Paying for auto insurance can be a very discouraging process.  You pay but get no immediate benefits other than the peace of mind that comes with being covered in case something happens to your car.  For a society that is used to getting immediate gratification this can be very difficult indeed.  Sometimes it just feels like you are throwing money away… until that inevitable moment when you get into an accident.  The reality of the situation is that paying for auto insurance is not optional.  It is required by law.  But even if it weren’t, it is still smart to some carry auto insurance, as long as you don’t go overboard.

Remember that insurance should not be used to pay for every little damage to your car.  Your auto policy should be used to pay for those unexpected high expenses that you either would not be able to afford otherwise, or that would have a significant impact to your budget.    Your auto policy should also include at least the minimum liability and/or uninsured motorist insurance that you are required to carry by law.  With that in mind, here are some smart tactics that can help you save a significant amount of money on your car insurance:

Reduce Coverage on Older Vehicles

The idea here is that you should not insure for more than the car is actually worth.  So, if you have an old clunker that is not worth more than a couple of thousand dollars, does it really make sense to carry collision and comprehensive coverage?  Probably not.  If you were to get into an accident that causes a lot of damage to your old clunker you might be better off getting rid of it rather than using insurance to pay for repairs.  By reducing the coverage on your car to what you really need you can save 40% or more.

Increase Your Deductibles

Again, remember that insurance should be used to pay for the big unaffordable damages, not the little things.  With that in mind, you should increase your deductable to at least $500, but preferably to $1,000.  A really smart plan would be to put $1,000 aside in your savings account in case you get into an accident, and use that to pay for the deductable if needed, instead of paying high premiums because you think you cannot afford to pay a $1,000 deductable for your repair bill.  You also have an opportunity to save 40% or more by following this simple plan.

Call Your Insurance Agent Often

Every year you should call your auto insurance agent just to check if you can get additional discounts.  A good agent should help you find ways to save money.  Sometimes they can identify things that you may not be thinking of.   For example, if your commute is shorter than it used to be you may qualify for better rates.  If you have not had any accidents in the last few years, there might be additional discounts.  If you combine you home insurance with your auto insurance you may get a better deal.  And sometimes your agent may just come up with different policies which can save you money.  I recently was nicely surprised when I called my agent and he told me he could put me on a different policy with the same terms, but at almost half the cost!  I saved almost $1,000 just for calling and asking, and you should do the same on a regular basis.

Every State is Different

Insurance practices and rates vary from state to state.  I would not recommend that you move to another state just to save on your auto insurance, but keep in mind that if you do move your rates are likely going to be different.  InsWeb, a website that provides auto insurance quotes, conducted a survey and came up with an affordability factor by state.  The factor was calculated by dividing each state’s median car insurance rate by its median household income.  Here is a list of the most affordable states according to the survey:

• Massachusetts
• New Hampshire
• Vermont
• Minnesota
• Utah

You may not be able to avoid paying for auto insurance altogether.  But you may be able to save a significant amount of money by simply making a few changes your auto policy.  If you are looking for ideas on how to also save money on other types of insurance, check out the article Insurance – What Do You Really Need?