The short answer
Car insurance has six coverage types: liability, collision, comprehensive, uninsured/underinsured motorist, medical payments or PIP, and gap. Liability is required by law in most states; collision and comprehensive are required by lenders. "Full coverage" is industry shorthand — not an official policy type — and averages $2,638 a year nationally (Bankrate 2025).
Which car insurance coverages are required by law and which are optional?
There are 6 core coverages. Liability is legally required in nearly every state, while collision and comprehensive are required by your lender while you finance. The rest — uninsured motorist, medical payments or PIP, and gap — close the gaps that liability alone leaves wide open after a serious crash.
| Coverage | What it pays for | Required? |
|---|---|---|
| Liability (BI & PD) | Other people's injuries and property when you're at fault | Yes, in most states |
| Collision | Your car after a crash, regardless of fault | By lenders |
| Comprehensive | Theft, fire, flood, hail, vandalism, animal strikes | By lenders |
| Uninsured/underinsured motorist | Your injuries when the at-fault driver isn't covered | Some states |
| Medical payments / PIP | Medical bills for you and passengers | Some states |
| Gap | The balance owed if a financed car is totaled | Optional |
For a deeper look at the last one, see what GAP insurance is and whether you need it. The Insurance Information Institute breaks each coverage down in detail.
What does liability insurance actually cover?
Liability covers the other party's costs when you cause a crash — their medical bills (bodily injury) and their vehicle or property repairs (property damage). It pays nothing toward your own car or injuries. Most states set a minimum near 25/50/25: $25,000 per person, $50,000 per accident, $25,000 in property damage.
- Bodily injury (BI): the other party's medical costs and lost income.
- Property damage (PD): their car, plus fences, buildings, or poles you hit.
- State minimums are low: a single hospital stay can blow past a $25,000 limit fast.
California raised its minimums from 15/30/5 to 30/60/15 in January 2025 — the first increase since 1967. Florida is the outlier: it requires no bodily injury liability at all, only $10,000 in PIP and property damage. Maine is the strictest, requiring up to 50/100/25 plus mandatory MedPay.
What is the difference between collision and comprehensive?
Collision pays for your car after a crash with another vehicle or object; comprehensive pays for everything else — theft, fire, flood, hail, vandalism, and hitting an animal. Together they are commonly called "full coverage" — a shorthand term, not an official policy type — which averages about $2,638 a year nationally per Bankrate's 2025 rate study, versus $773 for minimum-coverage policies.
- Collision: hitting a car, a tree, a guardrail, or rolling the vehicle.
- Comprehensive: a tree falling on the car, a stolen vehicle, a deer strike, a hailstorm.
- Both carry a deductible: the amount you pay before coverage kicks in, often $500–$1,000.
National averages come from Bankrate's 2025 cost study. Your rate depends on the car, your driving record, and your ZIP code — see the full picture in how much car insurance costs per month.
What extra coverages are worth adding?
Uninsured/underinsured motorist coverage is the most important add-on, because about 1 in 7 U.S. drivers carries no insurance. Medical payments or PIP covers your own injuries fast, and gap insurance covers the loan balance if a financed car is totaled early — the most common spot where buyers end up underinsured.
- Uninsured/underinsured motorist: protects you when the at-fault driver can't pay.
- Medical payments / PIP: covers your and passengers' medical bills regardless of fault.
- Gap: pays the difference when you owe more than the car is worth.
- Roadside and rental reimbursement: low-cost conveniences, not core protection.
Personal auto policies also have gaps worth knowing: they typically do not cover commercial or delivery driving (DoorDash, Uber Eats), ride-share trips without a supplemental endorsement, or vehicles used primarily for business. If you drive for a ride-share company, ask your insurer about a ride-share endorsement before your next trip.
How much coverage do you really need?
Carry more than your state minimum. The gap between the legal minimum (often 25/50/25) and recommended limits like 100/300/100 is where most underinsurance happens — one serious crash can exceed a $25,000 cap and put your savings at risk. Keep full coverage while you finance or while the car's value is high.
- Set liability near 100/300/100 to shield your assets from a lawsuit.
- Keep collision and comprehensive until the combined annual premium tops ~10% of the car's current market value — a widely cited guideline per NerdWallet.
- Add uninsured motorist coverage even where it's optional.
- Compare quotes — see where to finance a car and the full annual cost of ownership to budget insurance alongside the loan.
Frequently asked questions
What is the difference between collision and comprehensive insurance?
Collision pays for damage to your car from a crash with another vehicle or object, regardless of fault. Comprehensive pays for non-collision losses such as theft, vandalism, fire, flood, hail, and animal strikes. Lenders usually require both while you finance the car.
Do I need full coverage if my car is paid off?
Not legally, but it can still be worth it. Once the loan is gone you can drop collision and comprehensive, yet doing so means paying out of pocket to repair or replace your own car. A common rule is to keep full coverage until the annual premium exceeds about 10% of the car's value.
What is uninsured motorist coverage?
Uninsured and underinsured motorist coverage pays for your injuries and sometimes your car when an at-fault driver has no insurance or too little of it. Because roughly one in seven U.S. drivers is uninsured, it fills a gap liability cannot, and several states require it.
How much liability insurance do I actually need?
Buy more than your state minimum, which is often just 25/50/25. The Insurance Information Institute and many advisors suggest 100/300/100 limits so a single serious crash does not exceed your coverage and expose your savings to a lawsuit.
How much does full coverage car insurance cost?
Full coverage averages about $2,638 a year nationally per Bankrate's 2025 rate study across all driver profiles, versus $773 for minimum-coverage policies. AAA's 2025 Your Driving Costs study reports lower figures ($1,511–$1,833) because it models a favorable, low-risk driver — not the broader market. Rates vary significantly by state, driving record, vehicle, and deductible.
What is the minimum car insurance required by law?
Liability-only coverage is the legal minimum in 49 states; New Hampshire is the only state with no mandatory insurance requirement (though drivers must be able to prove financial responsibility). State minimums vary — most require at least 25/50/25 in bodily injury and property damage liability.
Is comprehensive or collision insurance required?
Comprehensive and collision are not required by state law, but most lenders require both while the car is financed. Once the loan is paid off, you can legally drop to liability-only, though keeping full coverage may still be worthwhile depending on the car's value.
Sources
CarsLens is editorial guidance, not individualized advice. This page draws on Bankrate's 2025 True Cost of Auto Insurance report, the Insurance Information Institute, and AAA's 2025 Your Driving Costs study.