The main types of auto insurance and what they pay for

Auto insurance comes in distinct parts, and most states require you to carry at least some of them. Liability coverage pays for damage or injury you cause to someone else — their car, their medical bills, their property. Collision coverage pays for damage to your own car when you hit something or something hits you. Comprehensive coverage pays for damage from events you did not cause — theft, weather, vandalism, hitting an animal. Uninsured and underinsured motorist coverage protects you if the other driver has no insurance or not enough.

Your state's minimum requirements determine what you must buy. Most states require liability only; a few require collision and comprehensive if you have a loan on the car. Beyond the minimum, you choose what else to carry based on your car's value, your financial situation, and your risk tolerance. The coverage you pick shapes what your insurer will and will not pay when you file a claim.

Key Takeaways

  • Liability coverage is required in nearly every state and pays for damage or injury you cause to others, but does not cover your own car or medical bills.
  • Collision and comprehensive coverage protect your own vehicle; collision covers crashes and comprehensive covers theft, weather, and vandalism.
  • Uninsured and underinsured motorist coverage protects you if the other driver has no insurance or insufficient coverage to pay your damages.
  • Your state sets minimum coverage requirements, but you can buy more; your loan company may require collision and comprehensive if you financed the car.
  • Each coverage type has a deductible — the amount you pay out of pocket before insurance pays — and choosing a higher deductible lowers your premium.

Liability coverage: what it covers and what it does not

Liability coverage is the foundation of auto insurance and is required by law in every state except New Hampshire and Virginia (which allow you to post a bond instead). It has two parts: bodily injury liability, which pays for medical expenses and lost wages if you injure or kill someone, and property damage liability, which pays to repair or replace their vehicle or other property.

Liability does not cover your own injuries, your own car damage, or your own medical bills — that is what other coverages do. If you cause a crash, your liability coverage pays the other person's costs up to your policy limit. If the damages exceed your limit, you are personally responsible for the rest. This is why many people buy limits higher than their state's minimum: a serious injury can cost far more than the state-required amount.

Your liability limits are usually written as three numbers — for example, 25/50/25 means $25,000 per person for bodily injury, $50,000 total per accident for bodily injury, and $25,000 for property damage. Your state sets the minimum; you choose whether to buy more.

Collision and comprehensive: protecting your own vehicle

Collision coverage pays to repair or replace your car if you hit another vehicle, a fixed object, or roll over — regardless of who is at fault. If you cause the crash, your collision coverage pays for your car and the other person's liability coverage pays for theirs. If someone else causes the crash, their liability coverage pays for your car, but if they are uninsured or underinsured, your collision coverage fills the gap.

Collision coverage has a deductible, usually $500 or $1,000, meaning you pay that amount out of pocket and insurance pays the rest. Choosing a higher deductible ($1,500 or $2,500) lowers your premium; choosing a lower one raises it. If your car is worth less than a few thousand dollars, the cost of collision coverage may exceed what you would receive in a claim, so many people drop it on older vehicles.

Comprehensive coverage pays for damage to your car from causes other than a crash — theft, vandalism, weather (hail, flooding, wind), hitting an animal, or falling objects. It also has a deductible, usually $250 to $1,000. If you live in an area with frequent hail, heavy snow, or high theft rates, comprehensive becomes more valuable. If you have a loan on the car, your lender typically requires both collision and comprehensive.

Uninsured and underinsured motorist coverage

Uninsured motorist (UM) coverage protects you if you are hit by a driver with no insurance. Underinsured motorist (UIM) coverage protects you if the other driver's liability limits are too low to cover your damages. Together, they fill the gap when the at-fault driver cannot or will not pay.

UM and UIM coverage have two parts: bodily injury, which covers your medical bills and lost wages, and property damage, which covers your car. In most states, your UM/UIM bodily injury limit should match or exceed your liability bodily injury limit — if you carry 100/300 liability, you should carry at least 100/300 UM/UIM. Property damage UM/UIM is less common and varies by state.

When you file a UM or UIM claim, your insurer investigates whether the other driver was truly uninsured or underinsured. If the other driver is found at fault and has no insurance, your UM coverage pays. If they have some insurance but it runs out before your damages are covered, your UIM coverage pays the difference. Your own deductible typically applies to these claims.

Medical payments and personal injury protection

Medical payments coverage (sometimes called MedPay) pays your medical bills and those of your passengers, regardless of who caused the crash. It covers hospital visits, surgery, dental work, and sometimes funeral expenses. It does not cover lost wages or ongoing care. Medical payments coverage has a low limit, usually $1,000 to $5,000, and a low or no deductible.

Personal injury protection (PIP) is similar but broader and is required in some states (called "no-fault" states). PIP covers medical bills, lost wages, childcare, and household services for you and your passengers. It typically has a higher limit than medical payments coverage and applies regardless of fault. PIP is required in Florida, Michigan, New York, New Jersey, Pennsylvania, and a few other states; optional in others; and not available in most states.

If your state offers both, you choose which one to buy. Many people buy medical payments coverage as a low-cost way to cover when ready medical expenses without relying on health insurance or the other driver's liability coverage.

Deductibles and how they affect your premium

A deductible is the amount you pay out of pocket when you file a claim; your insurer pays the rest. Liability coverage typically has no deductible — if you cause a crash, your insurer pays the other person's costs in full. Collision, comprehensive, medical payments, and UM/UIM coverage all have deductibles you choose.

Common deductible amounts are $250, $500, $1,000, and $2,500. Choosing a higher deductible lowers your premium because you are taking on more financial risk. Choosing a lower deductible raises your premium because the insurer takes on more risk. The trade-off is between lower monthly payments and higher out-of-pocket costs if you have a claim.

If you have an emergency fund and can afford to pay $1,000 out of pocket, a $1,000 deductible usually saves enough in premiums over time to make sense. If you cannot afford an unexpected $1,000 expense, a $500 deductible may be safer even if the premium is higher. Your deductible choice should match your financial situation, not just the lowest available premium.

State minimum requirements and when you need more coverage

Every state except New Hampshire and Virginia requires liability coverage. The minimum amounts vary: some states require 15/30/5 (meaning $15,000 per person, $30,000 per accident for bodily injury, $5,000 for property damage), while others require 25/50/25 or higher. You can find your state's minimum on your state insurance commissioner's website or by calling your insurer.

If you financed or leased your car, your lender requires collision and comprehensive coverage as a condition of the loan. If you own your car outright, collision and comprehensive are optional, but many people buy them anyway to protect their investment. If your car is worth less than $5,000, the cost of collision and comprehensive may outweigh the benefit, and dropping them can save money.

Buying more than the minimum liability coverage is common and often inexpensive. Increasing from 25/50/25 to 100/300/100 might cost $10 to $30 more per month, but it protects you if you cause a serious injury. If you have significant assets, a home, or a high income, higher limits reduce your risk of a lawsuit that could threaten your finances.

How claims work and what happens after a crash

After a crash, contact your insurer as soon as possible — most policies require notice within a certain time frame, often 24 to 72 hours. Provide the date, time, location, and description of what happened. If another vehicle was involved, exchange name, phone number, address, driver's license number, license plate, and insurance information with the other driver. Take photos of the damage, the accident scene, and the other vehicle if safe to do so.

Your insurer will assign a claims adjuster who investigates the crash, reviews the police report if one exists, and determines fault. If you are at fault, your collision or comprehensive coverage pays for your car (minus your deductible) and your liability coverage pays for the other person's damages. If the other driver is at fault, their liability coverage should pay for your car; if they are uninsured or underinsured, your collision or UM/UIM coverage pays.

The claims process typically takes two to four weeks. Your adjuster will contact you with an estimate for repairs, and you can use your insurer's repair shop or choose your own. If your car is declared a total loss (the cost to repair exceeds 70 to 80 percent of its value, depending on your state), your insurer pays you the actual cash value of the car minus your deductible.

Frequently Asked Questions

What is the difference between collision and comprehensive coverage?

Collision covers damage from crashes — hitting another car, a tree, or rolling over. Comprehensive covers damage from other causes — theft, weather, vandalism, or hitting an animal. Both have deductibles and protect your own vehicle, not the other driver's.

Do I have to buy collision and comprehensive coverage?

If you financed or leased your car, your lender requires both. If you own your car outright, they are optional. Many people drop them on older cars where the cost of coverage exceeds the car's value, but doing so means you pay for repairs out of pocket if something happens.

What does uninsured motorist coverage pay for?

Uninsured motorist coverage pays your medical bills, lost wages, and pain and suffering if you are hit by a driver with no insurance. It does not cover your car damage — that is what collision coverage does. If the uninsured driver is at fault, your UM coverage pays up to your policy limit.

Can I lower my premium by raising my deductible?

Yes. Raising your deductible from $500 to $1,000 typically lowers your premium by 10 to 25 percent, depending on your insurer and location. The trade-off is that you pay more out of pocket if you file a claim. Choose a deductible you can actually afford to pay.

What happens if I cause a crash and the damages exceed my liability limit?

You are personally responsible for the amount over your limit. The other person can sue you for the difference, and a judgment could lead to wage garnishment or asset seizure. This is why many people buy liability limits higher than their state's minimum.