Auto Insurance:

Driving is something most of us do without much thought—until something unexpected happens. A blown tire on the highway, a deer crossing out of nowhere, or another driver who forgets turn signals exist can turn an ordinary day into a stressful one. Auto Insurance is what keeps those moments from becoming expensive financial problems.

Many drivers only know whether they have “full coverage,” which technically does not describe what the policy includes. Below is a clear overview of what Auto Insurance actually covers, how the different parts work, and what matters most when selecting your limits.

The Core Parts of Auto Insurance

Auto policies are made up of several components. Some are required by state law, while others are optional but still essential for full protection.

1. Liability Coverage (Bodily Injury + Property Damage)

Liability is the backbone of every auto policy. It pays for injuries or damage you cause to others in an accident.

Two primary sections:

• Bodily Injury Liability: Covers medical bills, lost wages, and legal costs for people you injure.

• Property Damage Liability: Covers damage to another person’s vehicle or property.

Important: State-minimum limits are rarely adequate. Medical bills and lawsuits can exceed low limits very quickly.

2. Uninsured/Underinsured Motorist Coverage (UM/UIM)

UM/UIM protects you if the other driver does not have enough insurance—or has none at all.

It can cover:

• Medical expenses

• Lost wages

• Pain and suffering (varies by state)

With millions of uninsured drivers on the road, this coverage is one of the most important protections in any policy.

3. Comprehensive Coverage

Comprehensive covers damage to your vehicle that is not caused by a collision.

Examples include:

• Theft

• Hail damage

• Deer or animal strikes

• Vandalism

• Fire

• Falling trees

• Flooding

If something other than another vehicle damages your car, this is typically the coverage that applies.

4. Collision Coverage

Collision pays for damage to your vehicle when you strike another vehicle or object—whether it’s a car, a fence, or anything else solid.

If your car is financed or leased, lenders almost always require both Comprehensive and Collision.

5. Medical Payments / Personal Injury Protection (PIP)

Depending on your state, your policy will include either Medical Payments (MedPay) or Personal Injury Protection (PIP).

Both cover your medical expenses regardless of who caused the accident.
PIP is more expansive and may include:

• Lost wages

• Rehabilitation

• Replacement services (such as childcare or housekeeping)

6. Optional Endorsements

These add-ons can significantly improve your experience after a loss:

• Rental car reimbursement

• Roadside assistance

• GAP coverage (critical if you owe more than the vehicle’s value)

• OEM parts coverage

• Custom equipment coverage

These upgrades are often low-cost but provide substantial value.

Common Misunderstandings

Some things Auto Insurance does not cover by default:

• Mechanical breakdowns or worn-out parts

• Manufacturer defects

• Routine maintenance

• Personal items stolen from the vehicle (covered by homeowners or renters insurance)

And once again, “full coverage” is not an actual insurance term—it simply means you have Comprehensive and Collision, but says nothing about your liability limits, UM/UIM, or optional protections.

How Much Coverage Do You Really Need?

A helpful general guideline:

• Liability: High limits such as 100/300/100 or higher

• UM/UIM: Match your liability limits

• Comprehensive & Collision: Keep if your vehicle still has meaningful value

• Medical/PIP: Follow state requirements and consider your health insurance situation

• GAP Coverage: Recommended anytime your loan balance exceeds the car’s value

Your vehicle, financial situation, and state requirements together determine what “adequate” coverage means for you.

The Takeaway

Auto Insurance protects more than your vehicle—it protects your financial well-being every time you drive. The right policy turns a stressful situation into a manageable one. The wrong policy can make everything more difficult, more expensive, and slower to resolve.