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Car insurance can’t keep you from getting into an accident, but it can help pay the hefty medical bills and repair costs that come from a serious wreck. How much your policy will pay out depends on the types of car insurance you buy and the limits you choose. Here’s a guide to coverage options.
Types of car insurance coverage at a glance
How your car insurance works depends on the coverage you buy. Take a look below at the main types of car insurance coverage and how they work; then read on for more details and real examples.
What it pays for
Medical costs due to injuries or deaths from an accident you caused, and repair costs for property you damaged.
Medical and repair costs after an accident with an uninsured driver.
Expenses from an accident with a minimally insured driver. This coverage pays once the underinsured driver’s coverage limits have been met.
Repair expenses from traffic-related accidents, regardless of who is at fault.
Repair costs from events outside your control — including weather events, hitting an animal while driving, theft and vandalism.
Medical expenses for you and your passengers after an accident regardless of fault.
Medical expenses, as well as lost wages, child care, funeral costs and other losses due to an accident regardless of fault.
The difference between what you owe on your car and your car’s true market value.
How car insurance works
Most auto policies include several types of car insurance coverage, each designed to pay for different expenses. For example, one part of your policy might cover repairs for your vehicle, while another pays for someone else’s damage.
Each type of coverage has a limit — the maximum your policy will pay after an incident. You can choose many of these limits based on how much coverage you want and how much you’re willing to pay for your policy. Other coverage types aren’t customizable, such as comprehensive and collision, which are limited to the cash value of your car at the time of a covered incident.
The higher your limits and the more types of car insurance coverage you buy, the less financial responsibility you’re likely to face after an accident — but the more expensive your premiums will be.
To decide what coverage you need, research what’s required in your state and what will best protect your finances.
What car insurance coverage is required?
While minimum car insurance requirements vary by state, the main types of car insurance coverage you could be required to get are:
Liability insurance, which pays for expenses due to an accident you cause.
Personal injury protection, or PIP, to pay for your medical care, lost wages or funeral services after an accident, no matter who’s at fault.
Medpay, to cover your own medical expenses (but no other costs) after an accident, no matter who’s at fault.
Uninsured and underinsured motorist coverage, to pay for damage from drivers without car insurance, or without enough to pay for damage they cause.
If you cause a car accident, liability auto insurance will cover the cost of any subsequent damage, injuries or deaths. All states, except New Hampshire and Virginia, require this coverage for all drivers.
There are two types of liability coverage for auto policies:
Bodily injury liability pays for expenses from injuries or deaths in an accident you cause.
Property damage liability covers repair costs if you hit another vehicle or other property such as a fence or building.
The amount of liability coverage in a policy is usually expressed as three numbers. For example, 100/300/50 means:
$100,000 bodily injury for each non-passenger you injure in an accident.
$300,000 total possible payout for bodily injuries per claim.
$50,000 total to pay for property damage per accident.
Your car insurance will pay up to the limits on your policy. After that, you’ll be on the hook for any additional expenses.
PIP and MedPay
Personal injury protection and medical payments coverage both pay your own medical expenses after a car accident, no matter who was at fault. They also cover medical expenses for injured passengers if you caused a wreck as the driver.
Personal injury protection, sometimes called "no-fault insurance," may also cover funeral costs, child care or lost wages due to injuries from an accident.
Uninsured and underinsured motorist coverage
Uninsured motorist coverage pays costs that result from an uninsured driver hitting you. About 1 in every 8 drivers don't have car insurance, according to a 2019 study by the Insurance Research Council.
Underinsured motorist coverage pays out when the at-fault driver has insurance, but their limits are too low to cover all of the damage.
Some states require a minimum amount of uninsured or underinsured motorist coverage. Here are four coverage types that are sometimes required:
Uninsured motorist bodily injury coverage, or UMBI, pays for medical expenses caused by an uninsured driver.
Uninsured motorist property damage coverage, or UMPD, pays for repair expenses caused by an uninsured driver.
Underinsured motorist bodily injury coverage, or UIMBI, pays out if the cost of injuries and repairs is more than an at-fault driver’s bodily injury liability limits.
Underinsured motorist property damage coverage, or UIMPD, pays for repair costs that surpass the at-fault driver’s property damage liability limits.
Collision and comprehensive coverage
Collision and comprehensive insurance are optional in every state, but may be required by your contract if you financed or leased a vehicle. These coverage types pay to either fix your car or reimburse you for its value if it’s stolen or damaged beyond repair.
Collision insurance pays for damage to your car after an accident, regardless of who was at fault. It will also pay for pothole damage.
Comprehensive insurance pays out if your car is stolen or damaged by anything other than a car accident. That includes damage from storms, floods, falling objects, explosions, earthquakes, vandalism or contact with an animal, such as hitting a deer.
Both comprehensive and collision coverage generally come with a deductible, which is the amount of the insurance claim you’ll have to cover before your insurer pays. The higher the deductible you choose, the lower your premium will be. However, since the payout is limited by your car’s value, comprehensive and collision don’t make sense for older cars with little cash value — especially if you also have a high deductible.
A new car’s value begins to drop the moment it leaves the car lot — faster than loan balances decrease at first. If you total a new car that hasn’t yet been paid off, gap insurance will cover the difference between what the car is worth and how much you owe on your loan.
If you’re leasing a car, the leasing company might require you to carry gap insurance. Usually, the car dealer will provide the gap insurance, and the cost will be included as part of the lease payment.
A dealership may also try to get you to purchase gap coverage when you buy a new car and roll it into your car loan. However, both scenarios result in paying interest on coverage you can typically get cheaper through an insurer, whether you lease or have a loan.
What car insurance doesn’t cover
Though there are many different types of car insurance coverage, there are still certain situations that car insurance won’t cover such as:
General maintenance for your vehicle like oil changes and mechanical repairs.
Personal items that are stolen from your vehicle.
Injuries you cause to others or damage you cause to their property that exceeds your liability coverage limits.
Damage that you intentionally cause to your vehicle.
Damage from previous owners if you purchase a used vehicle.
Electrical wear and tear — only electrical damage related to a crash is typically covered.
Some situations are only covered by car insurance if you purchase additional coverage. If you have state minimum car insurance you aren’t covered for:
The cost of a rental car if your vehicle breaks down unless you purchase special coverage.
Roadside assistance, unless you purchase separate coverage.
Natural disasters, theft or falling objects, unless you have comprehensive insurance
Driving your car for Lyft or Uber, unless you purchase rideshare insurance.
Damage to modified or custom parts you added to your vehicle unless you purchase separate coverage.
The full value of a classic or antique car, unless you purchase special coverage.
Frequently using your vehicle for commercial use or business purposes, unless you purchase business auto insurance.
Additional coverage options
The good news is you can choose from a variety of extra options, which usually don’t cost too much to add to a policy but can come in handy in an emergency. You’ll need to buy collision and comprehensive to be eligible to purchase some of these extras.
Rental reimbursement pays for a rental car while your car is in the shop following a covered claim repair.
Roadside assistance, or towing and labor coverage, provides help if you break down and need a battery jump or a tow.
New car replacement insurance works similarly to gap insurance and will pay for the value of a new car if yours is totaled in an accident. Most insurers offer one coverage or the other only.
Full glass coverage pays to repair or replace chipped or broken window glass, without a deductible.
Rideshare insurance will cover you when you’re driving for a rideshare service such as Uber or Lyft.
Mechanical breakdown coverage, which pays for repairs or replacement parts if your vehicle breaks down.
Custom parts and equipment value coverage, to repair or replace modifications that you added to your vehicle, such as a new stereo.
Classic car insurance, to pay for repairs and to insure your classic or antique car for its full appreciated value.
Business auto insurance, to cover you when you are using your vehicle for commercial or small-business purposes.
Once you’ve determined the coverage options you want, it’s important to shop around and compare auto insurance rates. Gather at least three quotes to make sure you’re getting the best possible deal on whichever coverage you choose.