What You Should Know About Auto Insurance Coverage

An auto insurance policy usually has several types of protections or “coverages”—some required and some optional. Some coverages may automatically be part of your policy unless you opt out of them. You must decide what coverages best fit your needs, which may mean choosing more coverages to meet requirements. 

Coverage Types  

If you have an auto loan, your lender requires you to carry full coverage. This means you will need both comprehensive and collision coverage. 

• Comprehensive coverage reimburses you for damage to your car that’s not caused by a collision. This includes theft, hail, windstorm, flood, fire, and impact by an animal. Comprehensive coverage will reimburse you if your windshield is pitted, cracked, or damaged.  

• Collision coverage pays for damage to your car from a collision with another car, an object, a pothole, or from flipping over. 

Liability 

There are two types of liability insurance under your policy: bodily injury and property damage. Both are required in most states.  

• Bodily injury liability applies to injuries you cause to someone else. You and family members listed on the policy also are covered when driving someone else’s car with their permission. 

• Property damage liability is also required by state law. This coverage pays for damages you cause to someone else’s car or objects and structures you hit with your car.  

Uninsured and Underinsured Motorist Coverage 

In some states, you’re required to have uninsured and underinsured motorist coverage.  

• Uninsured motorist coverage reimburses you if an uninsured or a hit-and-run driver hits you.  

• Underinsured motorist coverage pays when an at-fault driver doesn’t have enough insurance to fully pay for your loss. 

What your policy may not cover 

In some instances, you may not be covered by your auto policy and will need a separate form of coverage.  

• Guaranteed auto protection (GAP) insurance. If your car is damaged, and its market value is less than what you owe, your policy will not pay off your auto loan. Auto dealers and lenders may offer GAP insurance for this purpose, which covers the difference between what you owe and the actual value of your vehicle.  

• Rental insurance covers the cost of renting a car while your own vehicle is undergoing repairs.  

• Roadside or Towing coverage reimburses you for your costs if your car is disabled. For example, the coverage might pay if you have your car towed to a service facility or you lock your keys in the car. 

• Medical Payments or Personal Injury Protection (PIP). This coverage pays for treating injuries to you and your passengers. PIP, which is available in “no-fault” states, can also cover lost wages and funeral costs up to your policy’s limit. If you live in a no-fault state, your own insurance company pays for injuries to you and your passengers regardless of who’s at fault.  

• Specialty vehicles. Your auto policy will not cover motorcycles, all-terrain vehicles (ATVs), off-road vehicles, recreational vehicles (RVs), or commercial vehicles.