These days, auto insurance is one thing that you absolutely can’t get by without. All states require at least liability insurance, and in many places more coverage than that is needed. Fines of $500 and up await if you’re caught driving without insurance, as well as the possibility of jail time. As expensive as being insured can be, it can end up costing you more if you’re not.

Exactly how does auto insurance work, though? What are the different types of coverage, and what affects the rates that you pay? There are a lot of companies that want your business when it comes to insurance, but none of them seem to cover the basic questions that many consumers have in their advertising materials.

What are the different types of auto insurance?

Just like there’s more to ice cream than chocolate and vanilla, there’s more to automotive insurance than just liability and full coverage. Even those terms, though, are tossed about freely while many don’t have a good understanding of what they entail.

Liability

Liability insurance is usually the minimum that’s required by law, though the amount of liability insurance that you have to have tends to vary from state to state. Basically, liability insurance pays for the damage that you’re liable for, up to the amount of coverage that you have. Any additional damage that’s caused is going to have to come out of your pocket.

Full coverage

As the name implies, full coverage insurance covers everything. Your premium will be much higher with full coverage, but the insurance company will cover all of the repairs associated with the accident. There may be some additional out-of-pocket expense, but it will be minimal; after all, that’s what you’re paying the high premiums for.

Uninsured driver insurance

Usually, if you’re in an accident that’s caused by another person then their insurance will pay for any damages. Unfortunately, if they don’t have insurance then you might be looking at expensive repairs and the money will have to come from somewhere. Uninsured driver insurance is designed so that if you’re in an accident caused by someone else and they don’t have insurance, you don’t have to foot the entire bill for their mistake. (Of course, they’ll have enough problems to deal with… steep fines and other penalties will be coming their way.)

Passenger medical

Not as well known as other forms of insurance, passenger medical covers the expenses of any injuries that are caused to car passengers in an accident. Often the policies come in coverage levels of $50,000 to $100,000 or more, and are designed to ease the costs for people who are injured by no fault of their own in automotive accidents.