How to cut insurance costs

Many insurers cut liability, medical and collision premiums if you're accident-free, meaning you've had your policy with the same company and you haven't been involved in an accident that was your fault for at least ten years. You'll usually get a smaller discount after three accident-free years. (Discounts vary by state.)

If your car has passive restraints, such as air bags, the medical-payments premium can be shaved by 10% to 60%. Antilock brakes could knock 5% off liability, medical and collision premiums, and anti-theft devices could cut 10% off the cost of comprehensive coverage.

Another 10% discount might be available if you or your kids have had driver training. Many insurers also reward good students (those with a B average or better) with 5% to 25% discounts.

If you drive fewer than 7,500 miles a year, you may qualify for a 10% to 15% low-mileage discount. Similar discounts often go to older drivers--age 50 and up--if there are no youthful drivers in the household.

Insuring more than one car with the same company could earn a multicar discount of 10% to 15% off your total premium, and if you have other coverage- such as homeowners, life or health insurance--with the same company, you might get a 5% multiple lines break.

How much do you need?

Auto insurance is modular--you can always change or eliminate one component without affecting the cost of the other coverage. Weigh the risks and rewards when choosing each type and level of coverage.

* Liability. Liability insurance protects you if you--or another person driving your car with your permission--injure or kill someone or damage property.

Assume an accident for which you are clearly responsible: You run a red light, strike another car and injure the driver. Your liability coverage obliges the company to defend you--in court, if necessary--and pay claims to the other driver for car damage and bodily injuries, including medical and hospital costs, rehabilitation, nursing care, and possibly lost income and money for pain and suffering.

Now assume you are involved in a collision at an intersection and there are no witnesses or evidence to pin the blame on either driver. Here, too, under your liability coverage, your insurance company agrees to defend you against most proceedings the other driver may take against you.

The company limits its liability payments to the policy limits, or the amount of coverage you select. You can be held personally liable for any excess.

Liability coverage is mandatory in nearly all states; the others have financial-responsibility laws that can be met by purchasing this coverage. But state minimum requirements don't come close to covering the cost of a serious accident. You should carry bodily-injury coverage of at least $100,000 per person and $300,000 per accident, and property-damage liability coverage of $50,000. Some companies issue single-limit policies, with one liability limit that applies to total payments arising from the same accident; you should be covered for at least $300,000 on a single-limit policy. You may even want to investigate raising your liability coverage further through an umbrella liability policy.