When you accidentally hurt someone in a crash or damage their property with your car, your car insurance is there to pick up the bill. Car insurance pays for expenses like the other party’s medical bills or vehicle repairs when you cause an accident, but it can also cover the cost if your own car is damaged or stolen, depending on the types of coverage in your policy.
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The amount of car insurance you need will depend on your state's requirements and how much you want to pay out of pocket in the event of an accident (certain drivers, like rideshare drivers or business owners who drive for work, will need specialized coverage). Before you shop, you should compare the cost of car insurance based on your needs.
Car insurance is actually made up of multiple types of coverage
Liability coverage, the backbone of your policy, is what covers the costs if you’re responsible for a car accident
Comprehensive and collision coverage are what pay for repairs to your own car
You may be required to add personal injury protection or uninsured/underinsured motorist coverage to your policy, depending on your state
Liability coverage covers the other party’s medical expenses and vehicle repairs when you’re responsible for an accident. Say you back out of your driveway without looking and cause a collision — your liability coverage is what pays to repair the other driver’s car.
Almost every state requires a minimum amount of liability insurance, although you should get more than your state’s minimum in order to be protected.
Liability coverage is made up of two parts: bodily injury liability (BIL) and property damage liability (PDL). When you buy liability coverage, you’re paying for bodily injury liability per person, bodily injury liability per accident, and property damage liability.
The amounts for each are typically written with three digits, such as 50/100/50, meaning you have the following coverage amounts:
$50,000 in bodily injury liability coverage per person
$100,000 in total bodily injury coverage per accident
$50,000 in property damage coverage
These numbers are called your limits of liability, meaning the maximum amount your car insurance company will pay for any damage you cause. They are listed on your auto insurance declarations sheet, the first page of your car insurance policy.
Bodily injury liability
Bodily injury liability coverage pays for the expenses you’re liable for when you injure someone else in a car accident. This includes their hospital bills, loss of income, legal fees, and even funeral expenses.
Keep in mind that injuries from a car accident could cost tens of thousands of dollars if the other party doesn’t have health insurance, so make sure you buy enough coverage that you’re not stuck paying for someone else’s medical bills out of pocket.
Property damage liability
This type of liability coverage pays to repair or replace someone else’s car when you’re liable for the damage. It also covers damage to other types of property you may have damaged with your car, like someone else’s house, fence, business, or even a tree or other landscaping.
As with BIL coverage, the victim must file a claim with the at-fault driver’s insurance company. The same caution about costs applies, too, so be sure to set high limits for property damage liability, so you don’t wind up having to pay out of pocket for an accident you caused.
Property damage liability coverage does not cover damage to your own car, which is covered under comprehensive and collision insurance.
Collision insurance pays out when your vehicle hits another car or object and you need to repair or replace it — so if you get in an accident and it’s your fault, collision coverage is what pays for repairs to your own vehicle.
Collision coverage requires a deductible. Typical collision insurance deductibles are $500 or $1,000. Setting a lower deductible means higher rates, and vice versa.
Comprehensive insurance, or “comp” coverage, is often purchased along with collision insurance. It covers damage that can happen when you’re not driving, like if a tree branch falls on your parked car. It also comes with a deductible, usually of $500 or $1000, that must be paid out of pocket every time you use your comp coverage.
Comprehensive insurance covers:
Theft or vandalism
Fire and explosions
Civil commotions and riots
Windstorm or hail
Water or flooding
Impact with an animal
Both comprehensive and collision coverage are optional, unless you’re financing or leasing your vehicle.
If you want to be fully protected, you should get what’s known as a full coverage policy, which includes comprehensive and collision coverage in addition to liability.
Uninsured motorist insurance and underinsured motorist insurance (UM/UIM) pays the difference in what you’re owed if someone else causes an accident but doesn't have enough (or any) insurance to fully cover the cost of the damage. UM/UIM can also help cover the costs after a hit-and-run when you don’t know who hit you or whether or not they had insurance.
Personal injury protection
Personal injury protection (PIP), also called no-fault insurance, is required in no-fault states, where drivers have to pay for their own medical expenses after an accident (even if someone else was at fault).
In an at-fault state, if you’re hit by another driver and they’re at-fault, their liability coverage can pay for any medical expenses you have after the accident — but in a no-fault state, your PIP coverage is what would pay your hospital bills, even though the accident wasn’t your fault.
In addition to covering the medical expenses you can incur in an accident, PIP can also cover lost wages and funeral costs for you and your passengers.
Medical payments coverage
Medical payments coverage, sometimes called MedPay, pays for medical expenses for you and your passengers after an accident. Medical payments coverage can also cover injuries you sustain if you’re hit by a car when walking or riding a bike.
Some of the medical expenses this coverage will pay for include:
MedPay is only available in states that don’t require personal injury protection, and drivers with robust health insurance may not need a lot of this type of coverage.
Rental car reimbursement
Rental car reimbursement coverage pays for the cost of a rental car if your car is in the shop after a covered loss, or if it was stolen or totaled. If you have comprehensive or collision insurance, your policy may also come with rental car reimbursement coverage. It’s also available as an additional add-on if it’s not automatically included in your policy.
Rental reimbursement coverage has both a daily limit and a total limit. For example, you may be covered up to $40 a day for a maximum of 30 days, or up to an overall payout of $1,000.
Roadside assistance, sometimes called towing and labor coverage, pays for emergency services, like a flat tire change or jump start, when you’re stranded on the side of the road. It may be included in your policy if you purchase comprehensive and collision insurance, but you can also add it to your policy for around $5 to $15 per vehicle. Drivers can also get roadside assistance through a third-party company, like AAA.
If you total a new car that you’ve leased or financed with a loan, your insurance company will pay you the actual cash value of your car, but that may not be enough to pay off the remainder of your loan or lease. Gap insurance pays the difference between what your car is worth, after depreciation, and what you still owe on a lease or loan. As with comp and collision coverage, your lessor or lienholder may require you to purchase gap insurance.
New car replacement coverage
When your car is stolen or destroyed in an accident, comprehensive and collision coverage will replace your car up to its actual cash value, which may not be enough to buy a new car of the same make and model of the one you totaled. New car replacement coverage can pay to replace your car with a similar make and model if it is destroyed, but it’s only available if you own a car that is one or two years old.
Is first-party insurance mandatory?
First-party insurance refers to coverage you can use for yourself and your property, like comprehensive and collision. This is different from liability coverage (which is third-party coverage), because it only involves the policyholder. Comprehensive and collision coverage are not mandatory unless you’re leasing or financing your vehicle, in which case your lender or lessor will require them.
What is the most common car insurance?
Liability coverage is required in every state except New Hampshire and Virginia, and it’s the most important part of your car insurance policy. Many drivers purchase what’s known as a full coverage policy, which includes comprehensive and collision coverage for your car, in addition to with liability.
What type of car insurance do I need?
The type of car insurance you need depends on the kind of car you have, where you live, and how much coverage you want. If you want to be fully protected, you should make sure your policy includes comprehensive and collision coverage in addition to liability. Depending on your state, you may also be required to add personal injury protection or uninsured/underinsured motorist coverage to your policy. The more coverage you choose, the more you’ll probably be paying, but you can compare quotes across multiple insurers to find the best price.