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10 Ways to Save 10% or More on Car Insurance

The average American driver spends around $850 a year on car insurance, according to data from the National Association of Insurance Commissioners (NAIC).

If you pay less than this, you're doing something right. But for those who pay more, or those who would like to lower their payment even further, there are a number of options you can explore to decrease your monthly premium.

From streamlining your coverage to improving your credit score, here are 10 ways to save money on car insurance. The goal is not to see how little you need to get by, but the optimal amount to adequately protect your assets.

1. Review Your Policy

The first step to saving money on your car insurance is to understand the ins and outs of your coverage. Basically, your policy is a package of six primary coverages, each with its own premium amount. The amount you pay is the total of the packages you've selected along with any add-ons, such as emergency roadside service.

Make sure you're meeting your state's minimum requirements, and if there is a lien on your vehicle, you'll also need comprehensive coverage adequate to satisfy your lending requirements. Insurance policies can be confusing, and overlap often exists. Be sure to review your policy with a representative with the know-how to fully explain your plan.

2. Compare Quotes

Now more than ever it's faster and easier to shop around for the cheapest quote. Just about all car insurance providers have an online presence, making it easy to check out several companies and request free quotes for the policy you want. All you have to do is answer a few questions about the make and model of your vehicle and your driving experience.

Keep in mind a credit check is part of the process, so only shop when you're ready to make the switch. And be sure to shop around all at once, because multiple credit checks within the same time frame mitigate the ding to your credit score.

3. Increase Your Deductible

The deductible is the amount that you will pay out of pocket for repairs to your vehicle. The less money the insurance provider has to pay will decrease the amount of your premium. Typical deductibles start at $250 to $500, but can be increased to $1,000 or more for maximum savings. If you do opt for the higher deductible, smaller repairs -- anything under $1,000, for example -- will be at your expense. Make sure you're in a financial position to be able to cover the small stuff. 

4. The Right Coverage for Your Needs

If you have a new car that is currently financed, then you need full coverage not only to protect your asset but also to fulfill your legal obligation to the lien holder. However, if your car is paid in full and is an older model, you might want to consider foregoing collision and comprehensive. A general rule of thumb is if your car is worth less than 10 times the premium, you'll be better served to skip the coverage. Assess your situation to be sure your policy is adequate.

5. Take a Defensive Driving Course

If you have a rough driving history plagued by speeding tickets or fender benders, you can get back on track with a defensive driving course. You'll have to pay for the course yourself (often times at a discounted rate through your insurance provider), but a half day spent learning defensive driving techniques could save you as much as 10% on applicable coverages.

6. Choose Your Car Wisely

While high-end sports cars are more expensive to replace and, therefore, require a higher premium to insure, typically modest vehicles can also come with a pricey premium. According to StateFarm.com, the top-three most frequently stolen cars for 2009 were: 1994 Honda Accord; 1995 Honda Civic; and 1989 Toyota Camry. If the make and model of your car is a common target of thieves, then you could be looking at higher premiums depending on the theft rate in your area. Make sure to do your research before you buy.

7. Use the Same Insurance Provider

Insurance companies often offer discounts when you use the same provider for all of your insurance needs. You can save as much as 10% by insuring your home, apartment or recreational vehicle with the same company. If your current provider doesn't offer discounts for multiple policies, keep this factor in mind when you're shopping around for a better rate.

#-ad_banner_2-# 8. Improve Your Credit

An insurance score is a rating that insurance providers generate based on your credit history to determine your coverage costs. Studies have shown that people with a low credit score are more likely to file an insurance claim, so you can bet that insurance providers will be paying attention to your credit score.

Taking steps to improve your credit rating -- including paying your bills on time and eliminating bad debt -- can make a big impact on your insurance premium by lowering the risk insurers assume to provide coverage.

[InvestingAnswers Feature: 7 Steps to Perfect Credit

9. Look for Low Mileage Discounts

The amount of miles you drive on a daily basis plays a role in the premium you will pay for car insurance. The less time you're on the road, the lower the risk that you will be in an accident. If you have a long commute to work, try carpooling or taking public transportation. If driving to work is a must, it might be worth it to downsize your car to something with a cheaper rate (and better gas mileage).  

10. Group Discounts and More

Some insurance providers offer discounts to members of certain organizations. Look for these group discounts when searching for the best rates to help increase your savings -- up to 8% in some states. While other discounts differ depending on your provider, common options include up to 10% savings if you're 55 years old and retired, discounts for active duty and retired military or if you are a Federal employee.

The Investing Answer: Protecting yourself from loss is a necessary component of smart investing. And when it comes to car insurance, a small monthly premium protects not only an asset that you rely on daily, but also you and your family's health and that of a third party should you find yourself in an accident.

While there are certain aspects of car insurance that are unavoidable -- such as full coverage if your vehicle has a lien against the title, or the minimum coverage you must have for your particular state of residence -- what you may not know are the small steps you can take to help lower your overall premium.