When it comes to car insurance, what kind of coverage do you actually need?
In most states in the U.S., you’re required by law to have at least some car insurance — and even in the places without requirements, you’re still financially responsible for any damage or injury you cause with your car, so insurance is a good idea anyways.
In states where car insurance is required, the minimum coverage you’ll need will include liability insurance, which covers property damage or injury you cause with your vehicle. In some states, liability insurance is all that’s required. Liability insurance is the backbone of most insurance policies — but there’s a lot it doesn’t cover. If you’re trying to figure out how much car insurance you need, you may be deciding between just liability coverage or a more robust policy.
There’s no actual type of insurance called “full coverage” — that phrase simply refers to a combination of coverages that includes collision coverage and comprehensive coverage in addition to liability insurance. Let’s take a more in-depth look at your coverage options, and what liability insurance does and doesn’t cover.
Liability coverage, also sometimes called third-party car insurance, is required in most states. There are essentially two types of liability insurance: there’s bodily injury liability, which covers the associated costs if you hurt someone with your car; and property damage liability, which covers the associated costs if you damage someone else’s car or other property with your vehicle.
Liability insurance means your car insurance carrier will pay those costs, at least up to your set policy limits. But liability coverage only covers you when you’re at fault, so there are a number of scenarios where your liability coverage alone can’t cover you — that’s why it makes sense to add more protection to your policy.
“Full coverage” auto insurance isn’t a specific type of coverage — it refers to a combination of no-fault liability, collision, and comprehensive coverage.
Collision coverage covers damage to your car from an accident, regardless of who was at fault.
Comprehensive coverage covers damage to your car that happens when it’s not being driven, like damage from vandalism, fire, earthquakes, floods, extreme weather, falling objects or theft.
Together, liability, collision and comprehensive coverage will cover a number of potentially costly scenarios, but there are lots of other types of coverage you can include on a car insurance policy.
Personal injury protection: Required in some states, this covers medical bills and other costs if you or your passengers are injured in an accident.
Uninsured/underinsured motorist protection: If you’re in an accident caused by a driver who doesn’t have insurance, or whose insurance doesn’t cover the full extent of the damage they caused, this will help cover those costs. Also protects you if you’re the victim of a hit-and-run.
Gap insurance: If you owe money on a loan for your car, or if you lease it, and your car is declared a total loss after an accident, this will pay out the difference between what you owe and what the car is valued at at the time of the accident.
Rental reimbursement: Usually an inexpensive add-on, this will cover a certain amount per day up to a set maximum for a rental car if your car is in the shop.
Anna Swartz is a Managing Editor at Policygenius, where she has been since 2018. An expert in home, auto and renters insurance, she loves making tough concepts easy to understand and helping readers feel confident about their insurance options. Before joining Policygenius, she was a senior staff writer at Mic. Her work has appeared in The Dodo, AOL, HuffPost, Salon and Heeb.
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