The coverage types at a glance
Each coverage on a policy pays for a different loss. The two liability coverages pay other people for damage you cause; the rest pay for you, your passengers and your own car. The NAIC, the association of state insurance regulators, describes them this way:
| Coverage | Pays for | Required? |
|---|---|---|
| Bodily injury liability | Injuries you cause to other people | In most states |
| Property damage liability | Cars, fences and other property you damage | In most states |
| Collision | Your car, after hitting a car or an object | Not by law; lenders do |
| Comprehensive | Your car: theft, hail, flood, fire, animals | Not by law; lenders do |
| Uninsured motorist | You, when an uninsured or hit-and-run driver hits you | Depends on the state |
| Underinsured motorist | You, when the at-fault driver's limits are too low | Depends on the state |
| Medical payments | Treatment for you and your passengers | Optional |
| Personal injury protection | Medical costs, lost wages, funeral costs | Sold in no-fault states |
The NAIC says liability is required in most states, while collision and comprehensive are not required by law. Medical payments and personal injury protection (PIP) both pay for treatment of you and your passengers. PIP exists in no-fault states, where your own insurer pays for those injuries regardless of who caused the crash, and it can also cover lost wages and funeral costs up to the policy limit. California, for example, has medical payments coverage that pays "no matter who is at fault", with a minimum of $1,000 per injured person.
How split limits are written
Liability limits are written as three numbers in thousands of dollars. California's minimum, as stated by its Department of Insurance, is 30/60/15:
The per-person cap applies first. The per-accident cap then limits the total for everyone, and the department notes that "the injured people share the money." Property damage has a single cap per accident. Anything above the limits is not covered: the department says you are responsible for any damage beyond the limits you bought.
A split-limit claim, worked through
Say you cause a crash with 30/60/15 limits. Three people are hurt and the other car needs $18,000 of repairs.
| Claim | Amount | After $30,000 cap |
|---|---|---|
| Driver of the other car | $40,000 | $30,000 |
| Passenger in the other car | $25,000 | $25,000 |
| Cyclist | $12,000 | $12,000 |
| Injuries total | $77,000 | $67,000 |
- Per person: the $40,000 claim is cut to $30,000; the other two are under the cap. That leaves $67,000.
- Per accident: $67,000 is more than $60,000, so the policy pays $60,000 for injuries in total.
- Property: the $18,000 repair is capped at $15,000, so the policy pays $15,000.
- Left for you: $17,000 of injury claims plus $3,000 of property damage, $20,000 in all.
The same $95,000 of claims under higher limits:
| Limits | Policy pays | You owe |
|---|---|---|
| 30/60/15 | $75,000 | $20,000 |
| 50/100/25 | $95,000 | $0 |
| 100/300/100 | $95,000 | $0 |
The minimum is what the law asks for, not what a serious crash costs. When you compare quotes, ask what each step up in limits adds to the premium and set it against the gap in the last column.
Deductibles and what they do to the payout
The California department defines the deductible as the amount of a loss you pay yourself. Its example: with a $500 deductible and $1,500 of storm damage, you pay the first $500 and the coverage pays the other $1,000. The deductible applies to the coverages that pay for your own car, collision and comprehensive; the department's glossary says those are the only ones with deductibles. The insurer's share for a few losses:
| Deductible | $1,500 loss | $4,000 loss | $12,000 loss |
|---|---|---|---|
| $250 | $1,250 | $3,750 | $11,750 |
| $500 | $1,000 | $3,500 | $11,500 |
| $1,000 | $500 | $3,000 | $11,000 |
| $2,000 | $0 | $2,000 | $10,000 |
A higher deductible usually means a lower premium, the department says. It does not publish a percentage, and the saving differs by insurer, car and driver, so get quotes at two deductible levels. Then do the arithmetic: if raising the deductible from $500 to $1,000 saves less per year than the extra $500 you would pay after one claim, it takes several claim-free years to come out ahead. Pick a deductible you could pay from savings on the day the car is in the shop.
Collision and comprehensive pay based on the market value of your car, not what you paid for it. For an older car worth little more than the deductible, the payout after a total loss can be small.
What a lender requires on a financed or leased car
The NAIC says that with an auto loan your lender requires full coverage, which it defines as both comprehensive and collision on top of the liability your state requires. The California department says this physical damage coverage is required by lenders or leasing companies, and that if you do not buy it, the loan company may buy it and charge you. The lender is listed as loss payee on the declarations page, so a repair check can carry its name too, because the car is its collateral.
That coverage has a cost that belongs in the budget before you sign. The car loan calculator shows the monthly payment and total interest; add the premium for full coverage to that payment to see the real monthly cost of the car. The lease vs buy car calculator compares the two ways to drive the same car, and both require the same physical damage coverage while the lender or lessor has an interest in it.
One gap remains. Insurance pays the market value of a totaled car, and the California department warns that it does not pay off your loan when the car is worth less than you owe. That difference is what GAP insurance covers.
Reading your own policy
- Find the three liability numbers on the declarations page and compare them with your state's minimum and with what you own.
- Check whether collision and comprehensive are listed, and the deductible for each; they can differ.
- See whether uninsured and underinsured motorist coverage is on the policy. In California the insurer must offer it, and you sign a waiver to turn it down.
- Note whether you have medical payments or PIP, and the limit.
- On a financed car, confirm the lender is named as loss payee.
Frequently asked questions
What does 30/60/15 mean on a car insurance policy?
It is a split liability limit in thousands of dollars. The first number is the most the policy pays for injuries to one person, the second the most for all injured people in one accident, and the third the most for property damage. California's minimum is $30,000, $60,000 and $15,000.
What is the difference between collision and comprehensive?
Collision pays for damage to your own car from hitting another car or an object, such as a tree or a guardrail. Comprehensive pays for damage that is not caused by a collision, like theft, hail, flood, fire or hitting an animal. Both pay based on the market value of your car, minus your deductible.
Is full coverage required by law?
No. Most states require liability insurance, but the NAIC says collision and comprehensive are not required by law. A lender or leasing company usually requires both while it has a claim on the car, and the NAIC calls that combination full coverage.
Does a higher deductible lower my premium?
Usually, yes. The California Department of Insurance says you usually pay a lower premium if you choose a higher deductible. How much lower depends on the insurer and your situation, so ask for quotes at two or three deductible levels and compare them with what you could pay out of pocket after a claim.
What happens if the damage is more than my liability limits?
The insurer pays up to the limits and you are responsible for the rest. In the worked example on this page, claims of $95,000 against a 30/60/15 policy leave $20,000 that the at-fault driver owes personally.
Sources
- NAIC: What Does Auto Insurance Cover? (bodily injury and property damage liability, both required in most states; collision; comprehensive with theft, hail, flood, fire, animals; uninsured and underinsured motorist; medical payments and PIP in no-fault states with lost wages and funeral costs; lenders require full coverage, meaning comprehensive and collision; GAP)
- NAIC: Auto Insurance consumer page (collision and comprehensive not required by law; collision may be required by your lender or lessor; the lender as loss payee on the declarations page; deductible when collision pays)
- California Department of Insurance: Automobile Insurance 101 (minimum liability $30K/$60K/$15K; injured people share the per-accident amount; you are responsible for damage beyond your limits; higher deductible usually lowers the premium; $500 deductible on $1,500 of damage; physical damage coverage required by lenders or leasing companies; market value; insurance does not pay off a loan worth more than the car; medical payments regardless of fault)
General information based on the sources above, not tax, legal or financial advice.