Whether you want to cut your auto insurance costs because your budget has gotten tighter or because you don’t want to spend extra money for what you don’t need, there are some smart and some not-so-smart strategies to reduce this household expense. What is a good idea for one household may be a lousy idea for another. Let’s take a look at five common strategies to save money on auto insurance to see who benefits and who doesn’t.

Shop around

While it’s true that costs for the identical insurance coverage can vary widely between carriers, it doesn’t always pay to switch companies to save a few bucks. Some insurance companies give loyalty discounts to customers who stay with them a year or more. Insurance companies also want as much of your business as they can get, so it’s common to pay less if you have multiple cars with the same company or if your cars and your home are insured together than if you had them insured separately.

To find comparative rates in your area, go to insureme.com, a Bankrate company.

5 ways to save
  1. Shop around.
  2. Drive an older car.
  3. Raise your deductible.
  4. Reduce your coverage.
  5. Drop some coverage.

Drive an older car

While driving an older car will generally cost less to insure, you should still investigate insurance costs before you purchase a used car, even if you’re not buying a sports car or a vintage Mercedes-Benz. Some seemingly mundane older cars are actually quite expensive to insure because they attract thieves. In 2008, the top five most commonly stolen vehicles were (in order): 1994 Honda Accord, 1995 Honda Civic, 1989 Toyota Camry, 1997 Ford F-150 pickup and 2004 Dodge Ram pickup, according to the National Insurance Crime Bureau, a Des Plaines, Ill.-based nonprofit focused on insurance fraud and vehicle theft that is supported by more than 1,000 insurance companies.

Raise your deductible

It’s true that you will save money on your auto insurance premium if you raise your deductible. But it’s not a good idea to raise your deductible if you don’t have easy access to the money to cover the deductible in the event of a claim. Save the money to cover the higher deductible and put it in a separate savings account that you don’t touch except for that purpose. Once the money is put aside, then go ahead and make the change to your coverage.

Reduce your coverage

The easiest way to reduce your auto insurance premium is to reduce your liability or uninsured/underinsured motorist coverages. The cost savings can be substantial, but it leaves you holding the bag if you have a claim. Make sure the policy covers an amount higher than your assets. Otherwise, if you are at fault in an accident, attorneys are likely to come after your home or other assets to cover the medical bills and possibly property damage (such as to the vehicle) for the amount that exceeds your coverage.

If you have few assets, then you can certainly reduce liability coverage, but keep in mind that the amount of your uninsured/underinsured coverage (which covers you if you are hit by someone without insurance or without enough insurance) cannot be higher than the liability coverage. So if you drive in an area where you think there are a lot of uninsured/underinsured drivers, then you might want greater coverage to protect yourself.

If you do reduce these coverages, be sure you still meet your state’s minimum coverage requirements. Edmunds.com has a handy chart of mandatory coverages by state.

Drop some coverage

Rental car and towing coverage are two items that can be dropped by many households with no negative effects, but the savings won’t add up to much. If you don’t have a roadside assistance plan or don’t have an alternative method of transportation, then these are coverages you may want to keep.

If you drive a clunker, you might consider dropping the collision and comprehensive coverage, but keep in mind that you’ll get nothing if your car is stolen and you’ll need to pay 100 percent of any repairs to your car if you are in an accident where you are at fault. Consider the savings carefully, because it may be better for you to spend a bit more if you’ll find it financially difficult to repair your car or replace it, even if it’s with another cheap car.

Whatever you decide to do, don’t go without auto insurance and don’t let your coverage lapse. If you are involved in an accident, the costs for repairs, any injuries and potential legal bills can quickly surpass the costs of several years of insurance payments.

If you have a car question, e-mail it to us at Driving for Dollars. Read more Driving for Dollars columns and Bankrate auto stories.