A car insurance policy is really a bundle of separate coverages, each paying for a different kind of loss. Liability pays for damage you cause to other people, collision and comprehensive pay to fix or replace your own car, and a handful of add-ons cover injuries, uninsured drivers, rental cars and loan shortfalls.
Knowing what each piece does lets you buy what you need and avoid discovering after a crash that you were underinsured.
Liability coverage: the part the law requires
Liability insurance pays for injuries and damage you cause to others when you are at fault. It never pays to repair your own car. It has two parts:
- Bodily injury liability covers medical bills, lost wages and pain-and-suffering claims from people you injure, plus your legal defense if you are sued.
- Property damage liability covers repairs to the other driver's vehicle and anything else you hit, such as a fence, storefront or utility pole.
How split limits work
Liability limits are usually written as three numbers, in thousands of dollars. A 50/100/50 policy pays up to $50,000 for injuries to any one person, up to $100,000 for all injuries in a single accident, and up to $50,000 for property damage in a single accident.
Example: you cause a crash that injures two people, one with $70,000 in medical bills and lost income, the other with $20,000. Your insurer pays $50,000 to the first (the per-person cap) and $20,000 to the second. The remaining $20,000 owed to the first person can come out of your pocket. Some policies use a single combined limit instead, such as $300,000 per accident shared across injuries and property.
Nearly every US state requires liability coverage, but minimum limits vary widely and are often low enough that one serious crash would blow through them. Check your state's current requirements with its insurance department; the NAIC directory of state insurance departments links to each one. In Canada, minimums are set by each province, and in the UK and India third-party cover is the legal minimum.
Collision and comprehensive: coverage for your own car
These two coverages pay for physical damage to your vehicle, up to its actual cash value: what the car was worth just before the loss, not what you paid for it. If your car is financed or leased, the lender or leasing company will almost always require both.
Collision
Collision pays to repair your car after it hits another vehicle or object, or rolls over, regardless of who was at fault. If another driver caused the crash, collision gets you repaired without waiting on their insurer; yours then seeks reimbursement and may refund your deductible.
Comprehensive
Comprehensive covers damage that isn't a collision: theft, vandalism, fire, flood, hail, falling trees and hitting an animal. Cracked windshields usually fall here too, and some insurers offer reduced or zero-deductible glass repair.
Coverage for injuries and uninsured drivers
Uninsured and underinsured motorist (UM/UIM)
If a driver with no insurance, or too little, injures you, UM/UIM pays what their policy can't. Some states require it; others require insurers to offer it and let you reject it in writing. Uninsured motorist property damage, where available, covers your car, sometimes with a small deductible. Because UM/UIM protects you and your passengers, a common approach is to match it to your own liability limits.
Medical payments (MedPay) and personal injury protection (PIP)
MedPay covers medical bills for you and your passengers after an accident, regardless of fault, usually in modest amounts such as $1,000 to $10,000. PIP is broader: depending on the state, it can also cover lost wages, services you can't perform while injured, and funeral costs.
PIP is required in no-fault states, where your own policy pays your injury costs first no matter who caused the crash, and your right to sue the at-fault driver is limited unless your injuries pass a legal threshold. No-fault rules differ significantly from state to state, so check how yours works.
Optional add-ons worth knowing
- Gap insurance pays the difference between your car's actual cash value and what you still owe on the loan or lease if the car is totaled or stolen. Say you owe $28,000 and the insurer values the totaled car at $23,000: gap covers the $5,000 shortfall, subject to the policy's terms. It is most useful with a small down payment or a long loan, and it often costs less through your insurer than when bundled into dealer financing. Our depreciation calculator shows how fast your car's value may fall compared with your loan balance.
- Rental reimbursement pays for a rental car while yours is being repaired after a covered claim, usually up to a daily cap such as $30 to $50 and a maximum number of days.
- Roadside assistance covers towing, jump-starts, flat-tire changes, lockouts and fuel delivery. It is inexpensive, but check whether you already have it through your car's warranty, an auto club or a credit card.
How deductibles work
A deductible is the amount you pay on a collision or comprehensive claim before insurance covers the rest. With a $500 deductible and $3,200 of damage, you pay $500 and the insurer pays $2,700. Liability coverage has no deductible on your side, because it pays the other party.
Common options run from $250 to $1,000 or more, often set separately for collision and comprehensive. A higher deductible lowers your premium, but pick one you could pay tomorrow without borrowing. Our guide to lowering your car insurance premium works through the trade-off with numbers.
What each coverage pays for
| Coverage | What it pays for | Who it protects | Usually required? |
|---|---|---|---|
| Bodily injury liability | Injuries you cause to others, plus legal defense | Other people and your assets | Yes, in nearly every state |
| Property damage liability | Damage you cause to other vehicles and property | Other people and your assets | Yes, in nearly every state |
| Collision | Repairs to your car after a crash, regardless of fault | You | By your lender or lessor |
| Comprehensive | Theft, weather, fire, vandalism, animal strikes, glass | You | By your lender or lessor |
| Uninsured/underinsured motorist | Injuries (and sometimes car damage) caused by a driver with too little or no insurance | You and your passengers | In some states |
| MedPay | Medical bills, regardless of fault | You and your passengers | Optional in most states |
| PIP | Medical bills, lost wages and related costs, regardless of fault | You and your passengers | In no-fault states |
| Gap | Loan or lease balance above the car's value after a total loss | You | Sometimes by a lessor |
| Rental reimbursement | A rental car while yours is repaired after a covered claim | You | No |
| Roadside assistance | Towing, jump-starts, lockouts, flat tires | You | No |
How much coverage a typical driver should consider
State minimums exist to make sure some money is available for victims, not to protect you. If damages exceed your limits, the injured party can pursue your savings, home equity and future wages, and a serious injury crash can easily run into six figures.
A common starting point for anyone with a home, savings or a steady income is 100/300/100: $100,000 per person, $300,000 per accident and $100,000 for property damage. Raising limits above the minimum often costs less than people expect. If your net worth exceeds your auto limits, ask about a personal umbrella policy, which adds liability protection above your auto and home policies once you carry the underlying limits it requires. Insurance is also one of the largest running costs of a car, so factor it into the total cost of ownership before you buy.
- Liability limits of at least 100/300/100, or higher if you have significant assets
- UM/UIM matched to your liability limits
- Collision and comprehensive if the car is financed, leased or worth more than you could comfortably replace
- Gap coverage while you owe more than the car is worth
- Deductibles you can pay from savings
- MedPay or PIP as your state requires, reviewed alongside your health insurance
Key takeaway: Set your liability limits based on what you could lose in a lawsuit, not on what the state requires. Then decide on collision and comprehensive based on your car's value and whether you could afford to replace it.
Watch out: Personal auto policies typically exclude driving for rideshare or delivery apps. If you drive for one, ask your insurer about a rideshare endorsement, or a claim made while you were working may be denied.
The bottom line
Read your declarations page and make sure you understand each coverage, limit and deductible. Strong liability and UM/UIM limits protect your finances; collision, comprehensive and gap protect the car and your loan. Review it whenever you buy a car, move or pay off a loan, and keep our guide on what to do after a car accident handy. This guide is general information, not financial or legal advice.
Frequently asked questions
What does 50/100/50 mean on a car insurance policy?
It is a liability limit written in thousands of dollars: up to $50,000 for injuries to any one person, up to $100,000 for all injuries in one accident, and up to $50,000 for property damage in one accident. Anything above those caps can become your personal responsibility.
Is full coverage an actual type of car insurance?
No. Full coverage is an informal term, usually meaning liability plus collision and comprehensive. It does not automatically include gap, rental reimbursement or higher liability limits, so always check the individual coverages and limits listed on your declarations page.
Do I need gap insurance?
Consider it if you owe more on your loan or lease than the car is worth, which is common with a small down payment, a long loan term or a car that depreciates quickly. Once your loan balance falls below the car's value, you can usually drop it.
Does collision coverage pay if the accident was not my fault?
Yes. Collision pays to repair your car regardless of fault, minus your deductible. If another driver caused the crash, your insurer can seek reimbursement from their insurer and may refund your deductible if it recovers the money.