What Auto Insurance Covers
Auto insurance is designed to protect you financially when accidents or theft occur. The core components—liability, collision, comprehensive, uninsured/underinsured motorist, and personal injury protection—are standard across most policies. Each serves a distinct purpose, and their limits and deductibles determine your out‑of‑pocket cost.
- What Auto Insurance Covers
- Liability Coverage
- Collision Coverage
- Comprehensive Coverage
- Uninsured/Underinsured Motorist (UM/UIM)
- Personal Injury Protection (PIP)
- Key Terms Explained with 2018 Examples
- How to Read Your Policy Statement
- Common Exclusions
- Comparing Policies: What Matters Most
- Why 2018 Rules Still Matter
- State‑Specific Variations
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Liability Coverage
Liability pays for damage you cause to others. It splits into bodily injury and property damage limits. In 2018, typical minimum limits in the U.S. were 25/50/25 (injury per person, injury per accident, property damage). Higher limits (e.g., 100/300/100) reduce your risk of paying large sums.
Collision Coverage
Collision covers damage to your own vehicle when you collide with another car or object, regardless of fault. The deductible—often $500 or $1,000—determines how much you pay before the insurer steps in.
Comprehensive Coverage
Comprehensive protects against non‑collision events: theft, vandalism, natural disasters, or hitting an animal. It's often paired with a lower deductible, such as $250.
Uninsured/Underinsured Motorist (UM/UIM)
UM/UIM protects you if the at‑fault driver lacks insurance or has insufficient coverage. In 2018, many states required UM limits of at least $25,000 per person.
Personal Injury Protection (PIP)
PIP covers medical expenses and sometimes lost wages for you and passengers, regardless of fault. Minimum limits varied by state; some required as little as $5,000.
Key Terms Explained with 2018 Examples
| Term | Definition | 2018 Example |
|---|---|---|
| Deductible | Amount you pay before insurance covers the rest. | $500 collision deductible on a $15,000 car. |
| Premium | Annual cost for coverage. | $1,200 per year for a 2018 Toyota Camry in California. |
| Coverage Limit | Maximum payout for a claim. | $100,000 liability limit per accident. |
| Gap Insurance | Covers the difference between car value and loan balance. | Car worth $10,000, loan balance $12,000, gap insurance pays $2,000 after a totaled claim. |
| Underinsured Motorist | Driver's coverage below your limits. | Driver has $10,000 liability; you need $25,000 for injury. |
How to Read Your Policy Statement
Your policy is divided into sections: summary of coverage, rates and premiums, and terms. The summary lists each coverage type, its limits, and deductible. The rates section shows how your premium was calculated—often based on age, driving record, location, and car model.
Common Exclusions
Exclusions are scenarios insurance won't cover. In 2018, typical exclusions included:
- Intentional damage caused by you.
- Damage from racing or off‑road use.
- Wear and tear or mechanical breakdown.
Comparing Policies: What Matters Most
When shopping, focus on these factors:
- Premium vs. Coverage: A lower premium might mean higher deductibles.
- State Minimums: Ensure your limits meet or exceed state requirements.
- Discounts: Safe driver, multi‑policy, or good student discounts can lower costs.
Why 2018 Rules Still Matter
While some regulations and rate structures evolve, the core definitions of coverage types remain stable. The 2018 examples illustrate the mechanics of a typical policy, and the same principles apply today, allowing you to interpret current quotes and renewals confidently.
State‑Specific Variations
Some states added or removed certain coverages over time. For instance, Michigan added a no‑fault PIP requirement in 2018, whereas Texas still relies on liability alone. Understanding these nuances helps you tailor coverage to your jurisdiction.