The Complete Guide to Auto Insurance Coverage

Key Takeaways:

• Car insurance coverage comes in different types, which include liability, collision, comprehensive, uninsured/underinsured motorist, and personal injury protection/medical payments.
• Liability coverage is mandatory in (almost) all states and covers injuries and property damage if you’re at fault in a collision.
• Policyholders can add premium coverages like gap insurance, new car replacement, roadside assistance, rental reimbursement, mechanical breakdown, accident forgiveness, ridesharing endorsement, OEM endorsement, vanishing deductible, and pet injury coverage to their policies for an extra cost.

Everyone has it. And yet no one understands it. Why does auto insurance have to be so complicated?

Never fear — Compare.com is here! Here’s a simple guide to the car insurance coverage you need:

In This Article

• Types of Car Insurance Coverage
• Car Insurance Coverage Required by Law
• How Much Coverage Do You Need?
• What Car Insurance Doesn’t Cover
• Should You File a Claim?
• Coverage FAQs

What Are the Different Types Of Car Insurance Coverage?

There’s no such thing as “one size fits all” car insurance. There’s a whole lot of wiggle room between the two extremes: the cheapest minimum coverage that just meets state requirements, and high-limits, full-coverage auto insurance.

Liability Coverage

You can think of liability as CYA coverage. This is the part of your car insurance that pays for other people’s injuries and/or property damage in an accident where you’re at fault. Liability coverage — both bodily injury and property damage liability — is almost always mandatory. And it can protect you in a big way if you cause an accident that results in serious injuries, or if the other driver sues you.

Read more: What is Liability Coverage?

Collision Coverage

Collision coverage pays for damage to your vehicle caused by a collision (just like it says on the label). This auto insurance coverage kicks in when you collide with another vehicle or a stationary object (like a tree or a wall), or when you roll over or damage your car by hitting a pothole. Collision coverage has a deductible, which is money you pay out of pocket before the insurance pays the rest.

Read more: What is Collision Coverage?

Comprehensive Coverage

Comprehensive is the “everything else” part of your auto insurance coverage. It pays to repair/replace your ride if it’s stolen or damaged by some event other than a collision with another vehicle or an object. Comprehensive covers minor incidents, such as broken windshields or a tree limb falling on your car. It can also cover vehicle damage from major disasters, such as earthquake damage, hurricane damage, flood damage, even tornado damage.

Read more: Comprehensive Coverage Explained

Uninsured and Underinsured Motorist Coverage

It’s not required in every state, but uninsured/underinsured motorist coverage can be really valuable. This coverage, abbreviated as UM/UIM coverage, can pay for your injuries and/or property damage if you’re hit by a driver who’s uninsured or who doesn’t have enough insurance. It also can pay for losses after a hit-and-run.

Driving without insurance is illegal, but it’s more common than you think! According to Nationwide, about 13% of drivers don’t have insurance. In states where insurance is expensive, the uninsured rate is much higher. That’s why it’s smart to protect yourself with UM/UIM coverage.

Read more: Considering Uninsured Motorist Coverage?

Personal Injury Protection/Medical Payments

Personal injury protection, also called PIP coverage, can pay your medical bills resulting from an accident, no matter who was at fault. PIP also can cover wages you lose because you were hurt in an accident, and sometimes other expenses too, such as household help or childcare. Several states require PIP coverage, while a handful of others make it optional. Medical payments coverage, also called Med Pay, covers only medical expenses.

Read more: What is Personal Injury Protection (PIP) Insurance? and What is Med Pay Coverage?

Premium Coverages

In addition to the main types of coverage described above, you also have the option of adding auto insurance coverage for special situations. These premium coverages include:

• • Gap Insurance: This extra, temporary insurance covers the gap between what insurance will pay if your car’s totaled and what you still owe on your loan.

Learn more: What Is Gap Insurance and What Does It Cover?

• • New Car Replacement: This add-on coverage will pay for a brand-new vehicle if you total your new car soon after buying it. Mileage/time limits apply.

Learn more: What is New Car Replacement?

• • Roadside Assistance: Instead of purchasing roadside assistance from a third party, like AAA, you can add it to your auto insurance policy.

Learn more: Five Roadside Assistance Programs Compared

• • Rental Reimbursement: When you can’t drive your car because it’s been in an accident, this coverage will pay for a rental car.
  • Mechanical Breakdown: This auto coverage will pay for certain car repairs if your vehicle has a mechanical problem.

Learn more: How to Compare Breakdown Insurance Plans

• Accident Forgiveness: This coverage protects you from rising insurance rates after your first at-fault accident.

• • Ridesharing Endorsement: Typically, car insurance won’t cover you while you’re driving for pay — unless you purchase a ridesharing endorsement.

Learn more: Does My Insurance Cover Driving with Uber?

• • OEM Endorsement: OEM stands for Original Equipment Manufacturer. This add-on coverage means that when your car’s repaired after an accident, only original parts — not cheaper lookalikes — are used on your car.
  • Vanishing Deductible: Every year you drive without an accident, your deductible will shrink by a certain amount (such as $100 or $50).
  • Pet Injury Coverage: If your pet is hurt in a car accident while traveling with you, this coverage can help pay for vet bills.

Learn more: Does Car Insurance Cover Pets?

What’s the Minimum Car Insurance Required by Law?

The amount of car insurance you need to drive legally depends on the state where you live. Some states require you to carry PIP protection or medical payments coverage. Some require uninsured/underinsured motorist coverage.

To find out how much car insurance you’re required to have, see the minimum car insurance laws by state.

How Much Insurance Do I Really Need?

A state minimum policy may be the cheapest car insurance option, but that doesn’t mean it’s your best choice. Insurance is about protecting yourself, your finances, and your family. So ideally, your policy will include enough coverage to protect you if the worst happens: if you cause an accident with serious injuries and get sued.

When you’re asking yourself “How much car insurance do I need?”, you should consider your financial situation. What monthly premium can you easily afford? Could you buy a new vehicle, or pay for repairs yourself, if you don’t have collision and comprehensive coverage? Keep in mind that you can control the costs of your car insurance by changing these two factors:

Your Deductible

You get to choose your deductible, although it probably can’t be zero (sorry). Typical amounts are $500 and $1,000. Raising your deductible for collision and comprehensive coverage will immediately lower your auto insurance rates.

Coverage Limits

You also can choose your coverage limits, as long as they meet your state’s minimum requirements. You might start with a 25/50/25 policy ($25,000 per person, $50,000 per accident and $25,000 property damage), and then compare quotes for higher-limit policies to see how much you’d pay.

What Does Car Insurance Not Cover?

Car insurance can’t cover everything, unfortunately. In your policy, you’ll see a lot of things listed as exclusions — that means they’re not covered. Some common car insurance exclusions are using a vehicle without permission; racing or competing in your car; normal wear and tear; and mechanical breakdowns. Nonstandard vehicles such as ATVs, golf carts or snowmobiles also may not be covered.

Should I File an Auto Insurance Claim?

If your vehicle gets damaged in an accident, it’s usually smart to file a claim. That’s why you have insurance, after all!

If the accident was someone else’s fault, you should definitely file a claim so their insurance can pay for your losses. However, sometimes it’s better not to file a claim.

The rule of thumb is that if the cost of repairs is about equal to, or less than, your deductible, then you should skip the claim process and just pay for the repairs yourself. Or maybe you can live with some scratches and dents on your vehicle.

Car Insurance Coverage FAQs

Does car insurance cover damage and injuries you cause to other drivers?

Yes! That’s what liability coverage is for. However, your car insurance may not cover everything. If the cost of the other drivers’ injuries and/or property damage exceeds your liability limits, then you may have to pay more.

Does car insurance cover theft?

Your comprehensive insurance covers vehicle theft, as well as the theft of any parts of your car. It also can cover damage from a break-in attempt. Car insurance doesn’t cover theft from your vehicle. If you leave something in your vehicle and it gets damaged or stolen, it won’t be covered by your car insurance. (Homeowner’s or renter’s insurance might pay for your losses, though.)

Does car insurance cover injuries to your passengers?

That depends on who your passengers are. If you’re the at-fault driver, your bodily injury liability coverage can help pay for your passengers’ injuries, unless they’re members of your family or household. In that case, your PIP or Med Pay may help cover their medical bills.

Does car insurance cover you if your car is totaled and it’s worth less than you owe on it?

If your car is totaled, your car insurance will only pay out its actual cash value. If you owe more than it’s worth, then you still have to pay off your loan. Boo! The exception is if you have gap insurance, which can cover the difference.

Does your car insurance cover you if you’re hit by someone who doesn’t have insurance?

Uninsured motorist coverage can cover you if you’re hit by an uninsured or hit-and-run driver. If you don’t have this coverage, however, you’ll have to sue the driver.

Where is the best place to compare coverages?

This is an easy one! Compare.com is the site you can trust to give you free, accurate, authentic car insurance quotes from leading car insurance companies. Our customers save an average of $720 a year.