I'm buying a beater that's worth next to nothing. Must I insure it?

Yes, you should still buy auto liability insurance, which pays for any damage or injuries other drivers and their passengers suffer if you're at fault in a car accident. If you don't have liability insurance and you cause an accident, others could come after your assets in a lawsuit.

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You could also get in legal trouble if you don't carry the minimum liability insurance required by your state. All states except New Hampshire require drivers to carry liability car insurance, and some states also require drivers to carry personal injury protection and uninsured motorist coverage.

Experts urge you to buy more than the state required amount of liability coverage, which is low. The coverage should be enough to protect your assets, such as your home if you're a homeowner.

How to save on car insurance

You could save some money, though, by not purchasing optional coverage, such as collision and comprehensive. Collision pays to repair your car if it's damaged in a traffic accident, and comprehensive pays for repairs if the car is damaged by anything other than a traffic accident, such as fire, natural disaster, vandalism or collision with an animal. Both types of coverage also pay the actual cash value of the car if it's damaged beyond repair. Comprehensive reimburses you for the value of the car if it's stolen.

Because of your car's low market value, collision and comprehensive auto insurance probably aren't worth the cost you'll pay. But if the car in question is the only vehicle you have for getting around, make sure you have enough money set aside in savings to pay for repairs or to purchase a replacement vehicle if your car is damaged or stolen.

For more, read life without collision and comprehensive insurance.