Car insurance involves many types of coverage and it is quite easy to get confused. It is very important to know the differences between the various types of coverage so you don�t end up either paying more than required in insurance premium or get a car insurance policy that does not provide adequate cover.

The two main types of coverage you need to learn about are full coverage and liability insurance. Both are at the extreme ends of a car insurance policy.

Much of what pertains to car insurance is state controlled. The state lays down the basic guidelines and requirements. The minimum amount of coverage required as per state law is known as liability car insurance.

Liability car insurance covers the damages and injuries to other people and their property when you are responsible for an accident. Liability car insurance consists of three basic parts.

It is normally denoted as x/y/z where �x� stands for Maximum Coverage limit for bodily injuries per person per accident, �y� stands for Maximum Coverage limit for all bodily injuries sustained by all people per accident and �z� stands for Maximum property damage coverage per accident. For instance, 25/50/10. More specific details are available on State car insurance requirements.

The specifications of liability coverage change as per state. You need to purchase a car insurance policy that complies with the liability coverage guidelines of your state. It is recommended that you buy more than the minimum limits to ensure that you have adequate coverage or else you might end up with huge bills. You can add other coverage to this basic plan.

Full coverage is a misleading term. It does not cover �everything�. Full coverage includes two more types of coverage in addition to the basic liability insurance coverage. These two additional types of coverage are:

You can purchase liability coverage and comprehensive coverage without buying collision coverage. But you cannot buy collision coverage without opting for liability and comprehensive coverage.

If you are paying a car loan, it becomes mandatory to purchase collision coverage along with the comprehensive one. This helps car insurance companies because if your vehicle is totaled during an accident, the car market value is paid off using the insurance money. However, the difference between the market value and the car loan amount needs to come from a Gap insurance coverage or your personal finances.

Collision and comprehensive coverage are not mandatory. Assess your needs and buy a car insurance plan as per your needs.