Car insurance coverage, explained
Six coverage types do almost all the work. Here is what each one actually pays for.
Most policy confusion comes from jargon. Once you know what each coverage does, you can build a policy that protects you without paying for things you do not need.
| Coverage | What it pays for | Usually |
|---|---|---|
| Liability | Injury and property damage you cause to others | Mandatory |
| Accident benefits / PIP | Medical, rehab and income for you and passengers, any fault | Mandatory in many areas |
| Collision | Repairs to your car after a crash, any fault | Optional (required if financed) |
| Comprehensive | Theft, vandalism, fire, hail, animal strikes | Optional (required if financed) |
| Uninsured motorist | Your costs when the at-fault driver is uninsured | Recommended |
| Endorsements | Add-ons: rental car, accident forgiveness, new-car replacement | Optional |
How to choose your level
Carry the mandatory coverages, then match optional ones to your situation. Finance or lease a car and you must keep collision and comprehensive. Own an older car outright and you can weigh those premiums against the car's value. Always carry generous liability and uninsured-motorist limits, they are cheap relative to the catastrophic costs they prevent.
Frequently asked questions
What is liability coverage?
Liability pays for injury and property damage you cause to others. It is mandatory everywhere and is the core of every auto policy. It does not pay for your own car.
What is the difference between collision and comprehensive?
Collision pays to repair your car after a crash, regardless of fault. Comprehensive pays for non-collision damage, theft, vandalism, fire, hail, and animal strikes.
Do I need collision and comprehensive?
They are optional in most places but required if you lease or finance. On an older, low-value car, dropping them can make financial sense; on a newer car they are usually worth keeping.
What are accident benefits?
Accident benefits (or personal injury protection) cover medical costs, rehabilitation and income replacement for you and your passengers regardless of fault. They are mandatory in many provinces and some states.
What is uninsured/underinsured motorist coverage?
It protects you when an at-fault driver has no insurance or too little. Given how many drivers are uninsured, it is inexpensive protection well worth carrying.