Auto insurance encompasses a variety of coverages. Each type of coverage has its own purpose, requirements, and costs. Knowing the ins and outs of your auto insurance is a great way to ensure you’re covered—and at a reasonable price.
In this guide, we’re doing a breakdown of the standard coverages on auto insurance, so you can know exactly what you’re getting when you get your auto insurance quote.
Below we will review: liability, uninsured/underinsured motorist coverage, collision, comprehensive, medical payments, PIP, and gap coverage.
Liability coverage helps protect you and your assets in case you are found at-fault for another party’s damages in an auto accident. Liability helps cover the cost of another party’s expenses related to personal injuries or property damage caused by the accident. It does not cover your own expenses, except it may help cover your defense costs in the case of a lawsuit.
There are two types of auto liability coverage: bodily injury and property damage.
Bodily injury liability: Helps to cover costs related to personal injury sustained by another individual in an auto accident, for which you are found at-fault. This typically includes causally related hospital and doctor bills, ambulance rides, follow-up care, loss of wages, and pain and suffering. It may also help cover funeral costs and additional damages in the case of a fatality.
Property damage liability: Helps cover the costs of damage to another person’s property. This includes any repairs or replacements that directly stem from the accident, including car replacement parts, and body shop labor. This will typically help cover other forms of property damaged in the accident, like a fence or a building front. For example, if you run your car into a neighbor’s fence, property damage liability would help cover the cost to fix the fence.
Most states require liability coverage, though the minimum required amount varies by state. When purchasing liability insurance, you ideally want enough coverage to protect all your assets. If you cause a serious accident, the other party could sue you for a significant figure and obtain a judgment that could put many of your assets at risk, so you want enough insurance coverage to protect you and your family. Learn more about what can happen if you don’t have enough auto liability insurance here.
Uninsured/Underinsured Motorist Coverage
Although most states require liability insurance, not all drivers are as responsible as you. Some drivers don’t have enough liability insurance—or they don’t carry insurance at all. If you get into an accident where the other driver is at-fault and they don’t have adequate liability insurance or they hit-and-run, you’ll likely have to figure out a way to pay for your medical or property expenses yourself.
Uninsured/Underinsured motorist coverage is intended for these precise situations. This can cover medical bills and bodily injury damages for you, your family, and your passengers, if the other driver does not have sufficient coverage.
Uninsured motorist coverage can kick in when you’re in an accident and the other driver who is at-fault does not carry any insurance. Underinsured motorist coverage comes into play when the at-fault driver does have insurance, but they just aren’t carrying high enough limits to cover your injuries.
Not all states require this coverage, so be sure to check with your insurance provider to see how much it would cost to add this coverage if you don’t have it already.
Get more info here: Does uninsured/underinsured motorist policy cover damage to my car?
Collision coverage will help cover the cost of repair or replacement to your car if you get into an accident with another car or if you hit a fixed object like a tree, mailbox, sign, bridge, lamp or fence. Collision coverage comes into play when at least one motorist (you or another driver) is responsible for the accident.
Collision coverage is required for leased or financed vehicles, but even if your vehicle is already paid off, we recommend adding this coverage if your vehicle is still on the newer end. If another party is involved and found at-fault, your collision can help your claim get resolved faster while your insurance company may still sue the other party for reimbursement.
Comprehensive coverage helps cover the cost to repair or replace your car in the case of a situation that is usually out of the motorist’s control, like:
- Severe weather events such as wind, hail, and flood
- Vandalism or theft
- Fire or explosions
- Civil commotions such as riots
- Animal impact.
You never know what crazy things could happen to your car. Comprehensive insurance helps you be prepared for the totally unexpected.
For both comprehensive and collision coverage you typically carry a deductible. The deductible is the cost you pay out of pocket for damage to your vehicle caused by a covered loss before your insurance will step in to cover the remainder (up to your policy limits). Figure out how to choose a comprehensive or collision deductible here.
Medical Payments Coverage
Much like Bodily Injury Liability, this coverage helps cover medical expenses. Unlike the liability portion of the policy, however, this coverage is for medical costs for you and anyone who is in your car during the accident regardless of fault, up to your policy limit. This coverage can also be used if you’re hit by a car while you’re a pedestrian.
Personal Injury Protection (PIP)
If you’re in a state where this coverage is applicable, Personal Injury Protection (PIP) helps cover your medical costs in case you’re injured in an accident. PIP is a “no fault” coverage, so it will help protect you no matter who is found at-fault for an accident.
PIP can cover your medical expenses that are directly related to an auto accident. This includes hospitalizations, ambulance rides, doctors’ visits, and other direct medical expenses. PIP is similar to medical payments coverage, but it’s slightly more extensive in what it will cover. It may also cover non-medical related losses incurred because of the accident, like lost wages, funeral costs, and other services.
Most policies will exhaust the PIP before turning to the healthcare policy to cover your medical costs.
It is important to note, PIP does not cover vehicle damage or property damage.
Guaranteed asset protection (GAP) insurance isn’t usually part of a typical auto policy, but it’s worth considering if you’re financing your car. The second you drive the car off the lot, the vehicle starts depreciating in value. If your car is totaled, the insurance company will typically only cover you for the current value of the car before it was totaled. But you still owe the finance company for the entirety of the loan balance.
If your car is totaled, Gap insurance helps cover the difference between the amount you owe on the car and its present value.
For example, let’s say you buy a car for $30,000. In the first year you owned the car, you only paid $1,500 off your car loan, so you still owe $28,500 on it. However, if after a year, the current value of that car is $26,000 and your car is totaled, your insurance company will issue $26,000 (less any deductible).
Without gap insurance, you would be responsible for the additional $2,500 —that’s an expense on an asset you don’t even use or own anymore. Gap insurance would step in to help cover the additional amount so you’re not paying a major out of pocket expense for a car that you're no longer driving.
Learn about other types of optional auto coverage here.
Get auto insurance now
Want more information about auto insurance coverage and types? Check out The Ultimate Guide To Buying Auto Insurance.
If you’re looking to save money on your auto insurance, read these 16 ways to get a discount on your auto insurance.
If you haven’t purchased a policy yet you can Request a quote now to find the right auto coverage at the right price just for you!