There are many car insurance coverages to choose from, and your decision should depend on what you want covered, what you can afford and what car you own. This article explains each type of coverage to help you understand car insurance and make a smart buying decision. If you’d rather get a recommendation in just a few seconds, use our How Much Car Insurance Do I Need? tool.
Property damage liability car insurance
First, you should ask yourself if you have enough coverage in case of an incident occurs. If you cause damage to others, liability car insurance protects you, but it does not cover you, your passengers, or your car. It is mandatory in nearly all states.
The basic insurance requirements in most states include property damage liability and bodily injury liability. There are limits associated with each liability coverage, and it is always recommended that you protect yourself to the fullest by getting the highest limits you can afford. You can comply with state car insurance laws by just buying minimum coverage amounts, but if you cause a serious accident, especially if there is more than one car involved, minimum limits can easily be exceeded. This means you’re on the hook for paying for damages.
Property damage liability (PD or PDL) covers you if your car damages someone else’s property — whether it’s the person’s car, fence, house or any other property. It is a good idea to purchase enough of this insurance to cover the amount of damage your car might do to another vehicle or object.
Bodily injury liability car insurance
Bodily injury liability (BI or BIL) coverage is required in most states, but some, such as the no-fault state of Florida, do not require it. Whether it is required by law or not, it is wise to have this coverage up to the highest limits you can afford. Bodily injury liability covers other people’s bodily injuries or death for which you are responsible.
Bodily injury liability does not cover you or other people on your policy.
Claims for bodily injury may be for such things as medical bills, loss of income, or pain and suffering.
In the event of a serious accident, you want enough insurance to cover a judgment against you in a lawsuit without jeopardizing your personal assets.
Uninsured motorist bodily injury coverage
Uninsured motorist bodily injury (UM or UMBI) is another coverage you may want to consider. An uninsured motorist covers you if the other party was at fault and you were injured, and the other driver was not insured. UM covers you, the insured members of your household, and your passengers for bodily/personal injuries, damages, or death caused by an at-fault uninsured or hit-and-run driver. If you are involved in an accident where the other driver is at fault but has no insurance, your policy will cover your medical expenses up to the limit on your policy.
Underinsured motorist bodily injury coverage
There is also underinsured motorist bodily injury (UNDUM) which covers you, the insured members of your household, and your passengers for injuries, damages or death caused by the negligence of a person with insufficient insurance. If you have an accident with a person whose coverage cannot meet your damages, your policy will meet the difference — up to the limit of liability listed on your policy.
In some states, UM, and sometimes UNDUM as well is required as part of the basic minimum insurance requirements. In other states, coverage is not required. However, the auto insurance provider must offer you the coverage, and you must decline in writing if you do not want it as part of your policy.
Uninsured and underinsured property damage coverage
There are also uninsured and underinsured motorist property damage coverages though they are not available in every state. Uninsured motorist property damage (UMPD) covers your auto when property damage is sustained by an insured driver, and the negligent driver does not have insurance. If you do not have collision coverage, UMPD coverage pays up to a certain amount for repairs to the insured car (some states have limits at $3,500, some are lower, and some are higher). If you have collision car insurance, UMPD coverage only pays your collision deductible (in some states).
Underinsured motorist property damage kicks in when property damage is sustained by an insured, and the at-fault driver has insurance, but the limits of liability carried by the negligent driver are not sufficient to cover the damages. Similar to UMPD, if you do not have collision coverage, underinsured motorist property damage coverage pays up to a certain amount for repairs to the insured car. Some states have limits at $3500, some are lower, and some are higher. Underinsured motorist property damage coverage only pays your collision deductible (in some states) if you have collision coverage.
There are two more very important types of physical damage coverage that you might want to explore — comprehensive and collision.
Comprehensive car insurance
Comprehensive coverage is sometimes referred to as “other than collision” or OTC. Comprehensive covers your vehicle in the event of a fire, theft, vandalism, hail storm damage, or any natural causes minus the deductible you agreed upon when purchasing your insurance. It is also what you would place a claim through for glass breakage or if you run into an animal, such as a deer, on the roadway.
Collision car insurance
Collision coverage would cover most other physical damage to your vehicle. Collision covers damage to your car when your car hits or is hit by another vehicle or object. It pays to fix your vehicle less the deductible you choose. To keep your premiums low, select as large a deductible as you feel comfortable paying out of pocket. For older cars, consider dropping this coverage since coverage is normally limited to the cash value of your car.
Physical damage coverages are not required by any state. Since states are more concerned about your ability as a driver to pay for damages, you cause others with your liability car insurance, but if you have a loan or a lease, then the lien holder will require it. Even if you paid for your car in cash, if you want your own vehicle protected in an accident, it is collision and comprehensive coverages that you would want on your vehicle to pay for repairs or for the actual cash value if it was found to be a total loss.
Sometimes people refer to their car insurance coverage as “full coverage.” While there is not any real coverage that can cover every situation out there, what is being referred to as full coverage is at least the state minimum liability coverage, along with comprehensive and collision car insurance.
Personal injury protection and medical payments coverage
Beyond these basic insurance coverages, there are many others you can add to your policy to protect you in various ways. A couple of ones that are available to help you pay medical expenses include:
- Personal injury protection (PIP) is required in no-fault states (but also an option in many other states). PIP covers within the specified limits the insured’s medical, hospital, and funeral expenses, others in his vehicles, and pedestrians struck by him. The basic coverage for the insured’s injuries on a first-party basis, without regard to fault. It is only available in certain states.
- Medical payments cover medical expenses for you and your passengers injured in an accident. There may also be coverage if, as a pedestrian, a vehicle injures you. This coverage applies regardless of who is at fault. Medical payments may also cover policyholders and their family members when they are injured while riding in another driver’s car or when a car hits them on foot or bicycling.
Work loss, gap, rental reimbursement and other add-on coverage
There is a long list of other types of insurance coverage that you can add to a policy. They include Work Loss, gap insurance, rental car reimbursement, towing and labor, and custom parts and equipment, among others. All coverages are limited to the terms and conditions contained in your specific insurance policy since state laws and insurance company guidelines and terms vary.
— Michelle Megna contributed to this story.
Ask the Insurance Expert
Laura Longero
Executive Editor
Laura Longero is an insurance expert and Executive Editor at CarInsurance.com, where she specializes in helping consumers navigate the complexities of the financial and insurance industries. She has 15 years of experience educating people about finance and car insurance. Prior to joining CarInsurance.com, she worked as a reporter and editor at the USA Today Network. Her expertise provides readers with practical guidance, helping them make informed choices about their financial and insurance needs.
Ask the Insurance Expert
John McCormick
Editorial Director
John is the editorial director for CarInsurance.com, Insurance.com and Insure.com. Before joining QuinStreet, John was a deputy editor at The Wall Street Journal and had been an editor and reporter at a number of other media outlets where he covered insurance, personal finance, and technology.
Ask the Insurance Expert
Leslie Kasperowicz
Executive Editor
Leslie Kasperowicz is an insurance educator and content creation professional with nearly two decades of experience first directly in the insurance industry at Farmers Insurance and then as a writer, researcher, and educator for insurance shoppers writing for sites like ExpertInsuranceReviews.com and InsuranceHotline.com and managing content, now at CarInsurance.com.
Ask the Insurance Expert
Nupur Gambhir
Managing Editor
Nupur Gambhir is a content editor and licensed life, health, and disability insurance expert. She has extensive experience bringing brands to life and has built award-nominated campaigns for travel and tech. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service.