Auto insurance policies consist of multiple coverage types, each designed to address specific scenarios. This guide explains the various types of auto insurance coverage available in the United States, how each coverage type functions, and the terminology associated with them.
Regulatory Status: Required in 49 out of 50 states.
Liability coverage addresses costs associated with damage or injury caused to others when you are at fault. It does not cover your own injuries or vehicle damage.
Regulatory Status: Optional (often required by lenders).
Collision coverage pays for damage to your own vehicle resulting from a collision with another car or object (like a tree or guardrail), regardless of fault.
Regulatory Status: Optional (often required by lenders).
Also known as "other than collision," this covers damage to your vehicle caused by events outside your control, such as theft, vandalism, fire, weather, or animal collisions.
Protects you if you are hit by a driver who does not have insurance or whose limits are too low to cover your medical bills or vehicle repairs.
Required in "no-fault" states. PIP covers medical expenses, lost wages, and sometimes funeral costs for you and your passengers, regardless of who caused the accident.
Similar to PIP but generally less comprehensive. It covers medical costs for you and your passengers after an accident, regardless of fault.
Vital for leased or financed cars. If your car is totaled, Gap insurance pays the difference between the car's actual cash value and what you still owe on the loan.
An optional add-on that helps with breakdowns, flat tires, dead batteries, lockouts, and towing.
Pays for a rental car while your vehicle is being repaired due to a covered claim.
If your new car is totaled shortly after purchase, this coverage pays for a brand new vehicle of the same make/model, rather than the depreciated value.
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