Save money on car insurance

More so than most other insurance, auto insurance as an industry is overloaded with jargon. Telling the difference between collision and comprehensive is an important start but so is figuring out exactly what you are getting for your money. It's easy to carry too much of useless coverage and not nearly enough of the kind of insurance protection you probably need.

Start by getting out your existing policy and taking a look. Then consider carefully what your goal with car insurance really is: Total protection at any cost? Or enough to keep you out of big trouble in most cases?

THE RULES
Remember the real purpose of car insurance
Like life, health and homeowner's insurance, auto insurance is not really about protecting you from damage or loss. It's not really even about repair or replacement (which is what insurance commercials stress on). It's about transferring away the financial risk of an accident. Once you understand this, it can be much easier to decide how much is enough of each type of auto coverage you might carry. The biggie here is bodily injury/property damage liability, generally known as liability coverage. This is your protection from the risk of losing everything you own in a lawsuit, should you injure others or destroy property with your vehicle. Experts figure you should have enough to replace your personal assets -- savings, home, retirement funds -- and probably double that amount. (Likewise, if you have no assets to protect, this coverage becomes less vital.) Do not presume that you will never get into an accident that costs more than $50,000 to fix. Insurance companies still offer liability at the $50,000 and $100,000 levels, but the number of cars on the road that cost well in excess of $50,000 to fix (or replace) is higher than you think. Nevertheless, the monthly cost of $100,000 in liability coverage is usually only a few dollars more. Why? Because your chance of being in an accident doesn't change, no matter what level of liability you take.

Watch your auto insurance deductibles
Collision is what your insurance company will pay to you to fix damage done to your car in an accident. Comprehensive is coverage if a tree limb or a neighborhood punk punches out a window. It's important to not confuse the emotional issues of a fender-bender (annoyance, late for work, stress, your lovely car all banged up) and the real problem: fixing the bumper or door and moving on with life. People often set deductibles far too low, thinking that it's better to make the insurance company pay for even minor scrapes. Watch out! A low deductible will push your premiums sky high. Remember, premiums are a guaranteed, recurring loss which adds up over the years. If you have short-term savings, put the deductible as high as you can. By taking responsibility for the small stuff, your insurance company will reward you with lower rates. If you get into a scrape, get it fixed yourself and move on. Your eventual savings on premiums will run into the thousands. Is your car older? Figure out what it's really worth (you can do this on the Web at a car site like Edmunds or by looking at online classifieds) and lower your coverage to match. An older car's value will fall to a few thousand bucks max. Paying hundreds a year -- every year -- to insure it is silly.

Shop hard, shop often and get discounts on car insurance
The Internet has been a blessing when it comes to buying car insurance. You can now easily compare policies from major providers online. If you get through another year with no accidents and no tickets, make sure you get new rate quotes. Your insurer might give you a good deal when you are a new customer and then inch rates up the year after. Keep them honest, be a perpetual quote shopper. You should ask for all the possible discounts, like for driving a safer car, for insuring more than one car (or your house) with the same company, for belonging to groups like AARP or the military, for staying with the same insurance company for more than a year -- even for having a good credit score. If your kids are on your policy but then move away to attend school, get them off right away! Avoid, too, expensive add-ons, like towing service, rental car reimbursement, medical payments coverage and uninsured/underinsured motorist coverage. The first two you likely already have through your car dealer and both are cheap and unlikely expenses. If you have health insurance from work, medical payments coverage is likely redundant, too. Uninsured/underinsured pays you for the same kinds of things, plus lost wages and such, if the other drive has no auto coverage. This is what your emergency fund is for.