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How to cut your car insurance bill in half

Read the Spanish version: ¿Cómo reducir a la mitad la cuenta del seguro de tu auto?

How to read liability limits
Example: 100/300/50 translates to $100,000 in bodily injury coverage per person, $300,000 in bodily injury coverage per accident and $50,000 in property-damage coverage per accident.

If you're looking to trim your expenses as much as possible, you might be eyeing your auto insurance bills. There are many ways to tinker with your car insurance quotes to chop your premium down to a bare minimum. You could call your insurance company and:

  • Drop your liability limits to the minimum level allowed by state law
  • Drop your collision and comprehensive coverage
  • Keep collision and comprehensive but increase your deductible to $1,000 or more
  • Drop your uninsured motorists (UM) coverage

How low can you go? You can likely chop your car insurance bill in half by dropping your liability limits from "recommended" limits of 100/300/50 down to 25/50/10, and dropping rental, collision and comprehensive coverage (see chart below for average savings). Many states have minimum liability limits of 25/50/10, but others are higher or lower. See the minimum levels of car insurance you are required to buy. In our savings experiment, we kept UM coverage when we reduced our liability limits -- you could save even more by dropping it.

How low can you go?
Average insurance savings by reducing coverage
Vehicle Coverage of 100/300/50, UM at the same level,  comprehensive & collision, and rental coverage Coverage of 25/50/10, UM at the same level, no comprehensive or collision Savings
Cadillac Escalade ESV $1773 $622 65%
Chrysler Town & Country LX $1142 $530 54%
Toyota Camry LE $1233 $583 53%
Hyundai Santa Fe GLS $1232 $589 52%
Ford F-150 pickup $1263 $632 50%
Source: Insure.com research, data from September 2010.
Average premiums were calculated for a 40-year-old single male driver. Policy limits of 100/300/50 with comprehensive and collision carried a $500 deductible. Model year 2005 was used for all quotes because collision and comprehensive are often dropped on older cars. We used states with liability minimums of 25/50/10; some states require higher minimums.

But remember this: Dropping your car insurance to a bare minimum opens you up to substantial risk.

"You want to consider that very carefully. You’re trying to protect the assets you have," says Robert Passmore, spokesperson for the Property Casualty Insurers Association of America (PCIAA), an industry trade group. If you have a house, savings and investments, they could be put at risk if you cause a large accident where damage exceeds your insurance limits. And if you've dropped your UM coverage, a driver with no or inadequate insurance could wreck your finances too.

Passmore notes that the most expensive coverage dollars are the first dollars. In other words, $100,000 in coverage does not cost twice the price of $50,000 in coverage. "It’s like getting a volume discount," says Passmore.

Another quick way to save money is to comparison shop and change companies based solely on price. Before you leap to another insurer, check its track record. You won't receive more value for your insurance dollar if your new company has poor customer service. Many states release "complaint ratios" showing the relative number of consumer complaints against each company. Insure.com has contact information for state insurance departments.

More from Amy Danise here

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