Types of Car Insurance: What Coverage Is Mandatory?

A minimum amount of auto liability insurance is required by law in almost every state, while other car insurance types may be optional or mandatory, depending on your state. Additionally, full coverage is often required by lenders and lessors if you are financing or leasing your car.

Keep reading to learn about the types of car insurance coverage typically available and which are best for your situation.

Key Takeaways Depending on your state, you may be required to get auto coverage for liability, medical payments, personal injury protection and uninsured or underinsured drivers. Liability coverage is typically broken into bodily injury and property damage protection. Physical damage coverage, including comprehensive and collision insurance, typically isn’t mandatory unless it’s part of your lease or loan agreement. While uninsured and underinsured motorist coverage aren’t always required by state law, they may still be worth considering if your state has a high number of drivers who lack enough insurance. Optional auto insurance endorsements, such as gap insurance and roadside assistance, may also be useful to help prevent additional out-of-pocket expenses in certain situations.

What Are the Most Common Types of Car Insurance?

Below, we’ve listed the most common types of car insurance, which can insure you for liability, car damage and even injuries.

Liability

Liability coverage is required in nearly every state and is the most common type of auto insurance. This coverage steps in when you are responsible for another person’s injuries or property damages in a car accident, paying for their medical expenses or repairs, along with legal expenses if you are sued. Liability insurance is broken down into two types of coverage:

Bodily Injury (BI) Liability	Property Damage (PD) Liability
This covers the other person’s injuries in a car accident that you caused. Expenses covered may include their medical bills, lost wages while recovering and funeral costs if you caused a fatality. If the injured party sues you, BI liability coverage also pays for legal expenses, like attorney and settlement costs.	This covers the other person’s repair bills in a car accident that you caused. PD liability coverage extends beyond two-car accidents and can pay for damages caused to somebody else’s home or personal belongings, such as those incurred if you drive into your neighbor’s backyard fence.

Motor vehicle laws typically use three numbers to distinguish the limit requirements for each type of coverage – for example, 25/50/10. This tells drivers that they need to carry the following coverage limits:

• $25,000 worth of bodily injury liability coverage per person injured in an accident
• $50,000 worth of bodily injury liability coverage for all people injured in an accident
• $10,000 worth of property damage liability coverage per accident

If you are responsible for a car accident that injures a single driver, a policy with the coverage limits mentioned above would pay out up to $25,000 for their medical expenses. However, if you injured the other driver and two of their passengers, your policy would pay out no more than $50,000, even if they racked up $75,000 worth of hospital bills.

Physical Damage

Full coverage bundles your state’s minimum insurance requirements with the two physical damage coverage types: collision and comprehensive coverage. Keep in mind that full coverage will not reimburse you for damage to your personal belongings, like clothes, your wallet and electronics, as these losses are typically covered by home or renters insurance policies.

Collision coverage pays for repairs to your car if you strike another car or object, like a tree or gate, even if you were the at-fault driver. Driving without collision insurance would leave you financially on the hook for all of your car repairs after an accident you were responsible for. Meanwhile, comprehensive insurance covers physical damages to your vehicle from sources other than collisions, such as fire, vandalism, theft and hail.

While not required by law, both collision and comprehensive coverage may be required when financing or leasing a car.

Medical Payments or Personal Injury Protection

Medical payments coverage (Medpay) pays for you or your passengers’ medical and funeral expenses after a car accident. Coverage is available whether you or the other driver can be held liable. Medpay generally covers the following expenses:

• Doctor visits
• Hospital bills
• Ambulatory fees
• Emergency room bills
• Surgeries
• X-rays

While health insurance should also cover your medical bills, Medpay can still be beneficial. For example, you won’t have to worry about the out-of-pocket costs required with health insurance, like deductibles and copays, since Medpay coverage generally doesn’t require you to pay a deductible before it takes effect.^[1]

Personal injury protection (PIP) functions similarly to Medpay and pays for your medical and funeral expenses plus lost wages. PIP is also called “no-fault insurance” because it pays for your injuries even if you were the at-fault driver — outside of no-fault states, you would typically file a claim with the liable driver’s insurance carrier for reimbursement. PIP isn’t available in every state for purchase, and depending on where you live, it may be mandatory or optional.

Uninsured/Underinsured Motorist

Uninsured motorist (UM) and underinsured motorist (UIM) coverage step in when you get into an accident but the liable driver does not have auto insurance or has insufficient coverage. UM/UIM coverages are mandatory in some states. If you live in a state with a high rate of uninsured drivers, like New Mexico (24.9% of drivers as of 2022) or Mississippi (22.2%), you should consider maintaining UM/UIM insurance even if they’re optional.^[2]

Uninsured motorist coverage pays for your medical and repair expenses if the liable driver has zero auto insurance. You may also be covered if you were involved in a hit-and-run accident and could not identify the at-fault driver.

Underinsured motorist coverage pays for your medical and repair expenses if the liable driver has auto insurance but does not have enough coverage to fully reimburse you for your losses. For example, suppose a California driver faces a $20,000 repair bill after a car accident, but the liable driver only has the state-required minimum of $15,000 in property damage liability coverage. In this case, UIM coverage would typically help cover the remaining $5,000.

Additional Types of Car Insurance

You can expand your coverage by purchasing endorsements, which add extra types of car insurance to your auto policy. Common endorsements include gap insurance, roadside assistance and rental car reimbursement.

Gap

If your car is totaled in a car accident, guaranteed asset protection (gap) insurance would cover the difference between the remaining balance on your auto loan and your car’s actual cash value (ACV), which refers to how much it is worth after considering depreciation. For example, suppose you totaled your car in a covered accident, the car is worth $10,000 and there’s $12,000 left on your auto loan.

In this case, collision insurance could reimburse you for $10,000 minus your deductible, and gap insurance would cover the remaining $2,000 to pay off your loan balance.

Gap insurance is typically recommended if you make a down payment of less than 20% on your car, your car loan is 60 months or longer or you lease your car. However, if you lease your vehicle, check if the gap insurance cost has already been worked into your lease payments.^[3]

Rental Car Reimbursement

Rental car reimbursement coverage steps in when you need a temporary vehicle while your car is undergoing repairs or was totaled. If the other driver was at fault, their liability insurance may cover your rental car costs. However, the claims process can take a while.

As a result, you may want to turn to your own rental car reimbursement policy to help you secure a rental immediately without paying out of pocket. Your insurer may then seek reimbursement from the liable driver’s insurance carrier on your behalf.

Roadside Assistance

If your car breaks down or you’re locked out, roadside assistance can pay for emergency roadside services, including flat tire changes, tows, fuel delivery and locksmith services. However, some providers, such as AAA, may limit your number of service calls to four times a year, with calls beyond that amount potentially resulting in additional fees.^[4] Also, as with AAA, the distance your roadside assistance company will tow you without additional charges may vary based on your membership level.^[5]

What Car Insurance Types Are Required by Law?

Below is an overview of the types of car insurance you need to purchase and the states where they are mandatory.^[6]

Coverage	Required States
Bodily injury liability	All states but FL and NH
Property damage liability	All states but NH
Collision	No states
Comprehensive	No states
Uninsured motorist (UM)	CT, DC, IL, KS, ME, MD, MA, MN, MO, NE, NJ, NY, NC, ND, OR, SC, SD, VT, WV and WI
Underinsured motorist (UIM)	CT, KS, ME, MD, MN, NE, NJ, ND, OR, SD and VT
Personal injury protection (PIP)	DE, FL, HI, KS, KY, MA, MI, MN, NJ, NY, ND, OR, PA and UT
Medical payments (Medpay)	ME
Gap	No states
Rental car reimbursement	No states
Roadside assistance	No states

Keep in mind that insurance requirements may change over time. For example, Virginia previously allowed drivers to opt out of traditional insurance requirements by paying a fee, but this practice ended in 2024.^[7] Meanwhile, California increased its minimum liability coverage limits from 15/30/5 to 30/60/15 in 2025.^[8]

While New Hampshire remains the only state that doesn’t officially require car insurance, it does require you to show proof of financial responsibility, meaning you are able to cover another person’s expenses in the wake of an accident. Should you choose to get auto insurance in New Hampshire, you’ll need to meet the minimum requirements set by state law, which include 25/50/25 liability limits, 25/50 UM/UIM limits and $1,000 worth of Medpay.^[9]

How Do I Choose What Type of Car Insurance To Get?

The auto insurance types you should choose may largely depend on where you live. For example, if you live in a state where UM and UIM insurance aren’t required, you may opt not to get the coverage to help reduce your car insurance premiums. However, in a state like New Mexico, where UM coverage is optional but there are a large number of uninsured drivers, you may be taking a greater risk by forgoing uninsured motorist insurance.^[2]

After comparing the different options available, you should search for auto insurance companies that offer those policies, and determine whether they have any discounts that may lower your monthly premium. Get quotes from three to five different insurers to get a range of options. You’ll typically need to inform each insurer of where you live and other details, such as the type of car you drive, its mileage and your age.

This process may become tedious since you’ll typically need to gather quotes from each insurer one at a time. Speed things up by using an insurance marketplace like SmartFinancial. After answering a brief questionnaire, we’ll connect you with a licensed insurance agent to help you get the right car insurance policy types based on your coverage needs. Click here for a free car insurance quote today!