Liability insurance Almost every state requires liability insurance. This covers a set amount of damages to property and people injured in accidents where you’re at fault. If these damages go over this set amount, you could be sued for the remaining balance. Also, liability insurance won’t pay for your medical bills or repairs for your car – you need comprehensive and collision insurance for that.

For a very simple exaggeration of how liability insurance works, imagine you had $50,000 worth of liability insurance and got in a wreck that caused $100,000 worth of damage. In all likelihood, you could be sued for the remaining $50,000 your insurance didn’t cover. Shelling out for the right amount of insurance here can save you cash in the long run.

How to save money on liability insurance: While there are tips that help, the biggest way to cut costs here is to have a safe driving record. It lowers your monthly or annual rate for liability insurance.

Collision insurance: If you want your car to be covered in case of a wreck, collision insurance is the way to go. Unlike liability insurance, collision plans have a deductible, which says how much money you pay upfront for repairs before your insurance kicks in and covers the rest.

Say you drive a $20,000 car, and collision insurance costs $200 a year. You drive it for two years before totaling it in an accident. Your car probably depreciated in value a few thousand dollars, but in this case, paying that extra $200 could have saved you over ten thousand dollars – and that payment could have been even cheaper by following the tips in this guide.