Car Insurance Coverage: What You Need to Know

With more than a dozen types of auto insurance coverage, shopping for car insurance can sometimes make your head spin. Coverage requirements vary by state, and your lender likely requires you to purchase additional coverage if you finance or lease your car.

So, what types of car insurance coverage do you need? Are statewide requirements enough to protect you from financial ruin? We’ll answer these questions and more in the sections below.

Key Takeaways:

• Every state but Vermont requires drivers to have minimum liability coverage to legally drive.
• Full coverage — which often includes liability, comprehensive, and collision coverage — is usually required by lenders if you finance or lease your car.
• Additional coverages — such as uninsured motorist, roadside assistance, and rental reimbursement — are worth considering, especially if you depend on your car for work.

Common Car Insurance Coverages

There’s no such thing as “one-size-fits-all” car insurance. There’s a whole lot of wiggle room between the two extremes: the cheapest minimum coverage that just meets state requirements and high-limits, full-coverage auto insurance.

Liability coverage

You can think of liability as CYA coverage. This is the part of your car insurance that pays for other people’s injuries and/or property damage in an accident where you’re at fault.

Liability coverage — both bodily injury and property damage liability — is almost always mandatory. And it can protect you in a big way if you cause an accident that results in serious injuries, or if the other driver sues you.

Read more: Liability Car Insurance: What It Is, What It Covers, and How Much You Need

Collision coverage

Collision coverage pays for damage to your vehicle caused by a collision. This auto insurance coverage kicks in when you collide with another vehicle or a stationary object (a tree or wall, for example), if you roll over, or damage your car by hitting a pothole.

Collision coverage has a deductible, which is money you pay out of pocket before the insurance pays the rest.

Read more: Collision Insurance: How Does It Work, and What’s Covered?

Comprehensive coverage

Comprehensive is the “everything-else” part of your auto insurance coverage. It pays to repair/replace your ride if it’s stolen or damaged by some event other than a collision with another vehicle or an object.

Comprehensive covers minor incidents, such as broken windshields or a tree limb falling on your car. It can also cover vehicle damage from major disasters, such as earthquake damage, hurricane damage, flood damage, and even tornado damage.

Read more: Comprehensive Insurance: How Does it Work, and What’s Covered?

Uninsured and underinsured motorist coverage

It’s not required in every state, but uninsured/underinsured motorist coverage can provide you with real value. This coverage, abbreviated as UM/UIM coverage, can pay for your injuries and/or property damage if you’re hit by a driver who’s uninsured or who doesn’t have enough insurance. It also can pay for losses after a hit and run.

Driving without insurance is illegal, but it’s more common than you think. According to Nationwide, about 13% of drivers don’t have insurance. In states where insurance is expensive, the uninsured rate is much higher. That’s why it’s smart to protect yourself with UM/UIM coverage.

Read more: What Is Uninsured Motorist Coverage and Is It Worth It?

Personal injury protection (PIP) and Medical payments coverage (MedPay)

Personal injury protection — also called PIP coverage — can pay your medical bills resulting from an accident, no matter who’s at fault. PIP also can cover wages you lose because you were hurt in an accident, and sometimes other expenses, too, such as household help or child care.

Several states require PIP coverage, while a handful of others make it optional. Medical payments coverage, also called MedPay, covers only medical expenses.

Read more: Personal Injury Protection: How PIP insurance works and MedPay 101: Your Guide to Medical Payments Coverage

Premium coverages

In addition to the main types of coverage described above, you also have the option of adding auto insurance coverage for special situations. These premium coverages include:

• Gap insurance: This extra, temporary insurance covers the gap between what insurance will pay if your car is totaled and what you still owe on your loan.

Learn more: Gap Insurance Defined: How It Works & Who Needs It

• New car replacement: This add-on coverage will pay for a brand-new vehicle if you total your new car soon after buying it. Mileage/time limits apply.

Learn more: New Car Replacement Insurance: Everything You Need to Know

• Roadside assistance: Instead of purchasing roadside assistance from a third party like AAA, you can add it to your auto insurance policy.

Learn more: Five Roadside Assistance Programs Compared

• Rental reimbursement: When you can’t drive your car because it’s been in an accident, this coverage will pay for a rental car.

Learn more: Do You Need Rental Reimbursement Coverage?

• Mechanical breakdown: This auto coverage will pay for certain car repairs if your vehicle has a mechanical problem.

Learn more: Everything You Need to Know About Mechanical Breakdown Insurance

• Accident forgiveness: This coverage protects you from rising insurance rates after your first at-fault accident.

Learn more: Accident Forgiveness: What You Need to Know

• Rideshare endorsement: Typically, car insurance won’t cover you while you’re driving for pay — unless you purchase a ridesharing endorsement.

Learn more: Why Every Rideshare Driver Needs Rideshare Insurance

• Vanishing deductible: Every year you drive without an accident, your deductible will shrink by a certain amount (such as $100 or $50).

Learn more: What’s a Vanishing Deductible, and Do You Need One?

• Pet injury coverage: If your pet is hurt in a car accident while traveling with you, this coverage can help pay for vet bills.

Car Insurance Requirements by State

The amount of car insurance you need to drive legally depends on the state where you live. Some states require you to carry PIP protection or medical payments coverage. Some require uninsured/underinsured motorist coverage.

To find out how much car insurance each state requires, check out the table below.

How Much Insurance Do You Need?

A state-minimum policy may be the cheapest car insurance option, but that doesn’t mean it’s your best choice. Insurance is about protecting yourself, your finances, and your family. So ideally, your policy will include enough coverage to protect you if the worst happens: you cause an accident with serious injuries and get sued.

You should consider your financial situation when asking yourself “How much car insurance do I need?” What monthly premium can you easily afford? Could you buy a new vehicle, or pay for repairs yourself, if you don’t have collision and comprehensive coverage?

Keep in mind that you can control the costs of your car insurance by changing these two factors:

Deductibles

You get to choose your deductible, although it probably can’t be zero (sorry). Typical amounts are $500 and $1,000. Raising your deductible for collision and comprehensive coverage will immediately lower your auto insurance rates.

Coverage limits

You also can choose your coverage limits, as long as they meet your state’s minimum requirements. You might start with a 25/50/25 policy ($25,000 per person, $50,000 per accident and $25,000 property damage), and then compare quotes for higher-limit policies to see how much you’d pay.

What Car Insurance Doesn’t Cover

Car insurance can’t cover everything, unfortunately. In your policy, you’ll see a lot of things listed as exclusions — that means they’re not covered.

Some common car insurance exclusions are using a vehicle without permission; racing or competing in your car; normal wear and tear; and mechanical breakdowns. Non-standard vehicles such as ATVs, golf carts, or snowmobiles also may not be covered.

Car Insurance Coverage FAQs

Car insurance coverage can be confusing with so many options to choose from. We’ve answered some of the most common questions to help clear things up and make your shopping experience easier.

What are the three limits of most car insurance policies?

You’ve probably seen car insurance policy limits referred to with three limits — such as “25/50/25.” These numbers correspond to your payout limits for bodily injury liability insurance per person, bodily injury liability insurance per accident, and property damage liability insurance, respectively.

So if you have a 25/50/20 policy, for example, you’d have $25,000 in bodily injury coverage per person, $50,000 in bodily injury liability per accident, and $20,000 in property damage coverage.

What’s usually covered by car insurance?

Basic insurance policies typically include only liability coverage. This coverage pays for the other driver’s (and their passengers) medical bills and repair costs when you cause an accident. If you want your vehicle covered as well, you’ll need comprehensive and collision coverages.

More than a dozen different types of auto insurance coverage exist, so it’s worth talking to your agent or insurance company to make sure you have adequate protection.

What does full coverage include?

“Full coverage” doesn’t have a consistent meaning, but it usually refers to a policy that has liability insurance, collision coverage, and comprehensive coverage. It can sometimes include additional coverages like uninsured/underinsured motorist coverage (UI/UM), personal injury protection (PIP), and others, as well.

What does an auto insurance policy typically include?

Each policy is different. State-minimum car insurance policies typically include basic liability coverage, but some states also require PIP, UI/UM, or MedPay.

And if you finance or lease your vehicle, your lender likely requires comprehensive and collision coverage to protect their financial interest in your car.

Methodology

Data scientists at Compare.com analyzed more than 50 million real-time auto insurance rates from more than 75 partner insurance providers in order to compile the quotes and statistics seen in this article. Compare.com’s auto insurance data includes coverage analysis and details on drivers’ vehicles, driving records, insurance histories, and demographic information. All the quotes listed in this article have been gathered from a combination of real Compare.com quotes and external insurance rate data gathered in collaboration with Quadrant Information Services. Compare.com uses these observations to provide drivers with insight into how auto insurance companies determine their premiums.

Sources

1. Insurance Information Institute, “Facts + Statistics: Auto insurance,” accessed March 13, 2024.