premiums vary based on driving record and credit. A driver with a clean record and excellent credit pays $89 per month, while the same record with poor credit increases the premium to $141. A driver with a speeding ticket and good credit pays $119, and one with an at-fault accident and good credit faces the highest premium at $162. This shows how both credit and driving history impact insurance costs.
The combination of financial responsibility and safe driving sends a strong signal to insurers and helps you secure the best rates.
AI-Powered Insights
Today's top auto insurers are increasingly relying on artificial intelligence to assess risk and personalize pricing. This impacts first-time shoppers more than most.
AI systems analyze thousands of variables, including:
- Driving history patterns
- Credit behavior trends
- Real-time location data
- Predictive modeling based on similar customer profiles
If you're not careful, these systems might classify you as a higher risk simply because of limited history or inconsistent data.
What You Can Do
- Double-check your information for accuracy before submitting quote forms
- Use quote platforms that apply AI to find personalized and optimized offers
- If you're working on improving credit or driving habits, check again in six months
AI can be your advantage if you understand how it evaluates your profile.
Jordan Blake's Take:
"Most first-time shoppers don't realize how much risk they're taking by choosing the wrong coverage. I've seen people save a few bucks on a bare-bones policy only to end up tens of thousands in debt after an accident. It's not worth it.
Think of your insurance like a financial safety net. You hope you'll never need it, but when life throws something unexpected your way, that net makes all the difference. Full coverage, better deductibles, and smart quote comparisons are your tools to protect what matters.
One more tip. The cheapest quote isn't always the best. Use tools that combine AI and human advice to get the full picture. Trust and transparency matter just as much as price. These first time car insurance tips are meant to help you avoid the traps that lead to regret later."
— Jordan Blake
Frequently Asked Questions
- Q: What is the biggest mistake first-time insurance shoppers make?
- The most common mistake is choosing the cheapest policy without checking what it actually covers. A low premium might mean high deductibles or missing protection that could cost thousands later.
- Q: How many quotes should I compare?
- Experts recommend comparing at least three to five quotes. Rates can vary dramatically between providers, even for the exact same coverage.
- Q: Does my credit score really affect my rate?
- Yes. In most states, insurers factor in your credit-based insurance score. A better score can mean lower premiums. Some states restrict or ban this practice, so check local laws.
- Q: Should I get full coverage on an older car?
- It depends on the value of your vehicle. If the cost of full coverage exceeds 10 percent of your car's value annually, it might not be worth it. Liability may be enough for cars with low replacement value.
- Q: What happens if I choose too high a deductible?
- You'll pay less each month, but more out of pocket in a claim. Make sure you can comfortably afford the deductible you choose, especially if an accident happens tomorrow.
- Q: How to avoid car insurance mistakes?
- Start by comparing multiple quotes, checking coverage details closely, and making sure your deductible and protections fit your situation. Following these steps is the simplest way to learn how to avoid car insurance mistakes before they cost you.
- Q: How to Get Car Insurance Quotes?
- You can get car insurance quotes online, through a comparison site, or from an independent agent. Knowing how to get car insurance quotes helps you find the right balance between cost and coverage.
About the Author
Jordan Blake is the Senior Insurance Editor at InsuranceBest, with over a decade of experience helping readers make smarter decisions about coverage and financial protection. He specializes in breaking down complex topics into plain English and believes that the right information can change your financial future.
When he's not researching industry trends, Jordan enjoys road trips, classic cars, and spending time with his rescued golden retriever, Max.