Of all of the personal lines of insurance, only auto insurance is mandatory. (To be more specific, it’s required if you drive a car on public roads. Those who ride the train or drive only on private roads aren’t obligated to get coverage.)

So why does the government require insurance?

In answering this question, it helps to understand the economic concept of externalities. (You don’t need a Ph.D. to understand the definition, so don’t click away just yet!)

An externality is a result of a particular economic activity, an activity either conducted by a person, business, or government. Shortened, an externality is a side effect.

Externalities can be both positive and negative, but the ones you hear about in the news are usually negative.

Take the example of a nuclear power plant, which is dumping the water it uses to cool its reactors into the nearby stream. The hot water alters the river’s ecosystem and all of the fish subsequently die off.

Meanwhile, down river, Bob, who operates a fly-fishing outfit, is suddenly faced with a fishless river. He is the victim of a negative externality. He had no economic stake in the nuclear plant’s activities, but he is paying a price nonetheless.

OK. Now that we understand externalities, let’s get back to car insurance.

It all has to do with the unique ability of cars to cause significant damage, either in the form of property damage or bodily injury.

“We force people to buy auto insurance to protect others,” says economist and writer Megan McArdle. “Drivers have a high potential to cause damage they can’t pay for.”

In a car insurance-less world, driving would be too financially risky; someone could smash into your car, send you to the ER with a broken leg, and that someone could be unable to pay for the damage that their recklessness caused.

In such a world you’d be stuck with the bill.

Many people lament the purchase of auto insurance. So we’re here to make it less painful. Check out these six money-saving tips and take the sting out of buying insurance.

#1 Raise your deductible. It’s a gamble, sure. You’ll be responsible for a larger amount of the bill should you get into an accident. However, this is a guaranteed way to lower your annual insurance costs.

#2 Shop around. Staying with the same insurance company year after year may not be in your best interest. You can cancel or change your policy at any time—you don’t need to wait for the policy to expire. So shop your insurance every six months and compare prices to ensure you are getting the best deal.

#3 Remove unneeded extras. Although knowing you have towing and rental car coverage may help you sleep at night, those add-ons are rarely used and not necessarily worth the cost. You pay between $10 and $30 a year over the life of your policy to cover towing. And in the unlikely situation that you need a tow, you’ll pay about $100. Likewise, a small economy car costs $20-$25 a day to rent and car rental tacks on another $20-$40 to your insurance bill each year. So you can sleep well knowing that you saved yourself some money.

#4 Protect your credit. More insurers have begun using credit-based insurance scores to determine what you pay for your policy. So paying the water bill on time will actually keep your insurance costs down.

#5 Research discounts. Cars with safety and anti-theft devices cost less to insure. You can also knock off a few bucks if you insure your car and home with the same company. People who abstain from alcohol, get good grades in school or take a driver education course are also rewarded with lower premiums.

#6 Get informed. The easiest way to save on any insurance is to research before you buy. And get recommendations from family and friends.

And now for the shameless plug: shope here to find quotes and matched with agents from your area!

If your insurance company has just raised your rates, or if you are shopping for a new policy, here are some tips to give you an affordable car insurance premium!

Consider raising your deductible. The difference in price between a $250 deductible, a $500 deductible, and a $1,000 deductible can be hundreds of dollars a year. If you are good at putting a little money aside for a rainy day, then bank the extra savings! If you do have a car accident, you can use the savings to pay off the extra money, but if you do not have an accident, then you have increased your savings! Hopefully you will drive without an incident, and then you can use the extra savings to buy something you want or save for other things.

Shop around. I, personally, have saved over $800 a year by checking prices between highly rated insurance company. I found that one major company which is based in the city I live in was willing to offer me a much cheaper premium than the other national insurance company. Make sure you compare the same policy with the same features, and that is exactly what I did. I cannot tell you which company will be the cheapest for you, but I can tell you that a little comparison shopping will either assure you that your company is cheapest, or it will save you lots of money!

Remove extras that you do not need. Now I would tell you to keep car rental insurance, because if you do have an accident and need transportation while your car is getting fixed, that rental insurance can save you hundreds, if not thousands, of dollars. However, you may not need roadside assistance if you already have it through a credit card or other service. I found that I had roadside assistance as the benefit on my health insurance association so I did not need to have the same coverage twice!

Watch your credit. This may sound insane, but more and more car insurance companies are basing premiums on credit! They have found that people with decent credit tend to have better driving records. Of course, if you do have challenged credit, look for a company that gives that factor less weight.

Look for discounts. You may get a discount on your car insurance for something you already do, or for something you can do without much trouble. Driver safety courses can earn a 10 to 20 percent discount, and you can take some from your own home with a video or PC! Anti-theft devices, car safety features, or even parking a car in the garage can also earn discounts. Make sure you let an insurance agent know that you are looking for discounts, and then he or she should be able to help you.

Another discount some people overlook is the one many large companies give for having multiple policies. If you insure your home and car, or more than one car, with the same drivers, you may be rewarded for loyalty! Some discount car insurance companies, however, do not offer home insurance, and the premiums may still be cheaper. Again, this is where we come back to the importance of shopping around.

If you got dinged with an increase, or if you just cannot find an affordable car insurance plan, then we invite you to Compare Car Insurance Quotes Fast with our safe and free online quote form!