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Auto insurance is required by law but before you get out your chequebook, educate yourself on the various packages out there.

I recently wrote about trying to tighten my family's budget in 2010 and finding an opportunity to reduce our car insurance fees. We were able to save several hundreds of dollars a year simply by showing our provider competing quotes and asking for a reduction after some driving infractions came off of our record.

Car insurance is one of those household costs that many people consider to be fixed and may overlook when fine-tuning a budget. But there is quite a lot of variability in the rates available. Rates can vary wildly between providers and will fluctuate based on your circumstances. If you've recently added another driver to your vehicle or if you're driving record has changed, it's time to go shopping for better quotes.

"It's a good idea to shop every year," says George Small, co-founder of insurance comparison website "People's lives are constantly changing. Families may have children coming of driving age or changing vehicles. We always suggest doing it annually on renewal, even if you choose not to change providers."

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Even if your provider was the lowest cost option available when you first took out the insurance, it may not be today. Mr. Small offers the following tips to help drivers get the lowest possible auto insurance rate:

Consider discounts There may be discounts that you are not already getting that you may be eligible to receive. For example, some insurers offer a discount if you change your tires seasonally saving you up to 5 per cent. Another example, the group discount, may allow drivers who belong to certain employer groups, trade unions, or alumni and professional associations to qualify for savings of up to 10 to 20 per cent.

Think about raising your deductibles The higher your deductibles the lower your premium. For example, policyholders with deductibles set to $500 could save up to 5 per cent by raising them to $1,000. Keep it affordable though, because this is how much you'll have to cover should you need to submit a claim.

Don't pay for optional coverage you do not need Review your policy to see if there are optional coverages included in your current policy that you may not need. For example, if you drive an older car and your collision and comprehensive deductible is set to a dollar amount that is more than the value of your car, it may no longer make sense to keep these coverages or keep these coverages at the current deductible amount.

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