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There are five basic types of auto insurance coverage: bodily injury liability, property damage liability, medical payments, uninsured and underinsured motorist coverage, and comprehensive and collision insurance, a two-part coverage which covers physical damages to a vehicle.
Although they have big names, most car insurance coverage is self-explanatory and can be figured out in the name of the coverage. Bodily injury liability will pay for any claims made involving bodily injuries caused in an accident, while property damage liability will pay for damages caused to another person's vehicle – or property - in the case of an accident. Medical payments will cover the medical bills of anyone in the policyholder's car or any passengers in that car so the costs don't come out of pocket.
Underinsured and uninsured motorists, will save a lot of worry and hassle if involved in an collision where the person who hit you does not have any or has insufficient insurance coverage. This type of insurance coverage, which in most states only covers bodily injury losses - protects a driver from other drivers who might be negligent.
The final portions of insurance coverage, collision and comprehensive, will help pay for physical damages to your vehicle. Collision means when or if you are involved in a car wreck, any damages caused to your vehicle, like broken headlights or a dented side panel, will be replaced by the insurance company and not from your pocket. Comprehensive covers things like a broken or cracked windshield or natural disasters, such as storms, earthquakes, fires, and other non-collision oriented accidents.
Which state you live in will determine the types of car insurance coverage that you will have to have on your policy. Most states require at least liability insurance at a minimum, and many make sure auto owners have insurance before drivers can even register their car with the state. Still other states use a type of system which doesn't inquire about insurance until drivers have gotten a speeding citation or has been involved in an accident.
Determining which kind of car insurance is right for you depends on the situation. If your car is worth a lot of money, you will most likely need a higher amount of insurance coverage. The premium will also be higher if the insurance company is expected to pay a lot. The second part of insurance that you'll have to decide on is a deductible. Generally ranging from $50,000 to $250,000, insurance plans have deductibles that are on average about $500; this will limit how much you pay out of pocket before the insurance coverage will take over. You can set your deductible as high as $1,000 to keep your payments down or set it as low as $200 to keep out of pocket expenses down, depending on your insurance company's regulations.
The most important types of insurance coverage are collision and comprehensive so there is some protection in case involved in an accident where your vehicle is damaged or completely totaled. That way no matter what happens, you will most likely always have some sort of protection.