Beyond carrying less liability coverage, you can prevent your car from being over-insured by eliminating redundancies in your insurance policy. For example, personal injury protection coverage (PIP) reimburses for medical and funeral bills stemming from auto accidents regardless of who is at fault and is mandatory in only a handful of states. But if you and your passengers already have health, life and disability policies -- and you know they're likely to cover these expenses -- you should purchase the minimum amount of PIP coverage required or consider dropping it if your state law allows [source: SmartMoney.com]. Your insurer might also push you to sign up for extras like towing and roadside assistance, but if you have a membership with the American Automobile Association (AAA) or a similar group, these services are already covered.
If you drive an older car and have collision and comprehensive coverage on your insurance policy, you might consider dropping them. Collision coverage pays for damages caused to your car during an accident, regardless of your responsibility; comprehensive coverage pays for repairs stemming from vandalism, cracked windshields and other non-collision forces. These forms of insurance can make sense for newer models, and if you're leasing your car they might even be required. But an insurer will only reimburse you for costs up to the Kelley Blue Book value, which declines dramatically within a few years. If you decide to keep this coverage, take a higher deductible -- the amount you must pay out-of-pocket before the insurer will compensate you for damage -- to lower your premium. And according to SmartMoney.com, if the cost of this coverage totals more than 10 percent of its value and you can pay for damages if you cause an accident, you should consider dropping this coverage completely [source: SmartMoney.com].
It's also possible to be over-insured when you're behind the wheel of a rental. Look at the rental company's insurance policy and cross-reference it with your personal auto insurance policy. Chances are you don't need the extra coverage that the clerk tries to sell you, and you might even be covered by your personal auto insurance policy or through the credit card company you use to reserve and pay for the rental [source: Deane]. Confirm your insurance status ahead of time, and if you're not sure, purchase rental coverage anyway. As we said before, being over-insured is better than driving with no insurance at all.