There are many ways to save money on insurance, but you should be careful about the ways you cut insurance costs.  There are smart ways to save on  insurance, and there are mistakes that can result in being dangerously underinsured.

1. Insuring a home for its real estate value rather than for the cost of rebuilding. When real estate prices go down, some homeowners think they can reduce the amount of insurance on their home. But insurance is designed to cover the cost of rebuilding, not the sales price of the home. You should make sure you have enough coverage to completely rebuild your home and replace your belongings.
   A better way to save: Raise your deductible. An increase from $500 to $1,000 could save up to 25% on your premium payments.
2. Selecting an insurance company by price alone. It's important to choose a company with competitive prices, but also one that is financially sound and provides good customer service.
   A better way to save: Check the financial health of a company and ask friends and family for recommendations. Select an insurance company that will respond to your needs and handle claims fairly and efficiently.
3. Dropping flood insurance. Damage from flooding is not covered under standard homeowners and renters policies. Many homeowners are unaware they are at risk for flooding, but in fact 25% of all flood losses occur in low risk areas.
   A better way to save: Before purchasing a home, check with the NFIP to see if it is in a flood zone; if so, consider a less risky area. If you are already living in a flood zone area, look at mitigation efforts that can reduce your risk of flood damage and consider purchasing flood insurance.
4. Only purchasing the legally required amount of liability for your car. Buying only the minimum amount of liability means you are likely to pay more out-of-pocket.
   A better way to save: Consider dropping collision and/or comprehensive coverage on older cars worth less than $1,000. The insurance industry and consumer groups generally recommend a minimum of $100,000 of bodily injury protection per person and $300,000 per accident. 
5. Neglecting to buy renters insurance. A renters policy covers your possessions and additional living expenses if you have to move out due to a disaster. It provides liability protection in the event someone is injured in your home and decides to sue.
   A better way to save: Look into multi-policy discounts. Buying several policies with the same insurer, such as renters, auto and life will generally provide savings.

By taking a few simple steps, it's possible to cut costs and still be protected.  When money is tight, it’s extremely important to be financially protected with the right amount and type of insurance.

Information from Insurance Information Institute.