What is automobile insurance?

Many of us take car insurance coverage for granted until the day we get into an accident or experience theft, or some other type of claim. While we don’t expect you to be an expert in car insurance coverage (that’s our job!) we do recommend that you brush up on the basics of your policy so that you know what type of coverage you have.

Basic auto insurance covers the following five coverage parts which are explained in greater detail on our Auto Insurance Coverage page:


Medical Payments

Uninsured Motorists

Physical Damage

Comprehensive (sometimes known as “comp”)

Liability coverage is the most basic form of auto insurance and covers damages that you may cause to other drivers and their vehicles on the road. An important thing to understand is that liability coverage is made of up different limits for specific types of coverage. Liability coverages are often expressed as a three-number ratio, for example:

100/300/50 – What Does it Mean?

The numbers in this ratio represent the three limits of your liability coverage that your insurance company will pay in the event of an accident. The numbers above are only an example and will vary from policy to policy. Let’s look at what the numbers 100/300/50 mean in this example:

100- Translates to $100,000 worth of bodily injury coverage per person. This would cover injuries sustained by passengers in the at-fault driver’s car as well as passengers in the other vehicle.

300- Translates to a $300,000 limit on bodily injury coverage per accident. In this case, the at-fault driver would have up to $300,000 worth of coverage total for all passengers in their car and passengers in the other vehicle.

50-Translates to a maximum of $50,000 worth of coverage for property damage per accident. This means that the at-fault driver would be covered up to $50,000 for damage they caused to another vehicle or something else they collided with including a phone pole, stop sign, a house, mailbox, etc.

While liability coverage is required in almost every U.S. state, coverage amounts for liability and collision can vary from one policy to the next. Some policies provide more or less coverage depending upon:

The Auto Owners Specific Needs For Their Vehicle

The Current State Requirements

The requirements set forth in a lease

For example, let’s compare Driver A to Driver B. Driver A drives a 2008 BMW worth $50,000. Driver B drives a 1985 Ford Mustang worth $1,200. Driver A would most likely opt for collision coverage on their vehicle because in the event of an accident, they would want to make sure they received compensation for their BMW. Driver B, however, might not choose to purchase collision coverage because the amount they pay for insuring the vehicle may exceed the value of the car. In this case, the driver may opt for only liability coverage- the minimum requirement by the law- and accept the total loss of the car if it was totaled.

State requirements also affect the amount of liability coverage that drivers will be required to obtain. For example, one state may require a driver to hold a minimum of $25,000 in single person bodily injury coverage whereas another state may require only $15,000 worth of the same coverage. For coverage requirements in your state, contact an auto insurance agent for more information.

If you lease your vehicle you should be aware that most lease companies also have a minimum liability requirement. Your lease company will typically require you to provide proof of insurance throughout the term of your lease. While most companies require 100/300/50 you should check with your lease holder for your specific requirements.