Here's a rough summary of the 3 basic coverages. This applies for most states in USA, some details vary state to state:
Liability coverage (Property + Bodily Injury: This is requires by all states, I believe. It will cover you when YOU are at fault in an accident, and damage other people or their property. If you don't have this insurance, they can sue you for anythin and everything you own, to recover their damages. You run a red light because you are yakking on the phone, ram another car and seriously injure someone? Their medical bills can be tens or hundreds of thousands of dollars. Your liability coverage pays for this (you get stuck with increased premiums, but you don't lose your house).
Comprehensive coverage: This will pay for damage to your car, when it's parked, or not in motion. If a tree falls on it or something, comprehensive coverage pays for the repairs, or they will pay the value of the car, less deductible. I believe comp also covers the car if stolen.
Collision: This pays for damage to your car, when you are driving, or the car is in motion. If the car hits something (tree, guardrail, another car) and damages your car, insurance will pay for repairs / value of your car, less deductible.
This is an over-simplification of course; click the link below for a bit more info, plus the scoop on uninsured/underinsured coverages, etc:
http://www.autoinsurance.org/types-of-auto-insurance-coverage/
IMO: Liability is not a scam nor a blight upon society; it protects your assets in case you are in an accident where other people/property are injured. If you own anything nice, you need this.
Comprehensive / collision are closer to the scam... you need to use judgment and figure out if it's worth it. If you borrow money to buy a car, the lender ALWAYS requires these to protect themselves. For an older car, say a 300E or 400E, comp/collision are likely a waste of money. You either pay a bunch in premiums for nothing if you are never in an accident where you are at fault... or if you ever do put in a claim, they will very likely not give you what your car is worth, and you would have been better off paying out of pocket to repair/replace your car. For expensive cars, comp/collision makes more sense. Wreck a $2k 300E, just buy a new one. Wreck a $20k E63 AMG (or have it stolen, etc), you'll wish you had the comp/collision coverage.
