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$20,000
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$200,000
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§ Coverage primer

Every coverage type, actually explained.

Liability

Required in most states

Liability pays for other people's injuries and property damage when you cause an accident. It does not cover your car or your own injuries.

It's expressed as three numbers. 100/300/100 means: up to $100k per injured person, $300k per accident total, $100k for property damage. State minimums are typically far lower — often 25/50/25 or less.

Why state minimums are often not enough: A serious accident can easily exceed $100k in medical bills alone. Damages beyond your limit come out of your pocket — your net worth is what's at risk.

Rule of thumb: buy at least as much liability as your net worth. A personal umbrella policy ($1–2M for ~$200–400/year) stacked on top of high limits is often the most cost-efficient way to protect significant assets.

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Collision

Required if you have a loan or lease

Collision pays to repair or replace your car when you hit something — another vehicle, a guardrail, a pothole. It applies regardless of fault.

The classic test: if your annual collision premium exceeds 10% of the car's current value, you may be over-insuring. On a $5,000 car paying $600/year, you'd need a claim every 8 years just to break even.

A higher deductible ($1,000 vs. $500) meaningfully lowers your premium. If you have savings to cover the deductible, it's almost always the right call.

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Comprehensive

Required if you have a loan or lease

Comprehensive covers damage that isn't from a collision: theft, fire, flooding, hail, falling trees, hitting an animal.

Comprehensive is typically cheap relative to its benefit — often $100–250/year. The bar for skipping it is much higher than for collision. Even on an older car, if the annual premium is under $100, it's usually worth keeping.

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Uninsured / Underinsured Motorist

Required in some states

UM/UIM covers your injuries and vehicle damage when the at-fault driver has no insurance or not enough.

About 1 in 8 U.S. drivers is uninsured. In some states it's 1 in 4. Without UM/UIM, you're suing someone who has nothing and absorbing the loss yourself. At ~$85/year it's one of the best values in auto insurance.

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Medical Payments / PIP

Required in no-fault states

MedPay and PIP cover your own medical bills after an accident, regardless of fault. PIP also covers lost wages in some states.

If you have health insurance, MedPay is largely redundant — but useful if your health plan has a high deductible, since MedPay has no deductible and pays first.

Without health insurance, MedPay is not optional. An ER visit after an accident can easily cost $20–50k.

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Gap Insurance

Financed and leased vehicles only

Gap covers the difference between what your insurer pays on a totaled car and what you still owe on the loan. New cars can depreciate 15–25% in year one — gap covers that shortfall.

Dealers charge $500–700 for gap rolled into the loan. Your insurer charges ~$35/year for the same coverage. Always buy it through the insurer.

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