The consumer may be protected with different coverage types depending on what coverage the insured purchases. Some states require that motorists carry liability insurance coverage to ensure that their drivers can cover the cost of damages to people or property in the event of an automobile accident.

In the United States, liability insurance covers claims against the policy holder and generally, any other operator of the insured vehicles, provided they do not live at the same address as the policy holder, and are not specifically excluded on the policy. In the case of those living at the same address, they must specifically be covered on the policy. Thus it is necessary, for example, when a family member comes of driving age that they be added to the policy. Liability insurance sometimes does not protect the policy holder if they operate any vehicles other than their own. When you drive a vehicle owned by another party, you are covered under that party’s policy. Non-owners policies may be offered that would cover an insured on any vehicle they drive. This coverage is available only to those who do not own their own vehicle and is sometimes required by the government for drivers who have previously been found at fault in an accident. Non-owners policies are also known as Named Operator Policies. The policies are useful for people whose Drivers License has been suspended and they have to have insurance for their license to be reinstated.

Generally, liability coverage extends when you rent a car. Comprehensive policies ("full coverage") usually also apply to the rental vehicle, although this should be verified beforehand. Full coverage premiums are based on, among other factors, the value of the insured’s vehicle. This coverage, however, cannot apply to rental cars because the insurance company does not want to assume responsibility for a claim greater than the value of the insured’s vehicle, assuming that a rental car may be worth more than the insured’s vehicle. Most rental car companies offer insurance to cover damage to the rental vehicle. These policies may be unnecessary for many customers as credit card companies, such as Visa and MasterCard, now provide supplemental collision damage coverage to rental cars if the transaction is processed using one of their cards. These benefits are restrictive in terms of the types of vehicles covered.

Liability coverage is offered for bodily injury (BI) or property damage (PD) for which the insured driver is deemed responsible. The amount of coverage provided (a fixed dollar amount) will vary from jurisdiction to jurisdiction. Whatever the minimum, the insured can usually increase the coverage (prior to a loss) for an additional charge.

An example of Property Damage is where an insured driver (or 1st party) drives into a telephone pole and damages the pole; liability coverage pays for the damage to the pole. In this example, the drivers insured may also become liable for other expenses related to damaging the telephone pole, such as loss of service claims (by the telephone company), depending on the jurisdiction. An example of Bodily Injury is where an insured driver causes bodily harm to a third party and the insured driver is deemed responsible for the injuries. However, in some jurisdictions, the third party would first exhaust coverage for accident benefits through their own insurer (assuming they have one) and/or would have to meet a legal definition of severe impairment to have the right to claim (or sue) under the insured driver's (or 1st Party's) policy.

In some jurisdictions: Liability coverage is available either as a combined single limit policy, or as a split limit policy:

A Combined Single Limit combines property damage liability coverage and bodily injury coverage under one single combined limit. For example, an insured driver with a combined single liability limit strikes another vehicle and injures the driver and the passenger. Payments for the damages to the other driver's car, as well as payments for injury claims for the driver and passenger, would be paid out under this same coverage.

A Split Limit Liability coverage policy splits the coverages into property damage coverage and bodily injury coverage. In the example given above, payments for the other driver's vehicle would be paid out under property damage coverage, and payments for the injuries would be paid out under bodily injury coverage.

Bodily injury liability coverage is also usually split into a maximum payment per person and a maximum payment per accident.

The limits are often expressed separated by slashes in the following form: "bodily injury per person"/"bodily injury per accident"/"property damage". For one example, California requires minimum coverage as follows;

$15,000 for injury/death to one person. 
$30,000 for injury/death to more than one person. 
$5,000 for damage to property

This would be expressed as "$15,000/$30,000/$5,000"

For another example, in the state of New York, drivers must carry at least state minimum liability limits of $25,000/$50,000/$25,000. If an insured driver hits a car full of people and is found by the insurance company to be liable, the insurance company will pay $25,000 of one person's medical bills but will not exceed $50,000 for other people injured in the accident. The insurance company will not pay more than $25,000 for property damage in repairs to the vehicle that the insured one hit.

"Full coverage" is term name commonly used to refer to the combination of Comprehensive and Collision coverages (Liability is generally also implied.)

Collision coverage provides coverage for an insured's vehicle that is involved in an accident, subject to a deductible. This coverage is designed to provide payments to repair the damaged vehicle, or payment of the cash value of the vehicle if it is not repairable. Collision coverage is optional, however if you plan on financing a car or taking a car loan, the lender will usually insist you carry collision for the finance term or until the insured's car is paid off. Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW) is the term used by rental car companies for collision coverage.

Comprehensive (a.k.a. - Other Than Collision) coverage provides coverage, subject to a deductible, for an insured's vehicle that is damaged by incidents that are not considered Collisions. For example, fire, theft (or attempted theft), vandalism, weather, or impacts with animals are types of Comprehensive losses.

Underinsure/Underinsured Motorist coverage, also known as UM/UIM, provides coverage if an at-fault party either does not have insurance, or does not have enough insurance. In effect, the insurance company pays the insured medical bills, then would subrogate from the at fault party. This coverage is often overlooked and very important. In  Colorado for example, it was estimated in 2007 that 24% of drivers did not carry the state minimum liability limits required by law. Unfortunately, this number goes up significantly during recessions. In some areas, it is estimated that 1 out of every 3 drivers don't carry insurance. Usually the limits match the liability limits. Some insurance companies do offer UM/UIM in an umbrella policy.

In the  United States , the definition of an uninsured/underinsured motorist, and corresponding coverages, are set by state laws.

Rental Reimbursement coverage, also known as rental coverage, provides reimbursement for rental expenses associated with having an insured vehicle repaired due to a covered loss.

Car Towing coverage is also known as Roadside Assistance coverage. Traditionally, automobile insurance companies have agreed to only pay for the cost of a tow that is related to an accident that is covered under the automobile policy of insurance. This had left a gap in coverage for tows that are related to mechanical breakdowns, flat tires and gas outages. To fill that void, insurance companies started to offer the car towing coverage, which pays for non-accident related tows.

Basis of premium charges

Depending on the jurisdiction, the insurance premium can be either mandated by the government or determined by the insurance company in accordance to a framework of regulations set by the government. Often, the insurer will have more freedom to set the price on physical damage coverages than on mandatory liability coverages.

When the premium is not mandated by the government, it is usually derived from the calculations of an actuary based on statistical data. The premium can vary depending on many factors that are believed to have an impact on the expected cost of future claims. Those factors can include the car characteristics, the coverage selected (deductible, limit, covered perils), the profile of the driver (age,gender, driving history) and the usage of the car (commute to work or not, predicted annual distance driven).

Gender
Men average more miles driven per year than women do, and consequently have a proportionally higher accident involvement at all ages. Insurance companies cite women's lower accident involvement in keeping the youth surcharge lower for young women drivers than for their male counterparts, but adult rates are generally unisex. Reference to the lower rate for young women as "the women's discount" has caused confusion that was evident in news reports on a recently defeated EC proposal to make it illegal to consider gender in assessing insurance premiums.

Age
Teenage drivers who have no driving record will have higher car insurance premiums. However, young drivers are often offered discounts if they undertake further driver training on recognized courses, such as the Pass Plus scheme in the  UK . In the  U.S. many insurers offer a good grade discount to students with a good academic record and resident student discounts to those who live away from home. Generally insurance premiums tend to become lower at the age of 25. Some insurance companies offer "stand alone" car insurance policies specifically for teenagers with lower premiums. By placing restrictions on teenagers' driving (forbidding driving after dark or giving rides to other teens, for example) these companies effectively reduce their risk.. Senior drivers are often eligible for retirement discounts reflecting lower average miles driven by this age group.

Driving History
In most states, moving violations, including running red lights and speeding, assess points on a driver's driving record. Since more points indicate an increased risk of future violations, insurance companies periodically review drivers' records, and may raise premiums accordingly. Laws vary from state to state, but most insurers allow one moving violation every three to five years before increasing premiums. Accidents affect insurance premiums similarly. Depending on the severity of the accident and the number of points assessed, rates can increase by as much as twenty to thirty percent.

Marital status
Policy owners that are married often receive lower premiums than single persons. One reason is that marriage may be considered an indicator of stronger financial stability within the household.

Vehicle classification
Two of the most important factors that go into determining the underwriting risk on motorized vehicles are performance capability and retail cost. The most commonly available providers of auto insurance have underwriting restrictions against vehicles that are either designed to be capable of higher speeds and performance levels, or vehicles that retail above a certain dollar amount. Vehicles that are commonly considered luxury automobiles usually carry more expensive physical damage premiums because they are more expensive to replace. Vehicles that can be classified as high performance autos will carry higher premiums generally because there is greater opportunity for risky driving behavior. Motorcycle insurance may carry lower property damage premiums because the risk of damage to other vehicles is minimal, yet higher liability or personal injury premiums because motorcycle riders face different physical risks while on the road. Risk classification on automobiles also takes into account statistical analysis of reported theft, accidents, and mechanical malfunction on every given year, make, and model of auto.

Distance
Some car insurance plans do not differentiate in regard to how much the car is used. However, methods of differentiation would include: over road distance between the ordinary residence of a subject and their ordinary, daily destinations.

Reasonable estimation
Another important factor in determining car insurance premiums involves the annual mileage put on the vehicle, and for what reason. Driving to and from work every day at a specified distance, especially in urban areas where common traffic routes are known, presents different risks than how a retiree who does not work any longer may use their vehicle. Common practice has been that this information was provided solely by the insured person, but some insurance providers have started to collect regular odometer readings in order to verify the risk.