Auto insurance premiums compose a considerable part of the annual budget, and surely every car owner wishes to find an affordable motor insurance policy. But you should do solid thinking before saving on car insurance.

As in most states motor insurance is mandatory for drivers, it has become customary for people to buy the cheapest auto insurance policy they can find. In that way they do not break the law and at the same time do not spend much on motor insurance. However, it is only one side of the medal. Basically, such cheap auto insurance policies cover only a narrow range of cases. But when the accident involves bodily harm or serious car damage, the driver will have to cover the major part of expenses himself. Therefore, the cheapest policy may be not the right choice.

Nevertheless, it is possible to find an affordable auto insurance policy that will cover most cases. The main idea is to personalize your insurance contract as much as possible. You know that the final premium depends on the number of factors, like your age, family status, technical characteristics of your vehicle, your driving habits and so on. Each of these factors has its weight and contributes to the final cost of the policy according to it. For example, for 25 year old drivers and younger "age factor" is a rising coefficient in the final formula due to their lack of experience. On contrary, people with considerable driving record have a decreasing age coefficient.

It is important to know, that different insurance companies may have different weight system. And here is the possibility to cut the expenses. A married 24 year old person may have a less auto insurance premium than the same age single. A thorough investigation of such details in your insurance contract is the key to a good price. In this view online quotes may be extremely helpful. They give information precisely on your request. You can find insurers in your area that offer similar policies and than, paying attention to the details, you may choose the right one for your needs. So, before purchasing an auto insurance policy, spend time surfing the Internet checking out online quotes and keep in mind the words of Charles Eames: "It will in the end be the details that give the product its life."

Does it sound incredible for you when an insurance company charges a 30 year old person $25 monthly for a $200,000 term life insurance policy? In this article we'll clear up this mystery and show that without going into details insurance is not so complicated as it may seem.

Insurance is a powerful economic device that plays an important role in modern society. Typically under insurance we understand a certain way of risk management. Thus, before we look deep into the insurance basis we should be clear about what the word "risk" means.

Usually, where there is risk, there is uncertainty about an adverse outcome. But such definition is a bit obscure and doesn't explain how do we actually evaluate and manage this "uncertainty". In the insurance industry under "risk" it is customary to understand "a condition in which there is a possibility of an unfavorable deviation from an expected outcome". Risk is related to the actual financial loss, and therefore is measurable. Degree of risk is the probability of the unfavorable event occurring, whereas magnitude of risk is the amount of the likely loss.

• Risk can be managed in several ways. For instance, an individual or a company may avoid risk by not engaging in any form of hazardous enterprise at all. Risk may be retained, so that the potential financial loss is completely the responsibility of the person exposed to risk. One may also reduce the risk by certain precautionary measures, such as by putting secure locks on the doors or installing a fire alarm system. In this way the magnitude of the probable loss can be limited. Finally, risk may be shared or transferred to another person or organization, and that is where we come to insurance.

The two main principles that form the foundation of insurance are risk transference and the law of large numbers.

Risk transference or "pooling" is what insurance is all about. Insurers take responsibility to cover the losses of their clients in exchange for regular payment that is called "premium". Premiums are considerably lower than the cost of the possible loss. Money from the clients forms a fund, which is used to reimburse expenses of the insured in case of robbery, fire, road accident, health emergency or any other reason listed in the insurance policy. This is how the risk is shared.

However, it would be obviously impossible for insurance company to refund all its clients at a time. One of the key goals for insurance companies is always to have a margin of assets over estimated liabilities in order to stay active in the industry and develop their business. And here the law of big numbers is used. Insurers look at the odds of event considered in the policy and thus estimate the probability of the need to cover the loss. This information comes from statistics such as mortality tables in case of life insurance or auto crash frequency for the car insurance. For more accurate calculations insurers use a theorem of probability theory - the law of big numbers: "The observed frequency of an event more nearly approaches the underlying probability of the population as the number of trials approaches infinity." In plain words, the more cars you insure, the more accurately you can predict the number of cars likely to be stolen.

Now with the basic knowledge of how the insurance industry operates you can make a weighted decision. Online insurance quotes are a powerful tool to find an insurance company in your area. You easily get information about several local providers, understand their offers and choose the policy most suitable for your needs and financial situation.

With gas prices heading higher each year, many people are looking for resourceful ways to save on fuel, such as taking the bus, the train, riding a bike or car-pooling to work. Yet even with these money-saving tactics, drivers are still paying for full auto insurance coverage on their vehicles.

As we all know, there are some corners that just can't be cut. Or so we think! Many auto insurance companies are starting to consider a new insurance program that would offer consumers a discounted rate for reduced car usage. In fact, some insurance providers are already offering trial programs.

One big supporter of this new program is the Environmental Defense, anorganization currently promoting a Pay-As-You-Drive Insurance (PAYD) program to auto insurance companies throughout the United States. This innovative concept would link insurance policies to an odometer rather than just a renewal date on the calendar.

According to the Environmental Defense, PAYD would not only help save consumers money; it would also help reduce pollution. "PAYD provides financial incentive for driving less and is expected to reduce driving and congestion by 10 to12%", states an Environmental Defense official. "Driving less reduces air pollution, toxic runoff from roads, and impacts on climate."

PAYD would also make auto insurance more affordable for drivers by giving them more control of their auto insurance premiums - a change the National Organization of Women's Cents Per Mile group would be happy to see happen. According to NOW's website, low-income drivers often have to bear a higher insurance burden, unjustified by their lower mileage. This burden results in drivers dropping or not renewing their auto insurance policies. The new program will help to alleviate this problem, decreasing the number of non-insured drivers on the road while helping to reduce the financial strain on low-income and part-time drivers.

Currently, there are two proposed techniques that could be used to detect car mileage usage. The first method involves installing a proprietary odometer that has an embedded cell phone that occasionally calls in your mileage to your insurance company. The other technique would entail installing a GPS device into an embedded phone, such as OnStar, to detail your actual routes.

Many groups object to this method because of the possible privacy infringement. However, the GPS device does have its advantages. Not only would it track your mileage, it would also detail where and when you drove. For instance, if you were traveling in a congested area during rush hour it might cost you more, as opposed to the savings you could potentially receive for driving during off-peak hours.

Auto insurance companies would convert a portion of your current annual rate into a per mile fee. Your auto insurance company would assign your car to one of its rate groups according to your zip code, type, and usage. Once your per mile rate is determined you will more than likely be asked to pay an upfront, set fee for your predetermined number of miles. Depending on how much you drive, you could either receive a rebate or pay more.

Currently there are two pilot programs underway in the United States. One program is through OnStar, who has joined with a national insurance company to offer a mileage discount program. Offered exclusively to motorists who own GM vehicles equipped with OnStar, this program will provide owners with the opportunity to earn an extra discount based on the miles they've driven. GM motorists have the potential to receive up to a 40% discount and save hundreds of dollars annually. Discounts are given to motorists who have driven less than 15,000 miles per year - the lower the vehicle mileage, the more significant the discount. Presently the program is only available in Arizona, Indiana, Illinois and Pennsylvania.

The other program, being offered in Minnesota, is designed for drivers that own a 1996 model year or older. This test study uses a matchbox-sized electronic device that is plugged into the owner's onboard diagnostics (ODBII) port. Once set up, the sensor detects how much, how fast and when the vehicle is in use. From there, the information is used to calculate the customers discount. This free, voluntary program can potentially save participants up to 25% on their car insurance…a considerable discount when you are trying to conserve funds.

Looking for ways to save on auto insurance, but don't have a PAYD pilot program in your state? Logon to InsureME.com's auto quote comparison tool. There, you'll be able to get free online auto insurance quotes to compare car insurance rates from up to 5 insurance providers, helping you save time and money on your auto insurance.