Auto insurance coverage types, explained

An auto insurance policy isn't one thing. It's a bundle of separate coverages, and each one answers a different question: who pays if you injure someone, who pays for your own car, who pays your medical bills. Once you can name the parts, a quote stops looking like alphabet soup and you can see what a cheaper price is leaving out.

Liability coverage: the part most states require

Liability coverage pays for harm you cause to other people. It has two halves. Bodily injury liability covers other people's medical costs, lost income and related claims when you're at fault. Property damage liability covers damage you cause to someone else's car, fence, storefront or anything else that isn't yours. In most policies, liability coverage also pays to defend you if you're sued over an accident.

Nearly every state requires drivers to carry at least some liability coverage, and each state sets its own minimum amounts. A small number of states handle financial responsibility differently, so check the rule where you live.

Limits are usually written as three numbers, each in thousands of dollars. On a policy written as 50/100/50, the first number is the most the insurer pays for any one person's injuries in an accident, the second is the most it pays for all injuries in that accident combined, and the third is the property damage limit. Some insurers instead offer a single "combined single limit" that covers injuries and property damage together.

Two things liability never does: it doesn't repair your own car, and it doesn't pay for your own injuries. It exists to protect the people you might hurt and, by extension, your own finances. If the damage you cause is larger than your limit, you're personally responsible for the rest, which is why many consumer guides suggest thinking carefully before settling for the state minimum.

Collision coverage

Collision pays to repair or replace your own car after it collides with another vehicle or an object, or rolls over, regardless of who was at fault. You pay a deductible first; the insurer pays the rest, up to the car's actual cash value. If the other driver caused the crash, your insurer can pursue their insurer to recover the payment, and you may get the deductible back through that process.

Comprehensive coverage

Comprehensive covers damage to your car from causes other than a collision: theft, vandalism, fire, flood, hail, falling objects, a cracked windshield, and hitting an animal. (Hitting a deer is a comprehensive claim in most policies, not a collision claim.) It also carries a deductible, which can be different from your collision deductible.

Together, liability plus collision plus comprehensive is what people usually mean by "full coverage." That phrase isn't a legal term and isn't a guarantee that everything is covered, so it's worth asking an agent exactly which coverages a "full coverage" quote includes.

Uninsured and underinsured motorist coverage

Some drivers carry no insurance, and some carry too little to pay for a serious crash. Uninsured motorist (UM) and underinsured motorist (UIM) coverage steps in for your injuries when the driver who hit you can't pay. In many states it also applies to hit-and-run accidents. Some states require it, some require insurers to offer it, and in others it's optional. Certain states also offer uninsured motorist property damage, which covers your car in the same situation.

Personal injury protection and medical payments

Personal injury protection (PIP) pays medical expenses for you and your passengers after an accident, regardless of fault, and often covers some lost wages and household services too. A number of states use a "no-fault" system and require PIP; elsewhere it's optional or not offered.

Medical payments coverage (MedPay) is a simpler version: it pays medical bills for you and your passengers up to a set limit, regardless of fault, without the wage-loss features. It's optional in most states and can be useful if your health insurance has a high deductible.

Common add-ons

• Rental reimbursement pays for a rental car while yours is being repaired after a covered claim, up to a daily limit and a set number of days.
• Roadside assistance covers towing, jump starts, lockouts and similar help.
• Gap coverage pays the difference between what your car is worth and what you still owe on it if the car is totaled. See our gap insurance guide.
• New car replacement replaces a recently purchased car with a new one of the same make and model instead of paying its depreciated value, subject to the insurer's age and mileage rules.
• Rideshare coverage fills the gaps between your personal policy and the coverage a rideshare company provides while you're waiting for a ride request.
• Custom parts and equipment covers aftermarket wheels, stereos, lifts and similar additions that a standard policy may not pay for.
• Accident forgiveness is a feature rather than a coverage: it prevents your rate from rising after your first at-fault accident, under the insurer's conditions.

If you finance or lease

When a lender or leasing company has a financial interest in your car, they almost always require you to carry collision and comprehensive coverage, often with a maximum deductible, until the loan is paid off or the lease ends. If you drop those coverages, the lender can buy a policy on your behalf and bill you for it, usually at a much higher cost and with no protection for you personally. Leases frequently require higher liability limits as well.

Putting it together