If you're buying a new car or shopping for auto insurance, you'll likely need to understand the common types of coverage available on a car insurance policy. The various types of car insurance coverage are available to help protect you, your passengers, and your vehicle if you're involved in a car accident.
Six common car insurance coverage options are auto liability coverage, uninsured and underinsured motorist coverage, comprehensive coverage, collision coverage, medical payments coverage, and personal injury protection. Depending on where you live, some of these coverages are mandatory and some are optional. Understanding what's required in your state and what each helps cover can help you choose the right coverage for your situation.
1. LIABILITY COVERAGE
Auto liability coverage is mandatory in most states. Drivers are legally required to purchase at least the minimum amount of liability coverage set by state law. Liability coverage has two components:
- Bodily injury liability may help pay for costs related to another person's injuries if you cause an accident.
- Property damage liability may help pay for damage you cause to another person's property while driving.
Auto liability insurance is a type of car insurance coverage that's required by law in most states. If you cause a car accident — in other words, if you are liable for the accident — liability coverage helps pay for the other person's expenses.
Auto liability coverage comes in two forms: bodily injury liability coverage and property damage liability coverage. Drivers in most states must have both types of coverage.
2. UNINSURED AND UNDERINSURED MOTORIST COVERAGE
If you're hit by a driver who doesn't have insurance, uninsured motorist coverage may help pay for your medical bills or, in some states, repairs to your vehicle. If you're hit by an underinsured driver, that means they have car insurance but their liability limits aren't enough to cover your resulting medical bills. That's where underinsured motorist coverage may help.
Uninsured and underinsured motorist coverage is required in some states and optional in other states.
What Is Uninsured Motorist Coverage?
What happens when the driver who hit you doesn't have enough liability coverage? Or, even worse, what if he leaves before you can get his information? Uninsured and underinsured motorist coverages financially protect you from irresponsible drivers.
3. COMPREHENSIVE COVERAGE
Comprehensive may help cover damage to your car from things like theft, fire, hail, or vandalism. If your car is damaged by a covered peril, comprehensive coverage may help pay to repair or replace your vehicle (up to the vehicle's actual cash value). This coverage has a deductible, which is the amount you'll pay out of pocket before your insurer reimburses you for a covered claim.
Comprehensive is typically an optional coverage — but your lender may require it if you're leasing or paying off your vehicle.
What Is Comprehensive Auto Insurance?
Comprehensive insurance is coverage that helps pay to replace or repair your vehicle if it's stolen or damaged in an incident that's not a collision. Comprehensive, sometimes called "other than collision" coverage, typically covers damage from fire, vandalism, or falling objects (like a tree or hail). If you're financing or leasing your car, your lender likely requires comprehensive coverage. If you own your vehicle outright, it's an optional coverage on your car insurance policy.
If you're shopping for auto insurance or are reviewing your current policy, you may want to consider comprehensive coverage. Learn what comprehensive insurance helps protect, how it is different from collision coverage, and how limits and deductibles apply to the coverage.
4. COLLISION COVERAGE
If you're involved in an accident with another vehicle, or if you hit an object such as a fence, collision coverage may help pay to repair or replace your car (up to its actual cash value and minus your deductible).
Collision coverage is typically optional. It may be required, however, by your vehicle's leaseholder or lender.
What is Collision Insurance?
Collision insurance is coverage that helps pay to repair or replace your car if it's damaged in an accident with another vehicle or object, such as a fence or a tree. If you're leasing or financing your car, collision coverage is typically required by the lender. If your car is paid off, collision is an optional coverage on your car insurance policy
5. MEDICAL PAYMENTS COVERAGE
If you, your passengers, or family members who are driving the insured vehicle are injured in an accident, medical payments coverage may help pay for costs associated with the injuries. Covered costs may include hospital visits, surgery, X-rays, and more.
Medical payments coverage is required in some states and optional in others.
What Is Medical Payments Coverage?
Medical payments coverage is part of an auto insurance policy. It may help pay your or your passengers' medical expenses if you're injured in a car accident, regardless of who caused the accident. This coverage is optional and not available in all states.
Medical payments coverage is sometimes called medical expense coverage, or just "med pay."
WHAT DO MEDICAL PAYMENTS COVER?
If you're injured in a car accident, medical payments coverage may help pay the following expenses for you or your passengers:
- Health insurance deductibles and co-pays
- The doctor or hospital visits
- Surgery, X-rays, or prostheses
- Ambulance and emergency medical technician fees
- Professional nursing services
6. PERSONAL INJURY PROTECTION
Personal injury protection, or PIP, is only available in some states. Like medical payments coverage, PIP may help pay for your medical expenses after an accident. In addition, PIP may also help cover other expenses incurred because of your injuries — for example, child care expenses or lost income.
Personal injury protection is required in some states and optional in other states where it's available.
What Is No-Fault Insurance (Aka Personal Injury Protection Or PIP Insurance)?
f you've been injured in an auto accident, personal injury protection may help pay for medical bills, hospital bills, and costs not covered by your health insurance company.
WHAT IS PIP COVERAGE/NO-FAULT INSURANCE?
Personal injury protection, also known as PIP coverage or no-fault insurance, covers medical expenses regardless of who's at fault. It can often include lost wages, too. Depending on the state where you live, PIP may be available insurance coverage or a required policy add-on. This coverage could help even if you’re not in your car. Say you’re injured by a car while walking or riding your bike, even riding in someone else’s car — depending on the state, PIP may have you covered up to the limits you choose.
PIP is required in many states. According to the Insurance Information Institute (III), in the 1970s, many states passed legislation to introduce "no-fault" auto insurance to simplify the process of determining which driver is responsible for an accident.
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