Many people find buying car insurance confusing. They know they are required to have it, both by the state motor vehicle divisions, as well as leinholders (also known as the company with whom your car loan is through). Although any car owner is therefore an auto insurance consumer, most of these consumers have no idea what they are purchasing, or why they are purchasing it. By understanding the basic concepts of purchasing auto insurance, a consumer can become informed on this important purchase, and also better protected.

The concept to understand is that there is an insurance game you must play, and the rules are written by the insurance companies. However, once you learn and play by the rules, both parties will win the game. As a consumer, the goal is to get the appropriate amount of important coverages needed to protect your net worth, and then deciding which more expensive "convenience coverages" you want to pay for. The less an insured reports small claims, the bigger discounts the insured can qualify for over time. Paying a $500 or $700 claim out of pocket may allow the insured to qualify for a claims-free discount saving thousands over just a few years.

The important coverages to be familiar with are: "liability" (also known as "bodily injury/property damage"- BIPD), "uninsured & underinsured motorist," "comprehensive," and "collision" coverages.

-"Liability" protects your net worth, and is the amount of money that will be paid out to other parties if you are found at fault for an accident. When considering net worth, you should take into account amount of savings, equity in a home, and wages. In Arizona, for example, a lawsuit against you can result in the garnishment of wages- 1/3 of total income for a period of 10 years, or until the lawsuit amount is fulfilled. These things considered, this is the amount of liability insurance you want to purchase. For some, this may be $50,000, for others $500,000. Liability coverage is actually the least expensive part of a policy- you may be able to protect yourself for $300,000 instead of $100,000 for just $20 or $30 more!

-"Property damage" covers property when you are at fault in an accident, including other drivers' vehicles and public or private property, such as homes, block walls, or a stop sign. Keep in mind that most vehicles on the road cost $20- $30,000 or more- what happens if you hit more than one vehicle in an accident? Be sure to purchase enough property damage coverage.

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