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Liability insurance

Liability insurance has two components: bodily injury liability coverage and property damage liability coverage. These coverage types make payments to third parties when you cause an accident. Bodily injury insurance pays for medical expenses, lost wages and legal fees. Property damage insurance pays to repair or replace damaged property, such as the other driver's vehicles or personal items inside the car.

Liability insurance is mandatory in all states (except New Hampshire) and Washington, D.C., and each state sets a minimum coverage requirement.

Personal injury protection

Personal injury protection (PIP) provides coverage for medical bills, lost wages and other expenses for you, your passengers and household relatives when injured in a car accident. Since this coverage pays out regardless of who is at fault for the accident, it is often called no-fault coverage and is required coverage in no-fault states. PIP is optional in many other states.

Uninsured motorist coverage

Often misunderstood, uninsured motorist insurance is not coverage for uninsured drivers. Rather, it pays for the medical costs for you and your passengers as well as your vehicle repairs when an uninsured driver is responsible for the accident, including hit-and-runs. This coverage is required in 21 states and Washington, D.C., and available as optional coverage in all others.

Underinsured motorist coverage

Underinsured motorist coverage pays for medical costs for you and your passengers as well as your vehicle repairs if an at-fault driver does not have enough coverage for the resulting damages from the accident.

Comprehensive coverage

Comprehensive coverage pays to repair or replace your vehicle when it is damaged from a loss resulting from something other than a collision. Some carriers actually call this coverage “other than collision” coverage or OTC. Perils typically covered are theft, vandalism, and damage from severe weather and climate events, like flood, fire, wind and hail. This coverage pays out up to the actual cash value of your vehicle, minus the deductible. This coverage is typically required if you have an auto loan or lease.

Collision coverage

Collision coverage pays to repair or replace your auto when it is damaged in a collision. It also covers rollover accidents and pothole damage. Just like comprehensive coverage, there isn't a predetermined coverage limit. The coverage pays out up to the actual cash value of your vehicle, minus the deductible. This coverage is typically required if you have an auto loan or lease.

Medical payments coverage

Medical payments coverage (often called MedPay) provides payment towards medical-related expenses resulting from a car accident. It covers you and your passengers and will pay out regardless of fault. While it is considered optional coverage in most states, it is required in Maine and New Hampshire (when an auto policy is purchased).

Gap coverage

Gap coverage is only available for newer vehicles with a lease or loan. When a car is totaled in a covered claim, this coverage pays the difference between the actual cash value of the claim payout and the remaining balance left on the lease or loan. Gap coverage can be purchased from dealerships and financial companies, but drivers can usually save money by buying it through their insurer. However, not all insurance companies offer this coverage.