Auto insurance coverage at a glance

Dealing with auto insurance can be a bit tricky and confusing for drivers who have purchased their very first policy or never took the time to learn what they are actually paying for each year. All those different coverage types, each serving its own purpose, can really make your head spin. Even so, it's not that complicated as it looks, and you don't have to become an expert in insurance to get the purpose of most options offered by the insurance company. Here's a brief explanation of the most widespread coverage options that will definitely help you decide whether you need to include it or not:

Third party liability

Third party liability coverage consists of bodily injury and property damage coverage and is actually mandatory in all states, so you can't exclude it from your policy. Bodily injury coverage pays for the injuries you've caused in a collision with another car, pedestrian or element of infrastructure. Property damage pays for the damaged property in the same situation. If the other party is responsible for the collision, it's their third party liability coverage that will pay for your damage and injuries. That's how traffic disputes are settled in most countries around the globe these days.


Collision coverage is optional; nevertheless, a lot of people tend to buy it due to its usefulness. It pays out in case of a collision with another car or object in traffic regardless of who is at fault. It is subject to a deductible, which you have to pay in order to get your reimbursement. Collision coverage is often required contractually when you take out an auto loan.


Comprehensive coverage is often sold together with collision coverage as these two options are complimentary and help protecting the car against most types of damage. Comprehensive coverage pays for damage that results from all situations other than traffic collision such as storm, lightning, fire, theft, burglary, flood, earthquake, explosion, social unrest and many others. It's advised that you check the contents of the policy in order to learn what types of damage are included with your particular auto insurance provider. Comprehensive is also subject to deductibles and can as well be required by lending institutions.

Uninsured/underinsured motorist

This coverage option applies in case of a hit-and-run collision or when the other party has insufficient or no auto insurance coverage at all. In such a case, your insurance company acts as the other party's insurer and pays for the damage and injuries caused if the other driver is at fault.

Personal injury protection

Personal injury protection pays for the medical expenses or funeral costs in case you or any of your passengers get injured during a collision regardless of who was at fault. It may serve as health insurance for people who don't have it but cannot be used together with an existing health insurance plan – you will have to choose only a single source of coverage.

Towing and labor costs

This coverage option is quite useful in cases of breakdowns as it pays for towing and basic roadside assistance services on site. Check the contents of the policy in order to get an idea of what types of services can be provided if your car breaks down.

Car rental reimbursement

As the name suggests, this coverage option pays for your car rental expenses while your own car is being repaired after an accident.