Whether you’ve just bought your first car or you’re shopping for a new – and hopefully less expensive – car-insurance policy, auto insurance can be mystifying. What kinds of coverage do you need? How much will it cost? What’s required, what’s optional, and what exactly is a deductible? Do you need different insurance if you drive for Uber or Lyft? And do you really need to know all this stuff?

Yes, you definitely need to know this stuff. It not only makes you a smarter consumer, but it can also save you money. You could save upfront by not paying for coverage that doesn’t suit your lifestyle, or you could save in the long run by opting to pay for a particular kind of coverage for situations that are likely to occur based on how you use your vehicle.

In this article, we’ll clear up some of the mystery around car insurance. We’ll start with the basic types of insurance you can get and what they do for you, your car, your passengers, and anyone else involved in an accident. We’ll also talk about what kinds of coverage are required in most states and what factors will influence how much you pay for your insurance. We’ll walk through the most common steps for filing a claim, regardless of who your insurer is. And we’ll talk about why you don’t want to let your auto insurance lapse.

This article has a lot of general information that applies to most readers. But as they say, your mileage may vary. Check with your insurer and your state to make sure you’re compliant with the legal requirements where you live. Also, not every insurer offers every kind of insurance, particularly the optional add-ons or discounts. Again, you’ll want to check with your policy or your insurance agent to find out which types of coverage are available to you.

Kinds of Car Insurance Coverage


If you cause an automobile accident, and are found to be at fault, you are liable for the damages. If that happens, liability insurance pays for the other person’s auto repairs and medical expenses. Often referred to as “minimum coverage,” liability is the very least insurance you can legally carry in most states.

Comprehensive Coverage

This one is a bit misleading. If something is comprehensive, it covers absolutely everything, right? Well, no. Not when it comes to car insurance.

Comprehensive insurance covers the repair or replacement of a vehicle that’s damaged from something other than an accident with another vehicle. This is the insurance you want when a tree falls on your car during a hurricane or when hail dents your hood. It covers damage caused by animals – deer, we’re looking at you. It also covers damage from things like vandalism, theft, or riots.

Personal Injury Protection (PIP)

Personal injury protection is often called “no-fault” coverage, and it is required in some states. It covers the medical expenses of the policyholder (that’s probably you) and anyone in the car with you at the time of an accident, no matter whose fault it is. Whether you run into another car or another car runs into you, this insurance will pay for medical bills.

Collision Coverage

Collision coverage picks up where comprehensive coverage leaves off. It takes care of repairs when you hit another object with your car, whether that’s another car or a light post. It does not cover damage from hail or hitting an animal.

Collision insurance covers you in any car you drive, not just your own. You’re protected whether you get into an accident while borrowing a friend’s car or you’re on the way home with a car you just bought.

Medical Payments Coverage

Medical payments coverage is optional. It covers you and any passengers in your car at the time of an accident. It also covers family members listed on the policy even if they’re in another car.

Flood Insurance

According to the Federal Emergency Management Agency, flooding is the most common natural disaster in the United States. It can happen when rivers overflow, dams and levees break, or snow melts rapidly. If your home is in a flood plain, you’re likely required to have flood insurance.

Mechanical Breakdown Insurance

  • Insurance for mechanical breakdowns is optional in every state, so it’s up to you if you want to pay a little extra over time to avoid a large payment when something goes wrong with your car.

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