Almost anyone who wants to drive on city roads and interstates will need to have some sort of insurance coverage. Although coverage amounts vary by state, the fact that drivers need insurance is pretty consistent no matter where you drive.
Because the amount of coverage and the types of coverage you need will depend on a variety of factors, including whether you own or lease your car, it can be challenging to create a car insurance policy that provides the exact coverage you need to ensure all the bases are covered if something happens to you or your vehicle.
The different types of car insurance coverage provide varying degrees of protection to drivers. Going with the basic coverage will help you pay for damage caused to others and their property, but for a policy that protects you and your property, you'll have to pay more.
Having the right protection can save you thousands of dollars if you're in a collision, so knowing what the different types of car insurance are can help you decide which coverage is right for you.
Reading up on the different types of car insurance can help you save money on your monthly premium. Learn more by filling out the form below:
Who Needs Car Insurance?
Although there are two states — New Hampshire and Virginia — that don't require drivers to carry a car insurance policy, as found in a chart on FindLaw, it's vital to have protection when you get behind the wheel. Car accidents can result in thousands of dollars worth of damage to both property and individuals.
If you don't have the right insurance coverage, you could have to pay out of pocket for medical bills and vehicle repair costs if you're at fault in an accident. When you have the right type of insurance, you'll only be responsible for paying your deductible if you're in an accident.
You can choose your deductible amount, so make sure you select an amount you can easily pay if you need to make a claim. The deductible is the amount you pay before your insurance kicks in, and the amount you select will affect how much you pay for insurance each month.
What Are the Different Types of Car Insurance?
You have a lot of options when it comes to insurance coverage, and the best policy for you won't be the same as the ideal policy for your friend or neighbor.
Knowing what each type of insurance policy covers can help you get only the coverage you need so you're not paying for anything that goes above and beyond the coverage that makes sense for you based on your driving habits and lifestyle.
Here are the details you need about the different types of car insurance so that you can decide which ones you want your policy to include:
Liability Coverage
Almost all states require some liability coverage, but as requirements can vary, it's important to know what liability coverage your state requires. Liability insurance covers injury and damage to other people and their property when you're considered at fault for any damage as a result of an accident.
So if you cause an accident, your liability insurance will pay the medical bills and repair costs for the other vehicle and driver. Keep in mind that this coverage won't cover any costs for repairing your vehicle, and it won't pay for your medical expenses if you have to go to the hospital.
The two types of liability coverage are:
- Bodily injury: This coverage pays for the medical costs for others who you have injured in a traffic accident. Your passengers will be covered by this type of protection, but it won't cover you.
- Property damage: This type of liability coverage repairs or replaces cars or property, like fences and mailboxes, after an accident that you cause. This coverage won't pay to repair your vehicle or property.
Your liability limits are the maximum that your insurance provider will pay for injury and damages to other people. Once you reach these limits, you must pay the remaining costs out of pocket.
For example, if your bodily injury coverage limit is $30,000 and the person injured in an accident you cause has $35,000 worth of medical bills, you'll have to pay the additional $5,000 because your insurance is only good up to the $30,000.
Uninsured and Underinsured Motorist Coverage
Uninsured motorist coverage pays for your medical costs and repairs to your car when you're in an accident with a driver who doesn't have insurance. Underinsured motorist coverage pays out when the at-fault driver's auto insurance limits don't cover the full cost of your repairs or medical bills.
Uninsured and underinsured coverage is a requirement in some states, but it can be a good idea to include this coverage for additional protection.
Uninsured motorist coverage is only applicable if you are not at fault for the accident. Some states require someone to be considered legally at fault for this type of coverage to pay out, while other states are no-fault states and do not consider any drivers legally at fault for an accident.
Check with your state laws to determine if uninsured or underinsured motorist coverage will help in your area if you're involved in an accident with an uninsured driver.
Comprehensive Coverage
Comprehensive insurance covers events considered out of the driver's control, like weather damage, theft, hitting an animal, and vandalism. Comprehensive coverage usually has a deductible that you must pay out of pocket before your insurance will begin to cover costs.
The higher your deductible, the lower your monthly premium, but make sure you can come up with the deductible if you have to after an accident.
Consider these factors when determining if comprehensive coverage is a type of insurance you need to have:
- Your vehicle's age: Older vehicles may not be worth carrying this type of coverage for, as they're not as valuable.
- Your vehicle's mileage: The more miles a vehicle has, the less comprehensive coverage will pay out if you're in an accident.
- Your vehicle's actual cash value: The ACV of your vehicle should be a certain amount to make comprehensive coverage worth the added expense to your monthly car insurance bill.
- Cost of premiums for your age group or location: Your age and location will affect your insurance rate, especially if you want to include comprehensive coverage in your policy.
- Your vehicle's likelihood of being stolen or vandalized: Vehicles that are more likely to be the target of theft or vandalism are more expensive to insure, and comprehensive coverage is the only type of insurance that pays for repairs or replacement because of these issues.
- Your vehicle's likelihood of being damaged in a natural disaster or by extreme weather: If you live in an area that experiences hurricanes or tornadoes frequently, you can expect to pay more for comprehensive insurance.
- Your ability to pay for repairs or vehicle replacement out of pocket: Your deductible is the amount you pay out of pocket before your insurance kicks in, so the more you can pay, the lower your monthly premium will be.
Each of these criteria will help you determine if comprehensive coverage makes sense. If you can cover costs out of pocket, you probably don't need comprehensive insurance. If your vehicle has a high value, then your monthly insurance costs will increase.
You have to decide if comprehensive coverage is something you need. For example, if you park your car in a locked garage, the chances of your vehicle being stolen or vandalized are quite low, so you may not need comprehensive coverage.
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Collision Coverage
Collision insurance will help pay for repairs or vehicle replacement when you are in a traffic accident with another vehicle or when you strike a static object like a tree or a curb. With this coverage, insurance companies pay up to your car's value at the time of your accident minus your deductible.
If you have a newer or generally high-value car, collision insurance can help you get back to where you were financially before the damage occurred. If your car is older, losing value quickly, or close in value to your deductible, collision coverage may not be worth it in the end.
Collision coverage is optional in most states and is included in full coverage auto insurance policies, although some leaseholders or lenders may require you to purchase collision insurance.
Personal Injury Protection
Personal injury protection will help pay for medical bills you incur after a traffic accident. It covers you and your passengers and works with your medical insurance coverage to pay your medical fees resulting from an accident. Personal injury protection insurance may also pay for costs related to or caused by your injuries, such as the need for child care or a loss of income.
Some states include personal injury protection as a part of their mandatory minimum auto insurance requirements. Personal injury protection (PIP) coverage may not be offered by insurers in all states, but no-fault states require drivers to have PIP as part of their policy, as stated on the Insurance Information Institute .
Medical Payments Insurance
Medical payments insurance, or MedPay, covers medical costs for the insured driver and passengers after a traffic accident, like surgeries, hospital stays, and X-rays, regardless of fault. MedPay is often compared to personal injury protection, but the largest difference between these two types of coverage is MedPay does not pay for home care services or lost wages. You can check with your insurance agent to find out what MedPay covers if you want to add it to your policy.
Guaranteed Auto Protection
Also known as gap insurance, guaranteed auto protection covers the amount of money you owe on a lease or loan if it exceeds the vehicle's actual cash value when it's totaled in an accident. When your car is totaled or stolen, your comprehensive or collision coverage will only pay for the car's current value, which may be less than what's left on your lease or loan.
Gap insurance pays for the remaining balance on your loan that comprehensive or collision coverage doesn't cover. This insurance may be required if you lease your vehicle. Otherwise, it's not required.
Rental Reimbursem*nt
Rental reimbursem*nt pays for the cost of a rental vehicle during repairs or replacement of your insured vehicle.
These policies include limits to how much the insurance company will pay per day or claim, although these limits are generally enough to cover you entirely until your car is out of the shop.
Emergency Roadside Assistance
Emergency roadside assistance will unlock your car, jump-start a dead battery, repair a flat tire, or refuel your vehicle if you run out of gas. If your car needs to be towed, emergency roadside assistance will tow it up to a mileage limit, either to a repair shop or your home.
This coverage can be especially good for younger drivers who may not know how to handle vehicle breakdowns yet.
Classic Car Insurance
Classic car insurance covers this particular type of vehicle. Your car must be considered vintage, classic, or antique to be covered under these plans.
Each company has its own definition of what makes a car classic. So check with your provider to find out if your car qualifies for this coverage and what it pays for.
FAQs About the Different Types of Car Insurance
Learn more about the different types of car insurance by reading the answers to some of the most frequently asked questions:
What Is the Most Basic Insurance Coverage?
Liability coverage is the most basic type of insurance. This type of coverage is required in almost every state.
It only pays for damages to other people and their property, so you need additional coverage if you want a policy that pays for repairs to your vehicle or for your medical expenses if you're in an accident that's your fault.
What Insurance Coverage Do I Need?
The insurance coverage you need will vary depending on the requirements in your state, whether you lease or have a loan, and your preferences.
Some drivers can get away with maintaining limited liability coverage alone, while others prefer to have more coverage for additional peace of mind. Your budget is another factor that can help you decide on the type of coverage you need and the limits you want to set.
What Will My Insurance Policy Cover?
Your insurance will cover whatever you want it to, but the more coverage you have, the more it will cost each month. A limited liability policy will only cover other drivers and their property, but it's the least expensive type of insurance.
If you want medical coverage for you and your passengers, you'll need to add more coverage to your policy. You'll have to consider a variety of factors to choose the right insurance policy.
Steven Glass
Insurance Editor
Steve Glass is a retired insurance professional with over 34 years of experience in the Property & Casualty insurance industry. Over the course of his career he led teams that handled Homeowners and Commercial property and casualty claims, Auto Medical claims, Auto Bodily Injury Claims, Catastrophe claims and Insurance Subrogation recovery efforts. He also has experience as an Insurance Subrogation Arbitrator.
