Car Insurance Basics

The most important car insurance basics everyone should know are the different kinds of coverage available. There are quite a few types of auto insurance coverage available including bodily injury liability, property damage liability, personal injury protection (PIP), collision, comprehensive and uninsured/underinsured coverage. Learn these auto insurance basics so you can find the best coverage for you.

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Natasha McLachlan is a writer who currently lives in Southern California. She is an alumna of California College of the Arts, where she obtained her B.A. in Writing and Literature. Her current work revolves around insurance guides and informational articles. She truly enjoys helping others learn more about everyday, practical matters through her work.

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Laura Walker graduated college with a BS in Criminal Justice with a minor in Political Science. She married her husband and began working in the family insurance business in 2005. She became a licensed agent and wrote P&C business focusing on personal lines insurance for 10 years. Laura serviced existing business and wrote new business. She now uses her insurance background to help educate...

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Reviewed by Laura Walker
Former Licensed Agent

UPDATED: Jul 16, 2021

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It would be an understatement to say that car insurance can be confusing. We all know that certain types of coverage are required by law. There are quite a few types of coverage available including bodily injury liability, property damage liability, personal injury protection or PIP, collision, comprehensive and uninsured/underinsured coverage. Before you close the deal on your next car purchase, be sure that you have a proper understanding of the basics of insurance coverage, so you are equipped with the knowledge to ask the important questions and make informed decisions.

Bodily Injury Liability

In many states having Bodily Injury coverage is mandatory. The amount of coverage needed may be higher than the bare minimum that these states require. For example, if you were to be at fault in an accident where 4 people were injured, one of the people injured quite seriously, then a $20,000 Bodily Injury coverage would be drained in no time; leaving you the responsibility for paying any additional medical costs yourself.

Property Damage Liability

This concept applies to Property Damage Liability just as it does to Bodily Injury. It is mandatory in many states, but the minimum requirement is very often not sufficient to pay the price for a replacement of just one new car. In cases where there has been extreme property damage, the costs can quickly exceed $50,000. It is important to have sufficient coverage that is comparable to the average costs of damages.

Personal Injury Protection

Personal Injury Protection or PIP insurance for short, provides coverage for injuries that you and passengers in your car sustain in an accident for which you are at fault. Few states require this coverage, even though personal injury is one of the most costly expenses related to automobile accidents.


This type of coverage pays for repairs to your vehicle that are sustained when you strike another car, mailbox, or anything else. Collision Insurance does not provide coverage for injuries, though it does pay for damages to your car in a way that is similar to how Property Liability Insurance covers damages that you have caused to another person’s car. Often times Collision and Comprehensive coverages are rolled into one policy, though not always.


The intent of Comprehensive insurance is to cover the cost of repairs or replacements that are not in direct relation to collision damage. For instance, fire, vandalism, broken windows, or other damages. It may not be required in many states, but it can prove to be a financial safety net.

Uninsured / Underinsured Motorist Coverage

This coverage protects you, your passengers and your car if you should have the misfortune of being hit by an uninsured driver or by a driver that has insufficient insurance coverage to pay the costs for damage incurred. If the insurance company for the person who causes the accident pays all that they are obligated to, this insurance type will cover the remainder of the payments.

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