Everything of value you do in life is a trade-off between benefits and costs. You plan to come out on the right side with a profit, but life is not always kind. When it comes to buying auto insurance in these times of financial hardship, there's a real temptation to find the cheapest policy and make do with that. It's a piece of paper to wave at a police officer and keep you legal on the public roads. But if your luck runs out and there's a claim to be made, the price you paid for that piece of paper may look a price too high. All insurance coverage looks great on paper until you see how it works in practice.

There's always a reason why a policy is cheap. There may be limitations on the amount you can claim, a big range of different risks may be excluded. Perhaps the company is not completely honest in the way it handles claims. Sure some people will complain to their state's insurance department or commissioner, but never enough people complain and profits mount up as a result. US law is not big on consumer protection. The only way to give yourself the best chance is to insure with companies that have a good claims record. The best state insurance departments and commissioners publish lists of the companies with the lowest numbers of complaints. Pay a few dollars more to have peace of mind.

Now look at your financial position with an honest eye. If you are unlucky and at fault in an accident, the victim will only sue you if you have assets worth pursuing. If you own your own home and it has positive housing equity, or you have savings and investments, all that is at risk if you are underinsured. With the cost of medical treatment and loss of earnings high, you should carry sensible levels of cover. It is only wise to carry the state's minimum if you have no assets to protect. Now consider whether you can afford to repair or replace your own vehicle if it's damaged in an accident. Most people are lost without their own transport. If you will not be able to survive, you have to carry enough to pay most of the repair costs (allowing for the deductible). With the number of uninsured and underinsured drivers increasing, you should carry coverage. This is usually quite low cost and well worth paying. There are other terms you can add to the policy to cover towing charges, replacement vehicles while yours is off the road, and so on. Finding the cheapest auto insurance policy will not add value. Only you can decide what represents the best use of your money and so put together the best policy deal for you.