What is covered by a standard auto insurance policy?

Liability coverage

This coverage pays the injured party (the other guy) if you get sued because of injuries you've caused in an accident. It also pays for any property you damage in an accident that is your fault other cars, houses, fences, light poles, etc.

Depending on the state in which you live and the company with which you insure, liability coverage can be purchased either as a "split limit" which has separate coverage amounts for bodily injury lawsuits and for property damage, or as a "combined single limit" which provides one pool of coverage.

It's important that you have adequate liability insurance. If you are involved in a serious accident, you may be sued for a large sum of money. If you do not have enough coverage, you may be forced to liquidate assets to pay for the suit, or have your wages garnisheed.

Medical Payments or Personal Injury Protection (PIP)

This coverage pays for the medical expenses incurred from an auto accident

PIP broadens this to cover lost wages and can also add essential services and funeral expenses.

Each state has different rules for how PIP coverage behaves. In some states, such as New Jersey, PIP coverage may automatically extend to all members of a household for any personal auto accident they are involved in as a driver, passenger, or pedestrian.

Some states and policies provide extended medical coverage. This may cover you if you are in an accident involving buses, taxis and many other forms of commercial transportation.

Uninsured and Underinsured Motorist Coverage (UM/UIM)

This will cover you if your auto is struck by an uninsured driver, or one who has less than the minimum state limits required (this sometimes happens with out of state drivers where they may be subject to different laws).

Depending on the state in which you live and the company with which you insure, uninsured motorist coverage can be purchased either as a "split limit" which has separate coverage amounts for bodily injury and property, or as a "combined single limit" which provides one pool of coverage.

It's important that you have adequate UM/WIM insurance. If you are involved in a serious accident with an uninsured driver and suffer debilitating injuries, it may be the only way in which you can be compensated. UM/UIM coverage is often relatively inexpensive in comparison to the other protections in you policy.

Comprehensive

This coverage reimburses you for loss primarily from theft, fire, vandalism, falling objects (tree branches or hail, for example) or if you strike an animal while driving.

It is typically required when you have a financed or leased vehicle, and is discretionary and is not required when the car is paid off. Many people will drop this coverage when their car is getting older, typically when the cost of coverage is high versus the present market value of the car. You may not eliminate comprehensive coverage on your policy without first eliminating collision (see below).

Comprehensive insurance is usually sold with a $50 to $2000 deductible, although this varies by company and state. The higher the deductible, the lower the cost of your insurance - and the less money you get back if your car is stolen or damaged.

Some companies offer glass coverage with or without a deductible.

Comprehensive and Collision coverage together on a policy comprise "full" coverage. A policy lacking these coverage is sometimes termed a "liability" policy.

Collision

This coverage pays for damage to your vehicle when you are in an accident. If you are at fault in the accident, or if your vehicle is damaged by a hit and run driver, your company will pay you minus your deductible. If you are not at fault, your company will subrogate - that is, obtain payment from the other party's insurance policy.

It is typically required when you have a financed or leased vehicle, and is discretionary and not required when the car is paid off. Many people will drop this coverage when their car is getting older, typically when the cost of coverage is high versus the present market value of the car.

Collision insurance is usually sold with a $50 to $2000 deductible, although this varies by company and state. The higher the deductible, the lower the cost of your insurance - and the less money you get back if your car damaged in an accident.

Comprehensive and Collision coverage together on a policy comprise "full" coverage. A policy lacking these coverage is sometimes termed a "liability" policy.

Lawsuit Option

Some states require insurers to offer you a choice of options for lawsuits - often terms the verbal threshold as opposed to the zero tort threshold.

A zero tort threshold gives you the ability to retain an attorney and sue under any circumstance, a verbal threshold imposes restrictions.

In general, it is much cheaper to accept the verbal threshold than to retain the zero tort option.

A few other options to consider

Most companies offer rental reimbursement and towing if you car is in an accident or stolen. Some also provide general roadside assistance, trip interruption insurance, and other, more exotic coverages. All of these are available at additional cost.

Many states permit a basic policy with a subset of these coverages to be offered. Generally speaking, these policies are inferior and may actually cost more than the standard ones as described above.

A few things to know

Many online insurers will be happy to let you "roll your own" coverage and take the state minimums to induce you to take a cheaper policy, or reduce your medical coverage in a way that provides inadequate coverage. This might save a few dollars up front, but exposes you to serious risks and possibly gaps in coverage.