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Mortgage Glossary
 
How to Save 50% on Your Auto Insurance
 
With the economy continuing to struggle, we are all looking for ways to save money.  Car expenses consume a large portion of the average family’s annual budget, so finding savings in this area is often fruitful.  One often overlooked area is car insurance.  If you have not reviewed your policy recently, chances are you are paying too much. 

There are some easy ways to save 50 percent or more on your auto insurance rate and still maintain a great policy.  You will need to be comfortable with a higher level of risk, but if you are willing to make some cuts you can save a significant amount of money.  Here are a few ideas:

Drop your comprehensive and collision coverage.  While this idea may sound scary, many motorists can get inexpensive auto insurance by considering this option.  If you drive a new car, then certainly you want to maintain your coverage as high as possible.  But if you are driving an older vehicle, chances are you do not need collision coverage.  The amount you can save by dropping comprehensive and collision coverage could more than make up for the extra out-of-pocket expenses you would incur if an accident happens.

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Increase your deductible to over $1000.  You may decide that keeping your comprehensive and collision coverage is important, but you can still save money if you increase your deductible.  Again, this will mean more money out of your pocket, though not as much as if you dropped your comprehensive and collision coverage altogether.

Reduce your liability limits.  Most insurance companies recommend liability limits of 100/300/50.  This means you carry $100,000 in bodily injury liability coverage with a $300,000 limit.  Depending on the specific requirements of your state, you may be able to reduce your liability limits to as low as 25/50/10.  Be aware that some states require you to have more than this and some states allow you to go even lower, so check with your local agent.

Eliminate your uninsured motorists coverage.  As with reducing your liability limits, dropping your UM coverage will increase your risks in the event of a serious accident, but it will also save you money.

Before you run out there and cut back your auto insurance policy, you should be aware that reducing your coverage should be viewed as a last resort.  If you maintain low liability limits and get into an accident that causes serious bodily injury, you could become personally liable for those costs.  If you have significant assets like a house, you could lose those if you are sued.

Think carefully about how much risk you are comfortable assuming before undertaking any of these steps.  But if the choice is between paying your rent or reducing your car insurance coverage, these suggestions can help.  Also remember to always maintain some level of coverage for your vehicle.  Driving without insurance is one of the worst financial decisions you can make.