Insurance isn’t a bad thing, it’s there to protect you and your assets from damage, loss, liability, and a whole list of unforeseen and unplanned events. If something happens and you don’t have insurance, the cost is going to come out of your pocket and if you don’t have the money to cover it, you have a whole world of trouble on your hands.

In most places, it’s illegal to drive without liability insurance, and if you have an auto loan, your loan servicer or bank will likely require you to carry collision and comprehensive coverages as well.

If you’re in an accident and it’s your fault, you are legally responsible for the damage to any other vehicles and people involved. And having liability insurance can protect you financially against any lawsuits that might be filed in response to an accident.

Even if an accident is not your fault, it can protect your assets if the other driver doesn’t have insurance, or doesn’t have enough to cover the expenses. And it can protect you in other cases not related to accidents, like a tree falling on your car.

But you don’t necessarily have to pay the highest price for auto insurance. There are ways to get the coverage you need at a better rate.

• Shop around for insurance. It’s best to do this prior to your next renewal. Some insurance companies will give you a discount for setting it up ahead of time. If you use an online service that “compares rates” you might get a few annoying phone calls, usually immediately, just to look at their rates, but it could be worth it to have a few conversations to find a better rate. Sometimes you can avoid this by going directly to the companies website for an online quote and this route might just bypass the phone calls and give you a discount because they don’t have to pay commission to an agent.
• Talk to an insurance broker that has access to multiple companies. You won’t get any annoying sales calls and they can compare rates across the board all at the same time. Although you might pay a slightly higher rate than if you went directly through the company (commissions).
• Pay the premium in full instead of making monthly payments. Most insurance premiums are based on 6 months or 1 year periods and will charge a monthly service fee of some sort if you choose to make monthly payments. If you pay the premium in full you’ll avoid those fees and generally get a decent discount. (Stay tuned for a lesson on sinking funds)
• Choose a higher deductible if it will reduce your rate by a good amount. Insurance companies will consider you less of a liability if you agree to be responsible for a larger sum prior to their payout in the case of an accident. But don’t do this if you don’t have the ability to pay that amount if there’s an accident.
• Avoid unnecessary add-ons that you’re not likely to use. Pay attention to the fine print when it comes to extras like roadside assistance. Sometimes the “co-pay” plus the additional cost built into the premium is more than what you would have paid if you’d have just taken care of that flat tire out of pocket.
• Bundle your various policies with the same company. If you have your auto, renters/homeowners, or whatever policies with the same company, they will likely give you a better discount.
• Choose the right coverage. Remember, insurance is meant to protect your assets in case of a loss, but you don’t need to insure for more than what they are actually worth. Many policies will typically base premiums on the actual value of the asset being insured, but you don’t need $100,000 of renter’s insurance if you only have $20,000 worth of stuff.
• Don’t insure small things. There’s no need to “insure” or buy the warrantee on coffeemaker or whatever household appliance. You’ll have to pay for shipping and probably some kind of co-pay, etc. It’s cheaper to just buy a new one if it breaks.

A note regarding liability coverage, keep in mind that the state minimum coverage may not be enough if you happen to be in an at fault auto accident. For example, my state requires a minimum liability coverage of $25,000/$50,000. This means if I cause an accident, my insurance will pay up to $25,000 per vehicle and a maximum of $50,000 per accident. But if I hit a Tesla, or cause a multi-vehicle accident, this might not cover all the damage and I could be sued for what the insurance company doesn’t cover.

On the same note, you don’t necessarily need to have a million dollar policy. No need to go to extremes on either end. The liability coverage I carry is $50,000/$100,000. The cost in premium is not much different than if I carried the minimum, and the likelihood of being in an accident beyond what my insurance will cover is slim. To me, it’s worth it to pay a little more in this case.

If you don’t have a car payment, you may not have to carry collision and comprehensive coverages but that doesn’t mean it isn’t a good idea. If you have a newer vehicle, it’s probably best to carry it. But if you drive a 20 year old car that isn’t worth a lot, it may be a waste of money to have full coverage.

In summary, you need insurance. Get what you need, no more and no less. Shop around for the best rates. Pay the premium in full if you can. Go with the highest deductible you can reasonably afford if you have a claim. Don’t add on extras without looking at the total cost vs. its actual value. Bundle your policies if it will save you money. Only insure high dollar items that you can’t afford to replace if needed.