While most people could cover a $500 deductible, a $500,000 lawsuit would be a different matter. So why do so many consumers pay extra for low deductibles and carry close to the minimum on liability coverage?



Taking your total liability coverage from the standard $300,000 to $500,000 will only cost about $60 a year for two cars or $60 for one car if you're a younger driver. Talk to a professional you trust and come to a decision on deductibles and liability coverage that works for you.



If you drive an older car, consider dropping collision insurance.This is one of those cost-saving measures where you have to do the math, and also make sure the idea meets your gut-check test. This is how it works: If you are driving a 12-year-old car worth $2,000 and the car is totaled, the most you will get from the insurance company is roughly $2,000. Would you rather bank the money you're paying in collision insurance? The critical questions to ask: How much of your premium is collision insurance? And could you lay your hands on $2,000 if you needed a new car tomorrow?



Understand the claims process when you buy your policy.Make your agent walk you through the claims process upfront. Will your insurance pay for brand name or generic parts to fix your car after an accident? Will you be limited in your choice of mechanics or body shops? If the language in your contract is unclear, have your agent put anything you don't understand in writing.



Ask about "diminished value."This is a hot button in the insurance industry, and the subject of lawsuits. The big debate: Is a car worth less after an accident? If so, should the insurance company have to fix the car and pay you the difference? Ask your agent, and call your state insurance department to find out about current regulations and rulings.



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