- A liability policy is required on all vehicles that are on the road. Liability policy limits and deductibles vary by state. If you have an at-fault accident, it is your liability policy that pays for damages to other people, including medical and property damage. Your vehicle and medical payments are not covered by your own liability policy. Although there is a state-mandated minimum, your insurance company can increase your coverage to protect your financial interests.
- A comprehensive policy is an add-on to liability. For dollars more a month, this policy covers "other than collision." Your vehicle is covered for accidents that you are not at fault for, such as hitting a deer or sustaining vehicle damage from a falling tree. This policy does not cover flooding. Comprehensive insurance also covers theft and vandalism. You may choose a deductible at the time of policy purchase, which is your financial responsibility toward damages. It is wise to keep these deductibles low--deductibles as high as a $1,000 may not prove beneficial for smaller, more common forms of damage.
- A collision policy completes "full-coverage insurance." Collision includes liability, comprehensive and collision coverage, or damages to your vehicle, even if you are at fault. Collision Insurance is required for vehicles that are financed or leased, to protect the bank that lends the money in the event of a loss.
- An Underinsured Motorist Bodily Injury (UMBI) covers your car and the people in it in the event or an accident where the other party is at fault, but has inadequate coverage to pay for damages. Uninsured Motorist Property Damage (UMPD) covers the same damages, but in the event the at-fault party does not have any insurance at all. Both UMPD and UMBI may be included in your policy if you have full coverage, so check with your agent. A Personal Injury Protection (PIP) policy is required or included in some states, while others do not offer it. PIP covers medical and funeral expenses of people in the insured's vehicle, including the policy holder, regardless of who was at fault. PIP coverage may also cover you in the event that you are hit by a car or riding in a car that has no insurance policy in place. PIP is state specific--your insurance carrier can let you if it is offered in your state and what it covers.
- Depending on your insurance company and state, you can add additional coverages onto your policy, such as windshield replacement. This add-on covers the replacement of your windshield without a deductible. Rental car coverage, another add-on, covers the cost of a rental car if you have an accident and your car is in the shop.
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