Buying a car that fits your budget and needs is a big deal. But there’s another big decision you’ll have to make in tandem with that: getting your car insured to protect yourself and your loved ones in the case of an accident.

There are several car insurance coverage types to consider, which gives you the freedom to choose a highly personalized policy—but it shouldn’t be complex. Understanding the basic features of common policies will ensure you’re meeting your state and lender’s minimum coverage requirements while protecting yourself from unexpected costs associated with car accidents.

How does car insurance work?

Auto insurance acts as a buffer between you and any financial losses that arise following an accident or other damages beyond your control. Drivers pay a specific price, called a premium, to an insurance company and in return, the insurer agrees to pay for any potential losses covered by your policy.

But what claims are covered depends on the type of car insurance you pay for. Some types of coverage—like bodily injury and property damage liability coverage—are required by nearly all states, while others are optional. Drivers have the choice to pay for additional coverage beyond their state’s minimum requirements to meet their insurance needs.

Types of car insurance coverage and what it covers

Common types of coverage include liability, collision, and comprehensive coverage, which protect you against damages, accidents, or theft. Some states require drivers to have uninsured or underinsured motorist coverage, which protects you against drivers with too little to no insurance.

Here is a general overview of some common types of car insurance and what they cover. (We’ll dive into the specific details in the next sections.)

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Liability coverage

What it is: Liability coverage helps protect you against the cost of medical bills and property damages that may arise if you are found at fault for an accident. Nearly every state in the U.S. requires drivers to hold a minimum level of liability insurance.

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What it covers: Liability insurance pays for both bodily injuries and property damages if you are responsible for an accident.

Bodily injuries (BI): If you are at fault in an accident, BI will assist in paying for any injured person’s medical expenses, such as a hospital visit or medications. BI may also assist you in paying any legal fees if someone injured during the accident wants to sue you for their pain and suffering.

Property damages (PD): If you damage another person’s property in an accident you cause, PD may assist you in paying for repairs. For instance, if you’re driving and you hit a neighborhood welcome sign, PD may cover the damages to the sign. It’s important to note that PD generally does not pay for damages to your own vehicle.

Coverage limits: The maximum amount your insurer will pay depends on the coverage limit outlined in your insurance agreement and the minimum limit for the state you reside in. For liability insurance, the limit is stated as three separate numbers, with each representing an amount your insurance company is willing to pay up to for damages or injuries incurred during an accident.

For instance, your car insurer might offer you a liability coverage plan that has a limit of “30/50/10”. This means your insurer is willing to pay up to $30,000 for bodily injuries sustained per person, $50,000 for total bodily injuries sustained in the accident, and $10,000 for property damages sustained in the accident.

Comprehensive coverage

What it is: Comprehensive insurance is optional coverage that safeguards you against non-collision damages.

What it covers: Comprehensive coverage pays for damages to your vehicle caused by:

• Theft

• Vandalism

• Hitting an animal

• Fire

• Explosions

• Falling trees

• Debris falling from cars

• Storms, such as hail, flooding, lightning, and earthquakes

Coverage limits: There is a limit to the repairs your insurer will cover, which is generally the actual cash value of your car less depreciation and deductibles.

Collision coverage

What it is: Collision insurance covers damages to your vehicle in the event you hit another car or an object. It is generally required by your lender if you have an outstanding auto loan, but may be optional if your vehicle is fully paid off.

What it covers: Collision insurance pays for any necessary car repairs for your vehicle following an accident involving:

• Another vehicle

• A single-car, if your vehicle rolls over or falls

• An object, such as a road sign or a tree

It’s important to note collision coverage only covers the repair and replacement costs for your own vehicle, it doesn’t cover damages to another vehicle.

Coverage limits: There is a limit to the repairs your insurer will cover in an accident, which is typically equal to the actual cash value of your car less depreciation and deductibles.

Personal injury protection

What it is: Personal injury protection (PIP) covers medical bills, hospital bills, and other costs associated with a car accident that are not already covered under your health insurance policy. Some states require drivers to obtain PIP, while other states deem it optional.

What it covers: PIP pays for medical expenses, and possibly funeral expenses or lost income, no matter who is found at fault in the accident. It may also cover pedestrians who have been struck by a vehicle while walking or riding a bike.

Coverage limits: PIP only covers medical expenses and lost wages up to the limit determined by your insurance agreement. If your expenses exceed your limit, you may be able to file a lawsuit against the driver responsible for the accident to cover the difference.

Uninsured and underinsured motorist coverage

What it is: Uninsured motorist coverage (UM) safeguards you in the event you are hit by a driver who does not have car insurance. Underinsured motorist coverage (UIM) protects you if you are hit by a driver who has insurance, but not enough to cover the damages sustained. UM and UIM are required in some, but not all states.

What it covers: UM and UIM help you pay for injuries to yourself and your passengers, as well as damages to your vehicle.

If the driver responsible for the collision has no insurance:

• Uninsured motorist bodily injury helps pay the medical costs sustained by you and any of your passengers

• Uninsured motorist property damage helps pay for vehicle maintenance and repairs

If the drive responsible for the collision does not have enough insurance:

• Underinsured motorist bodily injury helps pays the medical costs sustained by you and any of your passengers

• Underinsured motorist property damage helps pay for vehicle maintenance and repairs

Coverage limits: If your state requires UM/UIM coverage, the limit may be equal to the amount of liability coverage. If it is optional, you may be able to select your own coverage limit.

Medical payments coverage

What it is: Medical payments insurance helps you pay for the medical expenses of the driver and passengers involved in an accident, regardless of who is responsible. This coverage is only required in a few states. If your state does not offer medical payments insurance, you may be able to replace this with PIP coverage instead.

What it covers: Medical payments pays for any necessary medical expenses for you and your passengers following an accident, such as:

• Ambulance fees

• Emergency room and hospital visits

• Medical procedures, such as surgery, X-rays, or dental repairs

• Health insurance co-pays and deductibles

• Funeral costs

Coverage limits: The maximum amount your insurer will pay is stated as a dollar amount per person per accident. If you are able to select your coverage limit, consider reviewing your health insurance plans to determine how much you need to cover any out of pocket costs.

For instance, let’s say your health insurance requires you to pay a $100 copay for emergency department visits. If your coverage exceeds this amount, it will pay your copay and possibly also cover additional medical costs. But, if you select a medical payment coverage limit of less than this amount, you may be personally responsible for paying the difference.

Roadside assistance coverage

What it is: Roadside assistance is optional coverage that can be added to your auto insurance policy and is designed to cover expenses from a damaged or disabled vehicle.

What it covers: Roadside assistance helps you pay for repairs, such as:

• Emergency maintenance, like a flat tire or car battery replacement

• Towing

• Gasoline, if you run out while driving

• Locksmith, if you lock yourself out of your vehicle

Coverage limits: This coverage is limited by the insurer and can be based on the number of calls per year or type of service available. For instance, the insurer may help you switch your flat tire out for a spare, but may choose not to cover the cost to repair or replace the tire with a new one.

Gap insurance

What it is: Gap insurance is optional coverage which covers the difference between a vehicle’s current worth and the amount you owe on the auto loan if your car is damaged or totaled in an accident.

What it covers: If your car is damaged, totaled, or stolen, a typical insurance plan would only pay the amount your car is currently worth. Gap insurance helps cover the difference between the amount of your auto loan and the worth of your car, so you aren’t left paying back a loan on a car you can’t drive. Typically, this coverage is only offered to the original loan holder of a new vehicle.

For instance, let’s say you purchased a vehicle two years ago and still owe $20,000 on the car loan. Since the day you bought your vehicle, it’s actual worth has decreased to $17,000. If your car is stolen, your typical auto insurance policy may cover the current value of $17,000, while you’re left to pay off the remaining $3,000. With a gap insurance policy, the last $3,000 will be covered so you no longer owe money on your car loan.

Coverage limits: The maximum amount your insurer is willing to cover in a gap policy may be stated as a dollar amount or a percentage of your car’s current value, and may charge a deductible.

For instance, if you purchased a new car for $30,000 and you still owe $25,000 on it at the time your car is totaled. Your auto insurance policy covers the current value, say $23,000. Without gap insurance, you would pay the difference of $2,000. But with it, the gap coverage may help you pay the $2,000, less any deductibles.

New car replacement

What it is: If you purchased a brand new car, it may depreciate the second you drive off the lot. Because of this, new car replacement insurance helps you cover the cost to purchase a new car of the same make and model as your current vehicle if it is totaled. It is optional coverage, typically only available for cars less than a few years old and under a specific mileage.

What it covers: New car replacement helps pay the cost to replace your current vehicle. For instance, let’s say you bought a brand new car and as you pull out of the lot, the car is completely totaled. Without new car replacement, the insurance company may only pay you for the depreciated current value of the car. But with it, your insurer may reimburse you enough to pay for the exact same make and model, less any deductibles.

Coverage limits: This coverage may be limited on the age of the vehicle or the mileage. For example, an insurance company may require that your vehicle is less than two years old or has under 24,000 miles to qualify for coverage.

What doesn’t car insurance cover?

After reviewing several types of car insurance policies, you might think everything has been covered. But in reality, there are still some expenses that the car owner is responsible for, even with the maximum amount of insurance coverage, which include:

• Regular vehicle repairs and maintenance, such as oil changes and tire rotations

• Damages outside of insurance coverage, such as normal wear and tear

• Drivers not named on your insurance policy

• Personal belongings being stolen from your vehicle

The takeaway

Nearly every state in the U.S. requires drivers to hold property damage and bodily injury liability insurance. Other types of coverage—like uninsured and underinsured motorist coverage and PIP—may be required depending on the state you reside in. Your auto lender may also have specific coverage requirements to qualify for financing.

When determining which coverage is right for you and your vehicle, consider your state and lender’s requirement, your car’s age and value, and your current health insurance policy to close any coverage gaps.

This story was originally featured on Fortune.com

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