Car Insurance Coverage Types Explained in Plain English

Insurance paperwork uses a handful of terms over and over. Once you know what each coverage pays for, a policy or a quote is much easier to read. This guide uses consumer materials from the National Association of Insurance Commissioners (NAIC), the organization of state insurance regulators, and labeled examples from state insurance departments. It is education only: Car Bills Explained is not an insurer, agent or broker, and we can’t tell you how much coverage you need.

Is there such a thing as “full coverage”?

Not as a single product. The NAIC’s shopping guide says that policies are made up of different types of coverages, and that your state’s laws or your auto lender may require some of them. People often say “full coverage” to mean liability plus collision and comprehensive. The NAIC notes that if you have an auto loan, your lender will require both collision and comprehensive. When you compare quotes, compare the same coverages and limits.

What does liability coverage pay for?

Liability coverage pays for harm you cause to other people. The NAIC describes two parts, both required in most states:

• Bodily injury liability applies to injuries you cause to someone else.
• Property damage liability pays for damage you cause to someone else’s car or to objects and structures you hit.

Liability doesn’t pay to repair your own car or treat your own injuries. If the damage you cause is more than your limits, the NAIC and the Texas Department of Insurance both warn that you could have to pay the rest yourself, and the other driver could sue you.

How do you read liability limits like 30/60/15?

The NAIC explains that liability coverage is usually described with three numbers. Using 30/60/15 as an example:

• 30 = $30,000, the most the policy pays for bodily injury to one person.
• 60 = $60,000, the most it pays for bodily injury in one accident, no matter how many people are hurt.
• 15 = $15,000, the most it pays for property damage in one crash.

California: 30/60/15 is the state minimum for policies issued or renewed on or after January 1, 2025, up from 15/30/5. Texas: the minimum is 30/60/25. The NAIC suggests considering more than the minimum, and buying as much liability coverage as you can reasonably afford. See our guide to state minimum requirements.

What do collision and comprehensive cover?

• Collision pays for damage to your car from a collision with another car or an object, a pothole or flipping over, according to the NAIC. If the insurer decides the car is “totaled,” collision pays its actual cash value.
• Comprehensive (sometimes called “other than collision”) pays for damage that isn’t from a collision, such as theft, fire, hail, windstorm, flood, vandalism or hitting an animal.

Both usually have a deductible: the part of the claim you pay before the insurer pays the rest. A higher deductible usually lowers the premium but means you pay more when you file a claim, so choose one you could pay if you had to. States don’t require these coverages, but lenders usually do while you owe money on the car.

What is uninsured and underinsured motorist coverage?

The NAIC explains that uninsured motorist coverage reimburses you if an uninsured or hit-and-run driver hits you, and underinsured motorist coverage pays when the at-fault driver doesn’t have enough insurance to fully pay your loss. Some states require it. Texas: insurance companies must offer it, and if you don’t want it you must tell the company in writing, according to the Texas Department of Insurance.

What are medical payments and PIP?

Medical payments coverage pays medical bills for you and your passengers. Personal injury protection (PIP), available in “no-fault” states, the NAIC says, can also cover lost wages and funeral costs up to the policy limit. In some states a minimum amount is required regardless of who caused the crash.

• Florida: before you register a vehicle with at least four wheels, you must show proof of at least $10,000 of PIP and $10,000 of property damage liability, according to the Florida Department of Highway Safety and Motor Vehicles.
• Texas: all auto policies include PIP; to decline it, you must tell the company in writing.

What about rental, towing and GAP?

• Rental reimbursement pays for a rental car while yours is being repaired after a covered claim.
• Towing and roadside pays to tow a car that can’t be driven and, on some policies, for labor such as a jump-start.
• GAP pays the difference between what you owe on a loan and the car’s actual value if it is totaled or stolen. The NAIC lists it among things a standard policy doesn’t cover. Dealers, lenders and some insurers offer it; see dealer add-ons and GAP.

What does a standard auto policy not cover?

The NAIC lists several gaps: a standard policy won’t pay off your loan if the car is worth less than you owe (that is what GAP is for), and it won’t cover motorcycles, ATVs, off-road vehicles, RVs or commercial vehicles, which need their own policies. Normal wear and tear and mechanical breakdowns aren’t insurance claims either; repairs like that are what manufacturer warranties and service contracts address.

What affects the price of a policy?

The NAIC says insurers use different rating factors, and which factors are allowed differs by state. Common ones include your driving record, age and driving experience, the car, where you live and how much coverage you buy. If state law allows, insurers may use an insurance credit score. Some insurers offer usage-based rates that use a device to track how and when you drive. Because prices depend on so many factors, we don’t publish “average” premiums; compare quotes for the same coverage.

Who can answer questions about your policy?

Your insurer or a licensed agent can explain your own policy. Your state insurance department regulates insurers and agents, publishes consumer guides and takes complaints; see where to get help.