January 29, 2025
Auto insurance can be confusing, especially when you’re trying to decide which coverages you need. Understanding the basic components of an auto insurance policy will help you make informed decisions and ensure you're adequately protected. Below, we break down the key parts of auto insurance coverage, so you know what each one means and how it applies to you.
Types of Coverage
Liability Coverage: Protecting Others
Liability coverage is typically required by law in most states, and it’s one of the most important parts of any auto insurance policy. It’s divided into two types:
- Bodily Injury Liability (BIL): This covers medical expenses, lost wages, and other costs if you injure someone in an accident. It also covers legal fees if you're sued.
- Property Damage Liability (PDL): This covers the cost of repairing or replacing another person’s property, like their vehicle or a fence, if you cause an accident.
Why it matters: Liability coverage doesn’t protect you or your car—it only covers damage to others in accidents where you’re at fault. That’s why you need additional coverage for your vehicle and medical costs.
Collision Coverage: Protecting Your Vehicle in an Accident
Collision coverage pays for the repair or replacement of your vehicle if it’s damaged in a collision with another car or object, regardless of fault.
Why it matters: Without collision coverage, you’ll be responsible for paying to repair or replace your vehicle after an accident. If you’re financing or leasing your car, your lender will likely require this coverage.
Comprehensive Coverage: Protecting Against Non-Collision Damage
Comprehensive coverage covers damage to your vehicle that’s not caused by a collision. This includes damage from theft, vandalism, fire, weather events (like hail or flooding), and even hitting an animal.
Why it matters: Comprehensive coverage offers protection for a wide range of incidents outside of typical accidents. Like collision coverage, it’s often required by lenders if you’re financing or leasing.
Personal Injury Protection (PIP) or Medical Payments (MedPay): Covering Medical Costs
PIP and MedPay both help cover medical expenses for you and your passengers if you’re injured in an accident, regardless of who’s at fault. PIP may also cover lost wages and other related expenses like rehabilitation.
- PIP: Common in no-fault states and offers broader coverage, including medical costs and lost wages.
- MedPay: Offers more limited coverage and is typically available in states that don’t have PIP requirements.
Why it matters: Medical bills can add up quickly after an accident, and having PIP or MedPay can provide vital coverage for you and your passengers.
Uninsured/Underinsured Motorist Coverage: Protection from Uninsured Drivers
Uninsured motorist coverage (UM) protects you if you’re in an accident with someone who doesn’t have insurance or doesn’t have enough insurance to cover the damages. Underinsured motorist coverage (UIM) kicks in when the at-fault driver’s insurance isn’t sufficient to cover your costs.
Why it matters: Despite laws requiring drivers to carry insurance, not everyone follows the rules. UM/UIM coverage ensures you’re protected if you’re involved in an accident with an uninsured or underinsured driver.
Optional Coverages: Extra Protection
In addition to the main components, there are several optional coverages that can provide additional protection and peace of mind:
- Gap Insurance: This covers the difference between your car’s value and the amount you still owe on a loan or lease if your car is totaled.
- Rental Reimbursement: Pays for a rental car while your vehicle is being repaired after an accident.
- Roadside Assistance: Provides services like towing, battery jump-starts, and flat tire changes.
Why it matters: Optional coverages can help fill gaps in your policy and provide extra financial security in specific situations.
Finding the Right Balance of Coverage
Auto insurance isn’t one-size-fits-all. The right coverage depends on your vehicle, driving habits, financial situation, and state requirements. While liability coverage is required, adding other coverages—like collision, comprehensive, and PIP—can offer crucial protection for you and your vehicle.
Auto insurance doesn’t have to be complicated—or expensive. At Polly, we make it easy to compare quotes from top insurers and find the coverage that’s right for you. Start your free quote today and see how much you could save.
