The limit on liability for property damage in California is $5,000. That can be exhausted quickly, even with just a fender bender.

For medical expenses, the limit per accident is $30,000. "If your policy has a $30,000 limit and the medical expenses of the person you hit is $100,000, you're on the hook for that $70,000," says Moraga.

8. Ignore uninsured motorists coverage.

Protection against underinsured and uninsured motorists is an important add-on policy for anyone who spends a lot of time on congested roads.

"If you drive frequently in a city where there's a lot of traffic, your odds of having an accident with someone who isn't covered rise," observes Moraga. The added protection can be invaluable.

9. List your vacation home as your primary address on your auto insurance.

The ZIP code of your vacation home might qualify you for better car insurance rates than your primary address. But don't lie about the principal place where your car is garaged.

"If you have a loss and your insurer finds out, they may delay your claim settlement or take other adverse action," says Bach. "Most people don't grasp the concept that insurers want to know about the risks they're undertaking, and if you mislead them there can be serious consequences."

10. Drain your retirement accounts to fund a life insurance policy.

You should never stop contributing to your 401K because an agent tells you to put that money into a life insurance policy.

"Funding a tax savings retirement account should come before you buy anything except term life insurance, which is quite competitive [in pricing]," says James H. Hunt of evaluatelifeinsurance.org. "Buy enough life insurance to protect your family, but fund all retirement accounts that save on taxes first."

11. It's no problem to take cash out of a permanent life insurance policy.

"Agents often mislead people about cash value policies, saying you can borrow on it later to fund a college tuition or retirement," says Modell, "But if you take the cash out, you won't have the insurance."