"I've never bought auto insurance before. Could you please give me some basic information to help me understand what I need in the way of coverage?"

Auto insurance -- like all insurance -- is about risk. You buy auto insurance hoping an accident doesn't happen to you, but in order to be protected in case it does. By understanding what auto insurance covers and how premiums are calculated, you can make sure you’re adequately covered without paying more than you need to.

LIABILITY COVERAGE IS YOUR MOST IMPORTANT PROTECTION.

Liability coverage pays for injuries or damage that you cause to others in an accident. So, if you hit someone in a Mercedes, you want enough coverage to pay for the repairs or to replace it -- no matter what you drive. Likewise, if someone is injured in an accident that you’re responsible for, you want enough coverage to pay for any medical expenses that they incur. We don’t have to tell you how expensive medical care can be or how much it can cost to fix or replace a vehicle. Buy as much liability coverage as you can to protect yourself, your home and even, in a number of cases, your income.

OTHER TYPES OF COVERAGE THAT CAN ALSO BE IMPORTANT TO HAVE.

Even though auto insurance is required by law in every state, there are still a number of drivers who don't have it. As a result many states are now requiring you to purchase Uninsured Motorists Coverage. This will pay for your injuries or any damage to your property if you’re hit by an uninsured motorist. It will also cover you for injury or damages done by a hit-and-run driver.

If you live in a "No Fault" state, you’ll need to purchase Personal Injury Protection (PIP) coverage.

Medical coverage is for injuries to passengers in your vehicle who aren't on your health insurance.

COMPREHENSIVE AND COLLISION -- TO HAVE OR NOT TO HAVE?

Comprehensive and collision are protection for your vehicle from loss or damage, such as theft, fire, hitting a tree or a wall, etc. This coverage is required by a finance company if you’re leasing or buying a vehicle. Unfortunately, this coverage (and you need to buy both) can account for up to one-half the cost of your insurance premium.

CUT COSTS, NOT COVERAGE, BY SHOPPING SMART.

Now that you know what you probably need to buy, here's how to avoid paying more for your auto insurance than you should.

All the experts agree; comparison-shopping is the number one way to save on auto insurance. A recent study showed that auto insurance premiums can vary hundreds of dollars from company to company for the same coverage.*

The reason most people don't shop around is because it can be time consuming. That’s where you have an advantage.

An easy way to shop and compare is to take advantage of the insurance shopping service offered by Answer Financial®.

*Smartmoney.com—Six Ways to Save on Auto Insurance.