With the credit crunch affecting more and more people, consumers are being forced to cut back on their expenses to save money. It has been reported that a lot of people are reducing the amount of money they spend on optional financial products such as health insurance and life insurance to try and counteract the rising cost of living but for some this isn’t possible. Products such as car insurance are a legal requirement, something which might be a financial frustration for some. There are, however, ways to cut down the costs and find cheap car insurance that is right for you.

First of all, and most importantly, remember the golden rule of finding the right financial product: shop around. Price comparison websites are a great tool for getting a list of insurance policies that will suit your needs within seconds. Once you have found a policy, it is a good idea to look around every two years to make sure you have the cheapest deal on the market.

It is also important to decide what level of cover you are looking for. Obviously, the more comprehensive the cover is, the more you will have to pay for it. Generally, car insurance comes in three tiers. The most basic cover available is third party only, which will cover damage caused to other vehicles or objects but not your own. Third party, fire and theft is the usual name for the second level of cover. As it says, this includes the third party cover mentioned above but also covers damage caused by fire or theft. The most expensive type of insurance available is fully comprehensive cover which, depending on the policy, will cover all of the above plus extras such as windscreen replacement and damage to personal belongings in the vehicle.

Fully comprehensive cover may give a lot of drivers peace of mind as they will be covered for most eventualities. If you are trying to save money, however, check which optional extras are included in your policy. The more extras you have, you more you will pay, so check whether you need and/or want everything listed. The optional extras you could do without may include things like courtesy cards, legal protection, breakdown assistance and overseas cover.

While reading the fine print of your policy, there are a few other things worth checking which could save you some money. For instance, if you have built up a no claims bonus driving under someone else’s insurance, find out whether it can be transferred to your own. Also, some companies charge you more if you choose to pay your insurance by monthly direct debit.

There are a number of other ways you can cut down the cost of your car insurance. Some, like watching your mileage, are easier to start implementing immediately, while others, such as the fact that married men generally have lower premiums than single men, may take a while to come into effect! Your car’s security also affects the amount you pay. Gadgets such as alarms and immobilisers make it less likely that your car will be stolen and so will probably reduce your insurance. If you want to install security features, make sure they are approved by your insurance company and also check with your insurer to see which features will cut down your costs the most.

Some drivers might be quite blasé about minor driving offences, such as speeding tickets. After all, you pay the fine and receive a couple of points on your license and move on, right? Actually no; as soon as you get any penalty points your insurance will rise and stay that way until the points expire three years later. It is estimated that insurers make an extra £375 million each year just from charging extra to those with points. Even if you have been given penalty points, there may still be ways to reduce the extra insurance premiums you will have to pay. For example, if you share a car with your husband or wife and both use it equally, putting down the partner with the least penalty points as the named driver might reduce your premiums.