Auto insurance policies all have basic types of coverage, often with minimum levels set by the state you live in. Understanding these basics can help you make sure you have carry enough insurance and will help you compare pricing.

Liability Insurance

Almost all states in the US require liability insurance. This coverage will pay for damage done with your vehicle to other people or property. Liability insurance is not used to pay for your injuries, or for those injuries done to any one else on the policy.

A typical insurance policy or quote will list your basic minimum level of liability auto insurance coverage as something like 25/50/10. Every state is allowed to establish its own minimum requirement for liability so it is important to know what it is in your state. While many are 25/50/10, some are 25/40/10, or even 15/30/10.

In 25/50/10 the first number means that any person (besides you) that is injured in an accident that is your fault would receive a maximum $25,000 from the insurance company to cover injuries or items like loss of work. The second number reflects the maximum paid out by the insurance company per accident. So if there are three people in the accident, they wouldn’t each get the individual maximum to pay for their injuries, but would have to split the over all accident maximum of $50,000.

The last number, or $10,000, is the maximum amount paid by the insurance payment for property damage. These numbers are important because if the damage is over the stated coverage amount than you can be sued to pay the difference.

While you have to carry the minimum amount of liability coverage required by your state, you can and maybe should consider carrying more. Some experts suggest carrying liability coverage equal or close to your net worth. Regardless, it is important to check what the different cost would be to add a little more liability to basic coverage.

Collision Insurance

Collision insurance is what will pay to fix your car if it is damaged in an accident with another car or another object while you are driving the car. Typically you will have a deductible, from $100 to even $1000. This means that you pay the deductible amount first before the insurance company covers the rest. On many older cars that wouldn’t be worth fixing the owners may be able to choose not to carry collision insurance.

Comprehensive Insurance

A car accident isn’t the only way a car can be damaged. Hail, floods, fire, theft, etc can all cause damage to a vehicle and require it to be fixed or replaced. Again you will typically have a deductible that you have to pay before the insurance kicks in.

Both collision and comprehensive coverage are required basic coverage if you’re still making payments on the car. If you own the car then it may be a waste of money to keep this type of insurance on older cars. This is especially true if the cost to replace the vehicle is less than a few thousand dollars.

Personal Injury Protection or PIP Insurance

Often this type of basic insurance coverage is called “no-fault” insurance. Some states require PIP. This type of insurance is used to cover your medical costs, and in some cases lost wages, if you are injured in an accident. Some PIP policies will also cover injuries to other passengers in your car, and in some cases pedestrians. Check the policy to see exactly what your PIP basic insurance covers.

Uninsured Motorist Insurance

Even though everyone is required to carry minimum liability coverage, there are some who don’t. Uninsured motorist insurance is intended to cover both you and your passengers if you are hit by an uninsured driver. This part of your policy will also cover those accidents where some one hits you and leaves without exchanging information. This is called a hit-and- run accident.


Auto Insurance policy basics include liability, uninsured motorist, PIP, and sometimes collision and comprehensive coverage. There are many additional things that can be added, such as window glass replacement, towing, and other items.

You can save on your car insurance policy often by just understanding what you need, and getting the basics. In 2008, Consumer Reports suggested that the average American family could save about sixty-five dollars a month by simply getting competitive quotes on their car insurance. They could save further by taking of extras like towing, paying the insurance quarterly, semi-annually, or annually, and even buy thinking ahead and checking insurance quotes on vehicles before you buy. This is recommended as cars have different costs for repair and replacement and the difference in the cost of basic auto insurance can vary greatly between makes and models of cars.

To get free competitive online car insurance quotes from several companies, go here.