Every state imposes financial responsibility requirements on drivers. This means that if you cause an accident, you must have the means to pay for injuries to other drivers and passengers, and for property damage incurred by other motorists. For most drivers, auto insurance is the most cost-effective way to meet financial responsibility requirements. This does not mean that car insurance is cheap – it can take a sizable chunk out of your monthly budget. Fortunately, there are several ways you can comply with your state's financial responsibility laws while minimizing your auto insurance costs.


Visit your state's Insurance Department website to learn about the coverages and limits you must carry. In many states, you only have to carry liability coverage, which pays for other people's property and medical expenses after a motor vehicle accident. If cost is a major concern, you can elect to carry only the minimum coverages required under your state's financial responsibility laws.


In some cases, purchasing only the minimum coverages and limits might not be an appropriate option. Although this will allow you to register your car and legally drive, it may not protect you against legal action if you cause a major accident. For example, Ohio only requires drivers to carry $12,500 in liability coverages for injuries to one person, $25,000 for all injuries in a single accident, and $7,500 for property damage. Suppose you cause a traffic accident that results in $100,000 in medical expenses and $50,000 in vehicle damage. You would have to pay the difference between your liability limits and these amounts. If you cannot pay the difference, other drivers and passengers may take legal action to recover their losses.


Other options for saving money are available, even if carrying minimum-limit coverage is not feasible. Talk to your broker or agent about discounts that might reduce your premiums. You will usually save money if you insure all of your cars under one auto insurance policy instead of maintaining multiple policies. Your insurance company might also discount your premiums if you agree to purchase homeowner's, renter's, motorcycle, or watercraft coverage through the same company.


You might receive a policy discount if you take a defensive driving course, particularly if you are age 55 or older. Insurance companies recognize that these refresher courses help drivers decrease their risk of being involved in a motor vehicle accident. Remember, though, that you must take this course voluntarily. If a court orders you to attend a defensive driving course, your insurance company probably will not extend a discount.


Choose the type of car you drive carefully. Trading your family sedan in on a high-performance sports car might be an exciting prospect, but you probably won't be quite as thrilled when you see your car insurance bill. Statistically, high-performance vehicles are involved in more accidents than sedans, so insurance companies charge higher premiums for these cars.


Similarly, late model cars cost more to insure than older cars. Before you head to the dealership to buy a brand new car, remember that your lender will likely require you to purchase comprehensive and collision coverages. Even if you select high deductibles, these coverages can raise your auto insurance costs by 40 percent or more. Opting for an older vehicle will save you money on insurance premiums as well as loan or lease payments.


You can also save on auto insurance costs by paying for your six-month or 12-month term all at once, instead of spreading your costs out over monthly payments. Your insurance company likely assesses installment fees for payment plans. Although a $5 fee each month might not sound high, these fees can quickly add up. Because paying for your policy term up front reduces accounting costs for your insurance company, you might even receive a discount in addition to avoiding installment fees.


In most states, insurance companies can determine their own rates within guidelines established by a particular state's Insurance Department. For drivers, this means that one insurance company can charge higher or lower rates than another for identical coverage. Don't assume that your insurance company offers the best rates. Spend an hour gathering quotes from insurance company websites to find out if you are getting the best coverage for your money. It might make sense to switch to another insurance company if you can save a few hundred dollars per year.


If you would rather not gather quotes and compare coverages yourself, you might save on car insurance costs by enlisting the help of an independent insurance agent. This strategy allows you to obtain multiple quotes without having to do the work yourself. Some independent agents can help you dramatically reduce your costs, leaving more money in your pocket for other purchases.


Taking steps to save money on auto insurance might not be the most exciting task, but reducing your premiums can be well worth your effort. Through careful planning and diligent effort, you might be able to cut your car insurance costs by 40 percent or more.