Most people are obsessed with spending less on car insurance, but you might be better off paying more. While car insurance companies are happy to sell you more coverage, you shouldn't just increase coverage in every area. There are key coverages that deserve more attention than they often get.

Liability Insurance

It's incredibly easy to skimp on this one. Liability insurance is mandated by practically every state. Both bodily injury and property damage coverage should be increased above the state minimums unless you just can't afford to carry the coverage. In most cases, the coverage is inexpensive and well worth the additional cost.

For starters, it's relatively easy to sue someone in court over property damage. If you damage someone else's property, it's easy to exceed a dollar amount that would land you in small claims court. When that happens, you'll be going to civil court and paying a lawyer to represent you. This is where damages that exceed your policy limits become troublesome. You can be forced to liquidate assets to cover damage to someone else or to someone else's property.

While most retirement accounts are protected, some aren't. Individual Retirement Accounts (IRAs) are not protected under the Employee Retirement Income Security Act (ERISA) like 401(k) plans are. You can be sued, and any money in your IRA may be taken into consideration when determining your ability to pay a judgment against you.

Consider carrying several hundred thousand dollars worth of property damage liability coverage. This should cover most damage you could do someone's property. As for bodily injury, the fact of the matter is that this could cost you a million dollars or more depending on the injury. Carrying up to a million dollars in bodily injury ensures that expensive surgery or hospital stays are paid by the insurance company and not out of your future retirement or other savings.

Medical Payments

Increasing medical payment coverage is a good idea to supplement the bodily injury coverage. Unlike bodily injury payments, medical payments cover you (and anyone else in your vehicle) that is injured in an accident. This coverage is essential, especially if you regularly have passengers in your vehicle. It pays for the medical bills of the injured so that you don't have to pay these costs out of pocket. While your health insurance might pay for injuries you sustain to yourself, the medical payments coverage protects those riding with you. Better to have this coverage than to be sued for the medical bills of people riding with you.

Sometimes the cheapest car insurance means cutting cover but is this always the wise thing to do or are you leaving yourself open?