The six coverage types you'll see on every policy
Every car insurance policy combines six basic coverage types, though not all are required in every state. Liability covers damage you cause to someone else's car or property. Collision covers damage to your own car from hitting another vehicle or object. Comprehensive covers damage from weather, theft, vandalism, or animals. Uninsured motorist covers you if hit by a driver with no insurance. Underinsured motorist covers you if hit by a driver whose insurance doesn't pay enough. Medical payments covers your medical bills after a crash, regardless of who caused it.
Most states require you to carry liability. Collision and comprehensive are optional but required by lenders if you're financing or leasing a car. The other three are optional in most places but worth understanding because they protect you in situations where the other driver's insurance won't help.
Key Takeaways
- Liability is required in most states and covers damage you cause to someone else, but it does not cover your own vehicle or injuries.
- Collision and comprehensive cover your own car and are usually required by lenders, even though they are optional in most states.
- Uninsured and underinsured motorist coverage protects you when the other driver has no insurance or insufficient coverage to pay your claims.
- Medical payments coverage pays your medical bills after any crash, regardless of fault, and is separate from your health insurance.
- Your state's minimum liability requirements vary widely, so check your state's law rather than assuming a national standard applies to you.
Liability coverage: what you're required to carry
Liability is split into two numbers: bodily injury per person and bodily injury per accident, plus property damage per accident. A common minimum is 25/50/25, meaning $25,000 per person injured, $50,000 total per crash, and $25,000 for property damage. Some states require higher minimums; others allow lower ones. Your state's Department of Motor Vehicles or insurance commissioner's office publishes the exact minimum for your state.
Liability pays for the other person's medical bills, vehicle repairs, and legal costs if you're found at fault. It does not pay for your own injuries or vehicle damage. If the other person's damages exceed your liability limit, they can sue you personally for the difference, which is why many people carry limits higher than the state minimum.
If you cause a crash and don't have liability insurance, you face license suspension, fines, and a judgment against you that can follow you for years. Most states will not renew your registration without proof of insurance.
Collision coverage: protecting your car in a crash
Collision covers damage to your car when you hit another vehicle, a pole, a guardrail, or any fixed object. It pays for repairs up to your car's actual cash value, minus your deductible. If your car is totaled, it pays the current market value of that make and model, not what you paid for it.
Collision is optional in most states but required by lenders if you're financing or leasing. If you own your car outright and it's worth less than a few thousand dollars, the cost of collision coverage may exceed what you'd receive in a claim, so some owners drop it. If your car is newer or you owe money on it, keeping collision is usually the right choice.
Your deductible is what you pay out of pocket before insurance pays the rest. Common deductibles are $500 or $1,000. Choosing a higher deductible lowers your premium but means you pay more if you have a claim.
Comprehensive coverage: protection from weather, theft, and animals
Comprehensive covers damage to your car that is not caused by a crash: hail, flooding, theft, vandalism, falling tree branches, and collisions with animals. Like collision, it pays up to your car's actual cash value minus your deductible. It is optional in most states but required by lenders.
Comprehensive claims are often easier to settle than collision claims because fault is not an issue — a tree fell on your car, or your car was stolen, and the insurance company straightforward pays. You do not need a police report for most comprehensive claims, though you do for theft.
If you live in an area with frequent hail, heavy snow, or flooding, comprehensive becomes more valuable. If you park on the street in a high-theft area, it protects you if your car is stolen. If you park in a garage and live in a low-risk area, the cost may not justify the coverage.
Uninsured motorist coverage: when the other driver has no insurance
Uninsured motorist coverage pays for your medical bills and vehicle damage if you're hit by a driver with no insurance. It also covers hit-and-run crashes where you cannot identify the other driver. Without this coverage, you would have to sue the uninsured driver personally to recover anything, which is often impossible because they have no assets.
This coverage is required in some states and optional in others. Even where it is optional, it is worth carrying because roughly one in eight drivers on the road has no insurance. Your uninsured motorist limit should be at least as high as your liability limit, and many people carry it higher.
Uninsured motorist coverage is split the same way as liability: bodily injury per person, bodily injury per accident, and property damage. A common limit is 25/50/25, matching the state minimum for liability.
Underinsured motorist coverage: when the other driver's insurance is not enough
Underinsured motorist coverage pays the difference when the at-fault driver's insurance does not cover all your damages. If you're hit by a driver with only a $25,000 liability limit and your medical bills and car repairs total $60,000, underinsured motorist coverage makes up the $35,000 gap (minus your deductible).
This coverage is optional in most states but required in a few. It is often bundled with uninsured motorist coverage on the same limit, though you can buy them separately. Many people overlook it because they assume the other driver will have enough insurance, but minimum liability limits in most states are low enough that serious crashes easily exceed them.
Underinsured motorist coverage uses the same limits as uninsured motorist: bodily injury per person, bodily injury per accident, and property damage. You typically cannot claim both uninsured and underinsured motorist coverage for the same crash — you use whichever applies.
Medical payments coverage: your medical bills regardless of fault
Medical payments coverage (sometimes called MedPay) pays your medical bills, dental bills, and funeral expenses after a crash, regardless of who caused it. It covers you, your passengers, and family members living in your household. It pays up to your chosen limit, typically $1,000 to $5,000 per person.
Medical payments is optional in most states and is separate from your health insurance. It pays first, so your health insurance is billed second. This coverage is useful if you have a high health insurance deductible or if you're uninsured, because it covers when ready medical costs without waiting for a liability claim to settle.
Medical payments does not cover lost wages or pain and suffering — only actual medical expenses. If your health insurance already covers you fully after a crash, you may not need this coverage. If you have a high deductible or gaps in coverage, it is worth considering.
Frequently Asked Questions
Do I have to buy collision and comprehensive if I own my car outright?
No — they are optional in most states if you own the car. However, if you still owe money to a lender or leasing company, they require both as a condition of the loan or lease. If your car is paid off and worth very little, the cost of these coverages may exceed what you would receive in a claim, so some owners skip them.
What is the difference between actual cash value and agreed value?
Actual cash value is what your car is worth on the used market right now, minus depreciation. Agreed value is an amount you and the insurance company agree on in advance, usually for classic or specialty cars. Most standard policies use actual cash value, which means an older car may be worth less than you expect.
Can I use medical payments coverage if I also have health insurance?
Yes. Medical payments coverage pays first, and your health insurance is billed second. This is called coordination of benefits. Medical payments can cover your deductible or costs your health insurance does not cover, so it is not redundant even if you have good health coverage.
What happens if I cause a crash and my liability limit is too low?
The other person can sue you personally for the difference. A judgment against you can result in wage garnishment, bank account levies, or a lien on your home or car. This is why many people carry liability limits higher than their state's minimum.
Do I need uninsured motorist coverage if I have collision coverage?
They cover different things. Collision pays for damage to your car in any crash. Uninsured motorist pays for your medical bills and lost wages if hit by an uninsured driver. You need both to be fully protected, because collision does not cover your medical costs and uninsured motorist does not cover vehicle damage if the other driver is insured.