Types of Car Insurance Coverage Explained

Car insurance isn’t just one-size-fits-all. Whether you're driving a brand-new SUV or an older sedan, understanding the different types of coverage can help you make smarter choices—and avoid paying for protection you don’t need.

Liability Coverage

Liability insurance is required in most states. It covers costs if you’re at fault in an accident and someone else is injured or their property is damaged. It’s usually split into two parts:

• Bodily Injury Liability: Covers medical bills, lost wages, and legal fees.
• Property Damage Liability: Pays for damage to another person’s vehicle or property.

Collision Coverage

This optional coverage pays to repair or replace your vehicle if you hit another car or object, regardless of fault. It’s commonly used when financing or leasing a vehicle.

Comprehensive Coverage

Comprehensive protects against non-collision events like theft, vandalism, fire, flood, or hitting a deer. If it's not another car, this coverage likely applies.

Uninsured/Underinsured Motorist Coverage

If you're hit by a driver who has little or no insurance, this coverage pays for your medical expenses—and sometimes car repairs. Some states make this mandatory.

Medical Payments & Personal Injury Protection (PIP)

These coverages help pay for medical expenses for you and your passengers after an accident, no matter who’s at fault. PIP is required in no-fault states and may also cover lost wages and rehab.

Gap Insurance

If you owe more on your car loan than the car is worth, gap insurance pays the difference if your car is totaled. This is especially important for new cars or long loan terms.

Optional Add-Ons

You can also choose extras like roadside assistance, rental reimbursement, and rideshare insurance—depending on your insurer and lifestyle.

Bottom Line

The right car insurance coverage isn’t always the cheapest—it’s the one that protects you in the situations most likely to happen. Understand what each type does and tailor your policy to your driving habits, vehicle, and budget.

Next, we’ll dive into how state laws impact your insurance requirements.