All states require drivers to have some form of financial responsibility in place in order to register a vehicle and drive it in the state. The vast majority of vehicle owners choose to purchase car insurance that meets certain minimum standards of coverage. On top of those minimums, car insurance companies offer other types of car insurance that can provide greater protection if someone gets hurt in a car accident, or a vehicle becomes damaged (in an accident or otherwise).
But with this extra protection comes additional cost, via a higher premium. And depending on the driver and the vehicle, the additional coverage may not always be worth the extra money. In order to make the right decision on the best car insurance policy for you, you need to have a basic understanding of the different types of available coverage.
Liability insurance covers bodily injuries and property damage incurred by other drivers and passengers (even pedestrians) if you are liable for causing a car accident. It does not pay for injuries or damages that you sustain as a result of the accident. States that require car insurance will usually have a statutory minimum level of liability coverage, usually around $15,000 to $20,000 per injured person, and around $40,000 to $50,000 overall per accident.
If you're involved in an accident while driving your vehicle, collision coverage will pay to repair or replace it, regardless of who was at fault. This coverage will apply if your accident involves another vehicle, you hit a stationary object, or your vehicle rolls over. However, collision coverage does not usually cover vehicle damage that is the result of a collision with an animal.
Comprehensive coverage exists to cover damage to your vehicle that occurs when no one is driving it, such as when it's parked in your driveway or in a parking lot. Comprehensive coverage will pay for repairs necessitated by things like a falling tree branch, fire, or theft of the vehicle. Additionally, comprehensive coverage will pay for repairs resulting from an accident involving an animal.
It may be the law to have car insurance or some other form of financial responsibility, but many drivers go without coverage. And even more drivers only obtain the state's minimum coverage, which is often not enough to fully compensate you after a serious accident. To protect against these situations, uninsured/underinsured motorist coverage is available as an add-on to your policy (it's only required in a handful of states).
If you're in an accident with another driver who is at fault, but who has no (or not enough) car insurance to cover your losses, your UM/UIM coverage will kick in and make up the difference when it comes to your injuries and damage to your vehicle.
Personal Injury Protection (PIP)
Personal injury protection, also known as PIP or no-fault car insurance, will pay for the medical expenses of you or anyone else covered by your policy -- usually that means family members and anyone riding in your vehicle who has no car insurance of their own. PIP (which is a requirement in no-fault car insurance states) applies regardless of who caused the accident.
Medical Payments Coverage (MedPay)
Medical payments coverage, sometimes referred to as MedPay, is very similar to PIP in that it covers medical expenses for you, other authorized drivers, and any passengers. However, MedPay differs from PIP in that it usually doesn't cover as many expenses. Depending on the state, PIP may cover a certain expense (such as funeral expenses or lost wages) that MedPay does not, or vice versa.
If a vehicle is subject to a car loan or lease when it gets totaled, its actual cash value may be less than its lease value or the amount still owed on the car loan. In this situation, you must pay the difference to the dealer or lender. Gap coverage protects you in these situations by paying for this difference or "gap."
The answer to this question will depend on many factors, such as your aversion to risk, how much insurance you can afford, the cost of your vehicle, what state you're in and what other insurance coverage you may have.
For example, if you have health insurance for you and your family, PIP or MedPay coverage may not be necessary (assuming it's optional). This is because much of what PIP and MedPay provides is probably covered by your health insurance policy. And if you are insuring an older vehicle with very little resale value, it might be more cost effective to forego collision or comprehensive coverage. Speaking with an insurance agent will go a long way towards finding the right types and amounts of coverage.