The liability insurance is probably the most important type of car insurance, and is required in virtually every state. Liability coverage insures you against the cost of injury and damage you cause to others in an automobile accident.

The liability coverage is actually made up of two different policies, bodily injury liability, and property damage liability. Bodily injury insurance protects you from the cost of personal injury to others, and property damage insurance protects you from the cost of damage you cause to any physical property.

Your state's car insurance laws will require a certain level auto liability insurance. Check the minimum levels of required auto liability insurance to find out what's required where you live. Even though it may be tempting to save a few bucks by going with the minimum liability required in your state, keep in mind that if you cause a serious accident, minimum insurance may not cover you adequately. That's why it's a good idea to buy more than what your state requires.

Liability coverage limits (for the damage you do to others) are usually given as a series of three numbers. Let's take a typical policy that carries liability limits of 20/40/10. That stands for $20,000 in bodily injury coverage per person, $40,000 in bodily injury coverage per accident, and $10,000 in property-damage coverage per accident.

There are many factors that influence the price of an auto insurance policy. The average American driver spends about $700 a year on insurance. Your premium may be higher or lower, depending on your driving record, how you use your vehicle, where you live, your age, what car you drive as well as other factors.

For example if you've had accidents or serious traffic violations, you will pay more than if you've had a clean driving record. Also if you drive a higher than average number of miles per year, more than 10,000, you will pay more because there is a higher chance for accidents.

If you commute by car during rush hours, you're at greater risk of having an accident than if you only drive it for quick errands and on the weekends. Drivers who use their own vehicles for business also are considered to be at greater risk and will have to pay more for a policy.

In general, mature drivers have fewer accidents than less experienced drivers, particularly teenagers. So you will be charged a higher premium if teenagers or young people drive your car.

What type of car you drive is also a factor considered in setting the price of the policy. Some cars cost more to insure than others even though the cars have the same price. Variables include the likelihood of theft, the cost of the car, the cost of repairs, and the overall safety record of the car.