Auto insurance policies consist of different coverage types, each serving a specific purpose. Understanding these options helps drivers select the right protection based on their needs and budget.
Liability Insurance (Required in Most Places)
Liability insurance covers damages and injuries you cause to others in an accident. It is split into two categories:
- Bodily Injury Liability (BIL): Covers medical expenses and lost wages for injured parties.
- Property Damage Liability (PDL): Pays for damage to another person’s vehicle or property.
While liability insurance covers damages to others, it does not cover the policyholder’s own car or injuries.
Collision Coverage (For Your Own Car)
Collision coverage pays for repairs to the policyholder’s vehicle if it is damaged in an accident, regardless of who is at fault. Lenders often require this coverage for financed or leased vehicles.
Comprehensive Coverage (For Non-Collision Damage)
This covers damage caused by non-collision incidents, including theft, vandalism, fire, natural disasters, and animal collisions. Like collision coverage, it is often required for leased or financed vehicles.
Personal Injury Protection (PIP) & Medical Payments (MedPay)
These cover medical expenses for the driver and passengers, regardless of fault.
- PIP (Personal Injury Protection): Covers medical bills, lost wages, and rehabilitation costs.
- MedPay (Medical Payments): Covers only medical expenses, without income replacement.
PIP is required in no-fault states, where each driver’s insurance covers their own injuries.
Uninsured/Underinsured Motorist Coverage (UM/UIM)
This coverage protects drivers if they are hit by someone without insurance or with insufficient coverage. It pays for medical expenses, lost wages, and car repairs.
Gap Insurance (For Financed or Leased Cars)
Gap insurance is crucial for drivers with auto loans or leases. It covers the difference between the amount owed on a vehicle and its actual market value if the car is totaled or stolen.
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