Many factors can affect your auto insurance premium.

Almost every state requires you to buy a minimum amount of liability coverage. Chances are that you will need more liability insurance than the state requires because accidents cost more than the minimum limits. If you’re found legally responsible for bills that are more than your insurance covers, you will have to pay the difference out of your own pocket. These costs could wipe you out!

Having adequate car insurance is both smart and prudent, but there's no question that it adds to the expense of driving. The good news is that premiums can vary by hundreds of dollars depending on a number of factors. Review your coverage at renewal time to make sure your insurance is in step with your needs, and follow these practical steps to reduce the bottom line on your auto policy.

There are many insurance companies, so choosing between them can be a challenge. Here are the main points to keep in mind when selecting an insurance company:

There's a difference between an insurance company canceling a policy and choosing not to renew it.

Auto insurance cancellation

Insurance companies cannot cancel a policy that has been in force for more than 60 days except when:

There are more options for renting a car than ever before—bricks-and-mortar, peer-to-peer and membership-based car sharing services. While this means more choice for renters, it also creates more questions about insurance coverage. Use these tips to properly insure yourself when renting a car, and avoid wasting money on duplicative coverage.

If you lease a car, you'll still need to purchase your own state-mandated basic auto insurance—and you'll very likely need additional coverages:

Your leasing company will require collision and comprehensive auto coverage

The bank, leasing company or other entity that is financing your leased car has a monetary stake in the vehicle. They’ll want to make sure there are sufficient funds available to repair the car in the case of an accident. For that reason, you'll need to buy:

You cannot legally drive in any state without demonstrating financial responsibility for damages or liability in the event of an accident. In most states auto insurance is mandatory as proof of this responsibility.

All states have financial responsibility laws so, in states where there is no liability insurance requirement, you need to have proof of sufficient assets to pay damages, medical bills and more if you cause an accident.

While every state (except New Hampshire) and Washington, D.C., different states have different minimum requirements for auto insurance, most basic car policies consist of two types of coverage. Here's what you need to know about each.

Basic personal auto insurance is mandated by most states (except New Hampshire) and Washington, D.C and provides you with some financial protection in case of an accident. But is it enough? What are the options? Learn how auto insurance works and what types of coverage are available.