If you have insurance on your car, home, or business, there’s a good chance you’re paying too much for it. The truth is that the insurance industry wouldn’t be able to function as well as it does if it didn’t overcharge some customers, and insure things that don’t need to be insured.

To put it simply: insurance companies make a profit when people pay more in premiums than the value of the item insured. As a business model it works better the more customers you have.  On a micro level – that of the individual customer – it means that there is usually room to reduce premiums by calling insurance companies on their bluff, or doing a little of your own homework.

Here are five ways to reduce your insurance premiums:

1) Decide if it’s Worth Insuring

Insurance companies use complicated formulas to work out how much to charge someone for insurance. Unless your car has a special feature that causes it to burst into flames every time you stop at a red light, they will probably insure it – but they’ll charge you for their risk.

You can use a simple formula to decide if your car or contents of home are worth insuring.  If the value of the item is less than 15 times the monthly premium, you’ll probably be better off putting a little money away to protect you against damage or loss.  It’s not easier, but it’s cheaper.

2) Take a Higher Deductible

This is a gamble you make with an insurance company.  It’s basically a several-hundred-dollar bet on how often you’re going to crash your car or set fire to your home.   A higher deductible means you pay lower premiums, but you’re more likely to have to pay for repairs or replacements yourself.

If you’re not the kind of person who regularly scrapes their car against shopping carts or drops their iPhone in the John, then this might be a winning strategy for you.

3) Improve Your Credit Score

This takes time, but the sad truth is that a good credit score over 750 can save you hundreds of dollars a year.  A recent estimate by Carinsurance.com put that figure at nearly $750 a year on insurance!

You can start by taking out a debt consolidation loan and paying off your credit cards, reducing the credit facility on them, and making slightly larger credit payments every month.  It’ll take several years, but eventually you’ll be able to renegotiate your insurance at a lower premium.

4) Don’t Buy the Sport Model

Insurers don’t like fast cars.  If your car has an expensive body kit and a powerful engine, it could cost twice as much to insure as the basic model – especially if you are a young driver. If insurance costs are a major concern, then rather wait a few years before you buy the twin-turbo version.

5) Bundle Your Insurance

This is an old strategy that doesn’t get used much now that insurance quotes are so easy to find and policies can be taken out with a few clicks.  Sometimes an insurer will be more than happy to offer you a lower premium just so they can take your business away from their competitors.

To do this you’ll probably need to go into their office and talk very nicely to a consultant, but it can definitely be done.

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