Car insurance 101

KIPLINGER CONSUMER NEWS SERVICE

Car insurance can help you cover expenses in the case of an accident, including medical bills and repairs. However, how much coverage you have depends on the type of car insurance you have. The following are the most common forms of car insurance — this includes coverage that is mandatory and optional insurance.

Liability insurance

If you cause a car accident, liability insurance covers the cost of any damages and injuries to the other driver. Liability insurance is required in all states except for New Hampshire and Virginia. There are two types of liability insurance — bodily-injury liability and property-damage liability.

• Bodily-injury liability:In the event that you cause a car accident, physical-injury liability insurance is used to cover the other party's medical expenses.

• Property-damage liability:If you are at fault in an accident, property-damage liability insurance will cover repair costs to the other party's property, such as their car, fence or mailbox.

Collision and comprehensive insurance

Collision and comprehensive insurance are optional in every state but are usually required by lenders if you are financing or leasing your vehicle.

• Collision insurance:Regardless of who is at fault in an accident, collision coverage will pay for any damages to your vehicle. It will also cover any damages to your vehicle if you get into a single-car accident. Collision insurance covers up to the actual cash value of your vehicle and carries a deductible.

• Comprehensive insurance:Comprehensive insurance covers your vehicle if it is stolen or if it's damaged by anything other than a car accident, such as vandalism or flooding.

Uninsured/underinsured motorist coverage

In some states, uninsured-and/or underinsured-motorist coverage is required. This type of insurance covers any expenses that arise in the case of another driver hitting you, and there are four different types of coverage that could be required.

• Uninsured bodily injury:This covers your medical expenses if you are in an accident and the at-fault driver has no insurance.

• Underinsured bodily injury:This covers your medical expenses if you are involved in an accident and the at-fault driver's insurance is not enough to cover your overall expenses.

• Uninsured-motorist property damage:This type of insurance pays for any repairs needed if you are in an accident and the at-fault driver is uninsured.

• Underinsured-motorist property damage:If an at-fault driver's property damage liability insurance is not enough to cover repair costs to your vehicle, this type of insurance will cover any uncovered expenses.

Personal-injury and medical-payments coverage

Coverage for personal-injury protection and medical payments is required by law in the 12 no-fault states: Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania and Utah.

• Medical-payments coverage:This type of insurance helps cover any medical bills for you and your passengers in the case of an accident, regardless of who was at fault. If you are hit as a pedestrian, this insurance will help cover medical costs in that case, as well.

• Personal-injury protection:Personal-injury protection also helps cover any medical bills for you and your passengers in the case of an accident, regardless of who was at fault. It can also cover other necessary expenses, such as child care, lost wages and funeral costs.

Gap insurance

Gap insurance will cover the difference between the car's value and how much you still owe on your car in the event your car is totaled. If you're leasing a car, it's likely to be required.