Liability coverage provides an insured driver protection for bodily injury or property damage for which they are deemed responsible. An example of property damage would be where an insured driver runs over a neighbor’s mailbox. In this case, the liability coverage would pay for the damage to the mailbox. An example of bodily injury would be where an insured driver causes physical harm to a third party and the driver is deemed responsible for the injury. 49 of 50 states have requirements for a minimum level of liability coverage and penalize drivers who are not in compliance.

Collision coverage covers loss that occurs when the insured auto strikes another object or vehicle in the event of an accident. This includes all vehicles, as well as objects such as telephone poles, guardrails or lampposts. Collision coverage is not required by the state, unlike Liability insurance, but is highly recommended for most drivers. If a car is leased or financed, the lender or lessor will likely require collision coverage. An exception to this recommendation is if you have an older car, and the cost of repairing or replacing it would cost more than the car is worth. Collision coverage is subject to a deductible.

Personal Injury Protection (PIP) coverage covers medical expenses, and, in some cases, lost wages and other damages for the policyholder and any passengers injured in the vehicle as a result of an accident. People with good medical and disability policies may not need the maximum PIP coverage and may elect to purchase the minimum required by the state. Some states allow drivers to waive PIP coverage entirely.

Medical coverage is included as part of Personal Injury Protection (PIP) and covers costs of medical expenses, hospital visits and health-related costs for the policyholder and any passengers in the vehicle that result in the event of an accident. People with good medical and disability policies may elect to purchase the minimum required amount of medical coverage by the state. Some states allow drivers to waive medical coverage entirely.

Gap coverage is insurance purchased for a new vehicle that will pay the difference between the actual value of the vehicle and the amount left on the car loan if the vehicle is totaled. The value of a car sharply declines immediately after purchase, which means there is a period of time in which the amount owed on the car loan is greater than the value of the car. This is called upside-down or negative equity. If the vehicle is totaled during this time, the owner could still owe thousands of dollars more on the loan than the reimbursable value of the car. There are cases where Gap insurance may not always pay off the full loan value and the driver may be left with some payments. This could be caused by unpaid delinquent payments due at the time of loss, payment deferrals or extensions (skips), refinancing of the vehicle after purchasing the policy or late fees and other administrative fees. It is important for a consumer to be aware that they may still owe payment even though they purchased Gap insurance.

Rental Reimbursement coverage covers the cost of a rental car when your vehicle is being repaired as the result of a covered claim, or if it is stolen. This coverage will reimburse you for transportation expenses up to the limits specified in the policy. This coverage will not pay for a rental car if your car breaks down or is in the shop for regular maintenance. Rental Reimbursement insurance is recommended for drivers who absolutely need access to transportation at their convenience. It is not recommended for drivers who have access to a backup vehicle or can wait for repairs to be finished. It is important for a driver to discuss their needs with their agent before deciding whether or not to purchase Rental Reimbursement coverage.