Have you ever wondered what coverage's you really need in your car insurance and what all those technical terms exactly mean? Here is a short overview that might help you to determine what coverage's to choose and to understand your car insurance policy better.

Auto insurance coverage's you need to have

Liability

This is the one coverage you need to have by law no matter which state you live in. It covers the cost of damage and injury to others due to an accident caused by you.

To accomplish this, liability combines two policies, bodily injury liability and property damage liability.

Medical Payments Coverage

This coverage is intended mainly to cover medical expenses for people other than you in your vehicle that suffer bodily injury in a covered accident. Insurance companies encourage the prompt use of such coverage to ensure that the injured person is cared for as soon as possible preventing them from wanting to sue the driver at fault. Depending on the policy, there may be compensation for lost wages also.

Underinsured and Uninsured Motorist Insurance

Though most often put together, these are two distinct policies. They are necessary for those incidents where the driver does not have any insurance or his or her insurance covers only part of the expenses. Uninsured motorist insurance covers your expenses when the other driver has no liability coverage.

Underinsured motorist insurance covers the part of your medical expenses that is not covered by the other driver's coverage (due to a maximum coverage that is too low).

Most states do not require either of those policies, but some require one or the other and yet others even require you to have both.

Auto insurance coverage's you might want to have

Personal Injury Protection Coverage (PIP)

PIP covers such things as lost wages, childcare expenses, pain and suffering and funeral expenses due to injury or death in a car accident. These are usually not covered by medical payments coverage (see above).

PIP is required in most "no-fault" states as well as in Maryland, Delaware and Oregon. (None of these states use a pure no-fault system, which would mean that every driver is covered by their own insurance and nobody could ever be sued for damages. Instead, lawsuits are permitted in certain cases).

Collision Coverage

This coverage pays for repairs or replacement on your car after an accident for which you were at fault. Depending on your policy, you might be required to pay a deductible.

This coverage is not required by law in any state but is recommended for newer cars and may be required if there is a lien on the car.

Comprehensive Coverage

If your car is damaged due to collision with an animal, fire or theft by an unknown party or damage is caused by what is generally referred to as an "act of God", repairs will be paid for if you have this kind of coverage. Depending on your policy, a deductible may apply.

Just as collision coverage, comprehensive coverage is not mandatory in any state but may be required if a lien is on the car and recommended for newer vehicles.