One expense that cannot be cut out, even in a tough economy, is car insurance. All states require at least a certain amount of car insurance, and being caught without coverage can lead to even more expenses. But how can you choose a car insurance company and policy that's right for you without breaking the budget?

First, assess your needs to decide what type of car insurance you need. There's full coverage, which covers damage to other cars involved in an accident as well as your own, and liability, which will not cover your car's damages. Do decide if you really need full coverage. If you have a loan on the vehicle you need covered, full coverage car insurance is a must. If you own the vehicle outright, and the Blue Book Value is under $3000, liability only coverage may be a better option. On the other hand, if you live in a rural area where there's a good chance a deer could run in front of your car, you may find full coverage to be worth the added expense each month. Consider whether you could afford to replace the car without insurance money if you had to. If so, go for liability only, but if not, keep full coverage. Also consider how much of a deductible you could afford, in case of accident. Lower deductibles mean higher insurance costs, but that may be easier to work into your budget.

The next thing to do is shop around. Begin with the insurance company you already have a relationship with, whether you use them for another car's insurance, home insurance, or just have family or friends who use them. But don't be afraid to get quotes from multiple places-you may end up saving hundreds of dollars a year. When shopping for a car insurance policy, don't leave anything out. If you have tickets or accidents on your record, be upfront about it. The insurance company will find out when they pull your driving record anyway, so to omit this information only wastes everyone's time. Do mention any and all safety features on your car, especially passive ones like automatic seat belts and air bags. These features will get you valuable discounts, as will an alarm system on the car. Also consider the insurance company's payment policies when shopping. Can you afford to pay for 6 to 12 months of car insurance at one time? If not, some insurance companies offer the option of paying monthly or every 3 months. There may be a small fee added to each payment for this option.

Finally, keep an eye on your insurance policy at each renewal period. Make sure all applicable discounts carry over from policy period to policy period. Most insurance companies will slightly drop your premium each time you complete a period without any accidents or claims. If you aren't seeing this in your renewal documents, talk to your agent and ask why. He or she is there to work for you.