A car insurance policy is made up of several individual coverages that a driver buys together, usually as one package with one premium. Each coverage pays for a different kind of loss, and state law typically requires only some of them, according to the U.S. National Association of Insurance Commissioners (NAIC) and the California Department of Insurance. The exact minimum amounts and which coverages are mandatory vary by state.
Liability coverage: required in most states
Liability coverage pays for injuries or property damage the policyholder causes to someone else — it does not pay for the policyholder's own injuries or vehicle damage, the California Department of Insurance states. It is split into two parts: bodily injury liability, which covers medical costs and related expenses for people hurt in an accident the policyholder caused, and property damage liability, which pays to repair another person's car or property, such as a fence or utility pole, per the NAIC and the Insurance Information Institute (Triple-I).
California requires minimum liability limits of $30,000 per person and $60,000 per accident for bodily injury, plus $15,000 for property damage, according to the California Department of Insurance. Other states set their own minimums, so the required amount depends on where a vehicle is registered.
Collision and comprehensive: protecting your own car
Collision coverage pays for damage to the policyholder's own vehicle from hitting another car, an object such as a tree or guardrail, or from a rollover — regardless of who caused the crash, the NAIC and California regulator explain. Comprehensive coverage pays for damage to the policyholder's own car from causes other than a collision, such as theft, fire, vandalism, flood, hail or hitting an animal.
Neither collision nor comprehensive is required by state law, but a lender or leasing company will usually require both for as long as a vehicle is financed or leased, the NAIC notes. Both coverages apply a deductible: the California Department of Insurance gives the example of a $500 comprehensive deductible against $1,500 in storm damage, where the policyholder pays the first $500 and the insurer pays the remaining $1,000.
Uninsured motorist, medical payments and PIP
Uninsured and underinsured motorist coverage pays the policyholder's bodily injury costs, and in some states property damage, when the at-fault driver has no insurance or not enough of it, including hit-and-run cases, according to the California Department of Insurance and Triple-I. Some states require this coverage; others make it optional.
Medical payments coverage, or personal injury protection (PIP) in no-fault states, pays medical bills for the policyholder and passengers regardless of who caused the crash, and in some states can also cover lost wages, according to Triple-I. These coverages are frequently required but not universal across states.
Optional add-ons
Beyond the core coverages, insurers sell optional add-ons. Gap insurance covers the difference between what a driver still owes on a loan or lease and the car's actual cash value if it is totaled or stolen, since collision and comprehensive only pay out the vehicle's market value, Triple-I explains. Other common add-ons include rental-car reimbursement and roadside assistance, according to the NAIC, as well as glass coverage, according to Triple-I.
How to work out which coverages you need
- Check your state's minimum liability requirements, since these are legally mandatory and amounts vary by state.
- Decide whether you need collision and comprehensive coverage — required by most lenders while a car is financed or leased, optional once it is paid off.
- Confirm whether your state requires uninsured/underinsured motorist coverage or medical payments/PIP, and whether you want them even if optional.
- If you are financing or leasing, ask whether gap insurance is available to cover the loan-to-value shortfall.
- Choose deductible levels for collision and comprehensive, keeping in mind that a higher deductible lowers the premium but raises your out-of-pocket cost after a claim.
- Review add-ons such as rental reimbursement, roadside assistance and glass coverage based on your own driving needs.
Main car insurance coverage types| Coverage | What it pays for | Usually required? |
|---|
| Bodily injury liability | Injuries you cause to others | Yes, in most states |
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| Property damage liability | Damage you cause to others' property | Yes, in most states |
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| Collision | Damage to your own car from a crash or rollover | No, but required by lenders/lessors |
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| Comprehensive | Damage to your own car from theft, fire, weather, animals, etc. | No, but required by lenders/lessors |
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| Uninsured/underinsured motorist | Your costs when the at-fault driver lacks enough insurance | Required in some states |
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| Medical payments / PIP | Medical bills (and sometimes lost wages) for you and passengers | Required in some states |
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| Gap insurance | Difference between loan balance and car's market value | Optional |
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Questions
- What is the difference between collision and comprehensive coverage?
- Collision pays for damage to your own car from hitting another vehicle or object, or from a rollover, regardless of fault. Comprehensive pays for damage to your own car from other causes, such as theft, fire, vandalism, flood or hail, according to the NAIC and the California Department of Insurance.
- Is liability insurance enough, or do I need more coverage?
- Liability coverage only pays for injuries or damage you cause to someone else — it does not pay to repair or replace your own car or cover your own injuries, the California Department of Insurance states. Many drivers add collision, comprehensive, uninsured motorist or medical payments coverage to protect themselves.
- Do I have to buy collision and comprehensive coverage?
- State law does not require them, but a lender or leasing company will typically require both coverages for as long as the vehicle is financed or leased, according to the NAIC.
- What does uninsured motorist coverage cover?
- It pays your bodily injury costs, and in some states property damage, when the driver who caused the crash has no insurance, not enough insurance, or fled the scene, according to the California Department of Insurance and the Insurance Information Institute.
- What is gap insurance and who needs it?
- Gap insurance covers the difference between what you still owe on a car loan or lease and the vehicle's actual cash value if it is totaled or stolen, since collision and comprehensive only pay the car's market value. It is mainly relevant to drivers who financed or leased their vehicle, per the Insurance Information Institute.
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