Car insurance is designed to protect you from financial shocks caused by accidents, theft, natural disasters, and third-party liabilities. However, many car owners unknowingly weaken their coverage due to simple but costly mistakes. In 2026, as vehicles become more advanced and repair costs continue to rise, even small errors in policy selection or management can result in significant losses.

This detailed guide outlines the top seven common car insurance mistakes and explains how to avoid them. The goal is simple: help you make informed decisions that strengthen your financial protection.

1. Buying Insurance Based Only on Premium

Price is important, but it should never be the only deciding factor.

Many policyholders choose the cheapest available plan without reviewing coverage details. Lower premiums may come with limited benefits, higher deductibles, or strict exclusions that affect claim payouts.

Why This Matters

If your policy lacks essential protections, you may end up paying substantial repair costs yourself.

Smart Approach

  • Compare coverage features carefully
  • Review claim settlement terms
  • Evaluate add-on availability
  • Check policy exclusions

Insurance should be viewed as risk management, not just an annual expense.

2. Ignoring Policy Exclusions

A policy document clearly outlines what is not covered. Yet, many people skip this section.

Common Exclusions Include:

  • Driving without a valid license
  • Driving under the influence
  • Mechanical or electrical breakdown
  • Regular wear and tear
  • Unauthorized vehicle modifications

The Risk

Claims arising from excluded events are rejected outright.

Reading exclusions ensures you understand your responsibilities and limitations under the policy.

3. Selecting the Wrong Insured Declared Value (IDV)

IDV represents the current market value of your vehicle and determines the maximum payout in case of total loss or theft.

Common Mistakes:

  • Choosing a low IDV to reduce premium
  • Selecting a very high IDV assuming higher claim benefit

Consequences:

  • Low IDV = Insufficient compensation
  • High IDV = Higher premium without added advantage

An accurate IDV ensures balanced protection and fair premium pricing.

4. Not Opting for Relevant Add-Ons

Standard comprehensive insurance has limitations. Ignoring useful add-ons can expose you to unnecessary financial risk.

Examples of Important Add-Ons:

  • Zero Depreciation Cover
  • Engine Protection Cover
  • Roadside Assistance
  • Return to Invoice Cover
  • No Claim Bonus Protection

Why It Matters

Modern vehicles contain advanced electronics and expensive components. Add-ons can significantly reduce out-of-pocket expenses during claims.

Select add-ons based on your vehicle age, driving habits, and location risk factors.

5. Delaying Claim Intimation

In the event of an accident, timely claim reporting is critical.

What Often Happens

Some drivers delay informing the insurer, especially in minor accidents. This can complicate claim processing.

Why This Is a Problem

Insurance policies require prompt intimation. Delays may result in claim rejection or prolonged investigation.

Best Practice

Inform your insurer immediately after an incident, even if the damage appears minor.

6. Allowing the Policy to Lapse

A lapsed policy exposes you to both legal and financial risks.

Risks of Lapsed Coverage:

  • Loss of No Claim Bonus (NCB)
  • Vehicle inspection before renewal
  • Increased premium
  • No protection during gap period
  • Legal penalties for driving uninsured

Continuous renewal ensures uninterrupted coverage and preserves accumulated benefits.

7. Providing Incomplete or Incorrect Information

Accuracy in documentation is essential. Even unintentional mistakes can impact claim settlement.

Common Disclosure Errors:

  • Incorrect vehicle modification details
  • Failure to mention past claims
  • Wrong personal or nominee information
  • Misreporting vehicle usage (personal vs commercial)

Why Transparency Matters

During claim assessment, insurers verify information. Any mismatch may lead to reduced payout or rejection.

Always disclose accurate and updated details.

Why These Mistakes Are Costlier in 2026

Vehicle technology has evolved rapidly. Cars now include advanced driver assistance systems, sensors, electronic control units, and premium parts. Repair costs have increased significantly.

Additionally:

  • Climate-related risks such as floods are more frequent
  • Spare part costs have risen
  • Labor charges at authorized workshops are higher

This means policy gaps are more expensive than ever before.

Making informed insurance decisions is no longer optional—it is essential financial planning.

Practical Checklist to Avoid These Mistakes

Before purchasing or renewing your car insurance, ask yourself:

  • Have I compared coverage benefits beyond price?
  • Is my IDV accurate?
  • Do I need specific add-ons based on my location?
  • Have I read the exclusions section?
  • Is my information fully accurate and updated?
  • Am I renewing on time?
  • Do I understand my deductible obligations?

Answering these questions honestly can prevent most common errors.

Building a Stronger Insurance Strategy

A well-structured car insurance policy should:

  • Provide adequate IDV
  • Include relevant add-ons
  • Maintain continuous coverage
  • Offer clear claim procedures
  • Align with your financial capacity

Insurance is about preparedness. The right structure ensures that during an emergency, you focus on safety rather than financial stress.

Conclusion

Car insurance mistakes often happen due to lack of awareness rather than negligence. Choosing policies based only on price, ignoring exclusions, selecting incorrect IDV, skipping add-ons, delaying claims, allowing policy lapses, or providing inaccurate information can weaken your financial protection.

In 2026, with rising repair costs and evolving risks, informed decision-making is critical. Reviewing your coverage annually and understanding policy details ensures smoother claims and long-term savings.

If you are reviewing your policy options, exploring structured and transparent plans through Square Insurance can help you align coverage with your specific needs. The right insurance strategy today safeguards your finances tomorrow.

Frequently Asked Questions

1. What is the most common car insurance mistake?

Choosing a policy solely based on the lowest premium without reviewing coverage details is the most common mistake.

2. How does incorrect IDV affect claims?

A low IDV reduces compensation in case of total loss, while an inflated IDV increases premium unnecessarily.

3. Are add-ons really necessary?

Add-ons are optional but highly beneficial depending on vehicle age, location, and risk exposure.

4. What happens if I delay claim reporting?

Delayed claim intimation may result in rejection or extended verification processes.

5. Can a policy lapse affect No Claim Bonus?

Yes, a lapse can lead to loss of accumulated No Claim Bonus benefits.

6. Why is reading exclusions important?

Exclusions define situations where claims are not payable. Understanding them prevents unpleasant surprises during claim settlement.