Different Types of Auto Insurance

Coverage Types at a Glance

Quick way to choose coverages

• Financed/leased car?
  You’ll usually need
  collision + comprehensive.
• Paid-off car?
  Consider collision/comp based on the car’s value
  vs. your deductible + premium.
• Biggest “financial risk”?
  Raise liability limits first
  (it protects your assets/income).
• Worried about uninsured drivers?
  Prioritize
  uninsured/underinsured motorist
  (especially for injuries).

How Limits and Deductibles Work

Car insurance isn’t just about “having coverage.”
The details matter—especially your
limits and deductibles.

• Limits are the maximum amount your insurer
  will pay for a covered claim (for example, $100,000).
• Deductibles are what you pay out of pocket
  before coverage kicks in (for example, a $500 collision deductible).
• Exclusions are situations your policy won’t
  cover (every policy has them—read your declarations page
  and policy terms).

As a general rule,
higher limits mean more financial protection,
and higher deductibles usually lower your premium
(but increase your out-of-pocket cost if you file a claim).

Liability Coverage

Liability coverage is the foundation of an
auto insurance policy. It helps pay for
injuries and property damage you cause to other
people in an accident.

In the U.S., New Hampshire is the only state that doesn’t
require drivers to carry auto liability insurance in the
traditional way (drivers are still financially responsible
for damage they cause).

Meanwhile, Virginia previously allowed drivers to register
uninsured vehicles by paying a fee—but that option ended on
July 1, 2024, and registered vehicles must now
be insured to meet state liability requirements.

Liability coverage does not pay to repair
your own car. If you want protection for your vehicle,
you’ll typically need collision and/or comprehensive coverage.

Most states set minimum limits, but minimums can be surprisingly
low compared to real-world repair and medical costs. If you
have savings, assets, or a steady income, consider higher limits
than the state minimum—because once your liability limit is
exhausted, you’re on the hook for the rest.

Quick tip:
State minimum liability limits are often set for
“legal compliance,” not real-world costs. If you’re increasing
coverage anywhere, liability is usually the best place to start
because it protects your finances if someone is seriously hurt.

You’ll often see liability limits written as three numbers,
such as 30/60/25:

$30,000
Bodily injury per person
$60,000
Bodily injury per accident
$25,000
Property damage per accident

Many drivers choose higher limits (for example,
100/300/100) for better protection—especially if
they regularly drive in traffic-heavy areas or have a higher
net worth to protect.

Bodily Injury vs. Property Damage Liability

Bodily Injury Liability:
Helps pay for other people’s medical bills (and related costs)
if you cause an accident that injures them.

Property Damage Liability:
Helps pay for damage you cause to someone else’s vehicle or
property (another car, a fence, a building, etc.).

If you’re shopping for the lowest legal coverage, make sure you
understand what your state actually requires and what happens
if you’re underinsured.

Collision Coverage

Collision coverage helps pay to repair or
replace your vehicle if it’s damaged in a crash—whether you
hit another car, a pole, or a guardrail. It typically applies
regardless of fault (after you pay your deductible).

If you lease or finance your vehicle, your lender will usually
require collision coverage until the loan is paid off.
If your car is paid off, collision can still be valuable—but
it’s often a coverage people reconsider once their vehicle’s
value drops.

Comprehensive Coverage

Comprehensive coverage helps pay for damage
to your car from non-collision events, like
theft, vandalism, fire, hail, flooding, falling objects,
and animal strikes. Like collision, it usually comes with
a deductible.

Comprehensive coverage is often a “must-have” for newer or
higher-value vehicles (and is usually required if you finance
or lease). For older cars, the math can change—if your premium
and deductible don’t make sense compared to your car’s value,
it may be time to reevaluate.

What People Mean by “Full Coverage”

“Full coverage” isn’t an official policy type—it’s
a common phrase. In most cases, people mean a policy that includes:

• Liability
  (required in almost all states)
• Collision
  (damage to your car after an accident)
• Comprehensive
  (theft, weather, vandalism, etc.)

Many “full coverage” policies also include uninsured/underinsured
motorist coverage and medical coverage (PIP or MedPay), but what’s
included varies by insurer and state. Always check your
declarations page to confirm exactly what you’re buying.

Uninsured and Underinsured Motorist Coverage

Uninsured/underinsured motorist coverage
helps protect you if you’re hit by a driver who has no
insurance—or not enough insurance to cover the damage
they caused.

This coverage is especially important because even if the
other driver is clearly at fault, it doesn’t help you much
if they can’t pay. Depending on your state and policy,
uninsured/underinsured motorist coverage may help pay for
injuries to you and your passengers (and sometimes vehicle damage).

Quick tip:
Uninsured motorist coverage often matters most for
injuries, and it can help in many hit-and-run
scenarios. Property damage rules vary by state and policy.

It can also help in certain
hit-and-run accident situations, when the
at-fault driver can’t be identified.

Tip: What to Do After a Hit-and-Run

• Call the police and get a report number.
• Take photos, note the time and location, and ask
  witnesses for contact info.
• If you can safely do so, try to capture the
  license plate number from a hit-and-run
  (even a partial plate can help).

Medical Coverage: MedPay and PIP

Medical costs add up quickly after a crash—even a “minor”
accident. Two common coverages that can help are
Medical Payments (MedPay) and
Personal Injury Protection (PIP).

Medical Payments Coverage (MedPay):
Typically helps pay medical bills for you and your passengers
after an accident, regardless of fault. It’s usually optional
and can be helpful if you have a high-deductible health plan
or want extra protection for passengers.

Personal Injury Protection (PIP):
Common in no-fault states and required in some places.
PIP can cover medical bills and may also cover related expenses
like lost wages (up to your policy limits and state rules).

If you’re not sure which medical coverage applies in your state
(or what you already have through health insurance), ask your
insurer to explain how MedPay or PIP coordinates with your
health plan.

Towing & Roadside Assistance Coverage

Towing & roadside coverage
(sometimes called towing and labor) helps with
common “stranded” situations—like a tow to a repair shop,
a jump-start, lockout service, or a flat tire.
It’s usually inexpensive, but coverage limits and service
rules vary by insurer.

• Check the limit:
  Some policies cap towing at a dollar amount per event
  (or per year).
• Know what’s excluded:
  This usually covers the tow/service, not the mechanical repair.
• Compare alternatives:
  If you already have roadside assistance through an
  automaker, credit card, or membership program, you may
  not need this add-on.

Quick tip:
Before you add roadside assistance to your policy, check whether
you already have it through your vehicle warranty, credit card,
or a membership program.

Keep in mind: towing/roadside coverage is different from repair
coverage. If your vehicle simply stops working, you may get help
with the tow, but not necessarily the repair itself.

Popular Add-Ons and Endorsements

Beyond the “big” coverages, many drivers add optional protections
to make life easier after a claim. These won’t replace
liability/collision/comprehensive, but they can reduce stress
and out-of-pocket expenses.

Rental Reimbursement Coverage

If your car is in the shop after a covered claim,
rental reimbursement may help pay for a temporary
replacement vehicle.

Limits vary, but many policies set a
daily cap and a
total cap (for example,
“$40/day up to $1,200 total”).

Quick tip:
Pick a daily rental cap that matches real prices in your
area (including taxes/fees). If the cap is too low, you may
still pay out of pocket every day.

Gap Insurance and New-Car Replacement

Gap insurance can help if your financed/leased
vehicle is totaled and you owe more than the car’s actual
cash value.
New-car replacement (when available) may
help replace a brand-new vehicle with a new one rather than
paying depreciated value.

These can be useful for newer cars, but the value depends
on your loan/lease terms and how quickly your vehicle depreciates.

Rideshare and Delivery Coverage

If you drive for rideshare or delivery apps, you may need
a specific rideshare endorsement to avoid
coverage gaps.

A standard personal auto policy may limit coverage while
you’re working, so it’s important to tell your insurer
how you use your vehicle.

Specialty Coverage: Classic and Collector Car Insurance

If you own a classic or collector vehicle, a specialty policy
may offer better protection (and sometimes lower premiums)
than a standard policy.

These policies often use
agreed value coverage and may come with
mileage limits, storage requirements, and rules about
daily driving.

How to Build the Right Policy for Your Budget

If you want a simple way to choose coverages, start here:

• Need the legal minimum?
  You’ll likely need liability coverage at your state’s
  minimum limits.
• Have a newer, financed, or leased car?
  Strongly consider (or expect to be required to carry)
  collision + comprehensive, along with solid liability limits.
• Have savings and assets?
  Higher liability limits and uninsured/underinsured
  motorist coverage can protect you from expensive lawsuits
  and uninsured drivers.
• Driving an older paid-off car?
  Consider whether collision/comprehensive still make sense
  based on the car’s value, your deductible, and your ability
  to pay for repairs out of pocket.