CHARLOTTE, N. C. — Barry Miller figured he was saving $100 a month when he scaled back his disability insurance. After all, he was healthy.

“It just looked like the policy was too expensive,” said Miller, who was paying for his own disability insurance carried over from a previous job. “Sometimes you don’t know what will happen.”

What happened was this: In January, he was diagnosed with Bell’s palsy, a condition that causes facial paralysis. Now, at 61, he has left his job as a sales manager for a girls’ accessories company, and the Ridgewood,

N. J., resident is out $3,000 a month in disability payments.

Tough choices

This is the summer of the new frugality. Americans everywhere are clipping coupons, searching for freebies and finding all sorts of creative ways to save money. Saving money is chic; another way to impress the neighbors. But others are making far tougher choices that threaten to cost them far more than they save.

Reducing insurance coverage, whether it’s a consumer or a small business making the cuts, does mean instant cost savings. But it’s proving to be problematic for some people, leaving homes and businesses underinsured and their owners facing huge monetary losses should disaster or illness strike. It’s also making families vulnerable to financial hardship because some are giving up their life insurance.

“The economy is prompting a lot of people to reassess or reevaluate everything everywhere and they are looking to make sure they are getting the most for their money,” said Mark Gibson, assistant vice president of advertising for State Farm Insurance Cos. “Our industry is no different.”

Shop around

That creates something of a buyers’ market. Many consumers are shopping around for the best price.

After receiving a rate increase notice last year for policies on two automobiles and two homes, Justin Gregonis decided to leave his current insurance provider and go with a cheaper company. Gregonis, of Phoenix, said he was able to get the same amount of coverage without changing his deductibles for a savings of about $1,200 a year.

“I was willing to go with whomever was going to get me the best rate and have the best coverages,” he said. “Insurance in itself is just basically like playing the lottery. It’s just a gamble, but you have to have it.”

Consumers’ willingness to abandon their insurers is making some companies work with customers to try to retain them.

Companies like Allstate Corp. and Travelers Cos. are introducing new discounts and lower-priced products. But consumers need to be careful about discounts, for example, when carriers offer lower prices to customers who buy both homeowners and auto policies.

To help consumers, President Obama has been advocating health care reform, which could pressure private insurers to keep premiums reasonable. And state regulators limit how much insurers can charge for coverage such as auto and homeowners insurance.

But many consumers are still cutting back on all types of insurance.

Al Tobin, managing director and leader of Aon Corp.’s property practice, said some clients aren’t renewing the same limits on what are known as specialized policies, such as California earthquake coverage, because they can’t afford them. Aon, an insurance broker, helps companies find commercial insurance coverage.

“We have seen a trend for quite a few months where clients are buying less,” he said.

Cutbacks are common

Insurers don’t release figures on how much their customers are reducing or ending their coverage. But according to an Insurance Resource Council survey that questioned 1,000 adult consumers by telephone in December, 28 percent with at least one vehicle shopped for lower auto insurance rates, while 9 percent said they had canceled or decided not to renew their auto coverage.

Five percent of homeowners surveyed said they had canceled or not renewed their homeowners insurance, as did 14 percent of renters.

“We expect consumers to be taking a lot of steps to reduce costs,” said David Corum, vice president of the Insurance Resource Council, an industry-supported research organization. “People are willing to take on more risk in tough economic times to save money, but when they do that, the outcome can be catastrophic.”

There are certain policies that consumers and businesses absolutely must have—auto insurance, for example, or homeowners insurance for people with mortgages.

But many consumers are sliding by without discretionary coverage such as life insurance or even health insurance. And small companies may not be buying enough insurance to cover their losses, or to guarantee they’ll stay in business should disaster strike.

Cost vs. risk

The less coverage consumers and companies have, the more risk they take on. It’s a hard choice, but one many consumers feel they have to make.

W. W. Johnson is between jobs, and currently on an unpaid internship for health administration. His wife’s job in communications is dicey. So, he called his insurance broker and slashed the coverage for his Kennedale, Texas, home and five cars. An insurance bill that ran over $900 a month was chopped by $300.

“I have cut everything that I can cut,” Johnson said after agreeing to higher deductibles and dropping collision coverage on three vehicles. “And I’m still shopping around for the best deal.”

Some consumers aren’t buying insurance for their vehicles at all — although that’s illegal.

In 2007, the latest data available, about 13.6 percent of U. S. drivers were uninsured. That translates to almost 32 million uninsured vehicles on the road.