There are many types of auto insurance. The most commonly known are liability, collision and comprehensive. These take care of expenses from medical bills and/or property damage under their separate areas of coverage. Personal injury protection, MedPay and uninsured/underinsured mostly work to supplement the first three types of insurance. There are other optional types of insurance, such as gap insurance and personal umbrella policies, that may be good to have depending on your personal needs.
This article covers:
What are the different types of car insurance?
The various types of car insurance available to drivers cover different areas of risk. There is usually very little crossover in coverage between them, so you'll want to consider each one separately to make sure your insurance needs are fulfilled.
Some types of car insurance are required, depending on what state you live in or if you finance your car. Others are optional and are valuable depending on what your insurance needs are. Here is a breakdown of the main kinds of auto insurance available:
|Coverage||What it covers|
|Liability||Covers injury and property damage you cause.|
|Collision||Pays for your car repairs or replacement after a crash.|
|Comprehensive||Takes care of non-collision damage to your car.|
|Personal injury insurance||Pays for your medical-related expenses after a collision.|
|Medical payments||Reimburses only your medical bills due to a collision.|
|Uninsured/underinsured motorist coverage||Covers your medical and repair costs if the other driver has no or not enough car insurance.|
|Guaranteed auto protection||Pays the difference between the actual cash value of your car and what you still owe on it after an accident.|
|Personal umbrella policy||Covers expenses beyond your liability limits.|
|Rental reimbursement||Takes care of costs for renting a vehicle while your car is being fixed after a crash.|
|Emergency roadside assistance||Helps take care of expenses resulting from a car breakdown or similar problems.|
The main types of car insurance
Liability, collision and comprehensive car insurance are the top forms of coverage that most drivers need. These types of insurance combined are termed "full coverage". However, they cover very different coverage needs.
Liability car insurance
Liability insurance covers injury and property damage expenses to others that are your responsibility. It covers medical expenses, your legal fees and the repair or replacement of damaged property. It is also known as "minimum auto insurance" because its limits are based on the required minimum coverage amounts your state legally mandates. Liability auto insurance limits are usually based on the three following categories:
- Bodily injury coverage per person
- Bodily injury coverage per accident
- Property damage coverage.
All states except New Hampshire require liability car insurance coverage for drivers. The liability limits a state mandates shouldn't be considered satisfactory. A serious accident could easily go over most states' limits. Raising your liability car insurance limits is highly recommended.
Collision insurance covers the repair or replacement of your vehicle after a crash. While not required by states, lenders will usually require it if you're leasing or financing your vehicle. Even if you're not going through a lender and own your car, it's good coverage to have if you couldn't afford to repair or replace your car after a major crash. Your payout on a collision claim has a limit of your car's actual cash value minus the deductible you chose.
Comprehensive auto insurance
Comprehensive car insurance takes care of damages not caused by collision events, such as falling tree branches and theft of property in your car. Like collision insurance, comprehensive insurance is usually required by financiers as part of a lending or leasing agreement. If you're not going through a lender, it's good to have if you own an expensive car and aren't in a financial position to pay for serious repairs or replace it outright. Like collision insurance, the payout limit is set at the actual cash value of the car minus your deductible.
Additional car insurance types
Personal injury insurance is required in some states, as is uninsured/underinsured motorist coverage, but are largely optional elsewhere. Medical payments insurance is similar to PIP, but doesn't fulfill a state's PIP limit requirements.
Personal injury insurance
Also known as PIP, personal injury insurance covers your medical-related expenses after a car accident including rehabilitation, income loss and even funeral expenses. PIP claims are made directly to your insurer, so it's a good way to make sure that medical expenses are paid quickly after a crash.
PIP is "no-fault" insurance, meaning that it covers your medical expenses regardless of who caused the crash. Many states require PIP coverage as part of their minimum auto insurance limits.
Also called "MedPay", medical payments insurance is similar to PIP but more limited. MedPay only covers medical bills for you, your passengers and family on the policy. This coverage does help with copays and deductibles of other insurance types, including health insurance and PIP. It's good to have in order to make sure your medical bills are paid if you don't choose to go for full PIP. Before getting MedPay, check with your health insurance. It may provide the same coverage, and it doesn't make sense to pay twice for it.
Uninsured/underinsured motorist coverage
This insurance type covers your medical and repair costs if the other driver has no or inadequate auto insurance coverage. Some states require one or the other, while some states require both. You'll want to check with your own state's requirements before purchasing. When getting these types of auto insurance, we recommend purchasing limits equal to your liability car insurance.
Optional types of auto insurance
Guaranteed asset protection, personal umbrella policies, rental reimbursement and emergency roadside assistance are types of car insurance that aren't required in any states. However, they provide good value to help "fill in the cracks" in your auto coverage to possibly help save you money in the long run.
Guaranteed asset protection (Gap)
Gap insurance is of particular interest for those who financed their car. Collision and comprehensive will only compensate up to your car's actual cash value in the event of damage or theft. This is a problem if you owe money on the car, but the actual cash value of the vehicle has depreciated. Gap insurance will pay the difference between what you owe on the car and the actual cash value of the car if it's depreciated.
The Insurance Information Institute recommends getting gap insurance if you paid less than 20% for a down payment on the car, you're financing the car for 60 months or more, or you're leasing the car.
A personal umbrella policy is additional auto insurance coverage that provides extra coverage beyond your liability limits. Umbrella insurance minimums start at $100,000 and can go up to a limit of $1 million. If you have a lot of high-value personal assets, PUP is good to have to protect yourself if an auto accident results in serious litigation.
This type of car insurance covers the costs of a rental car while repairs to your vehicle are happening. It's not a need-to-have policy, but it can be good if you can afford it and don't like dealing with out-of-pocket expenses.
Emergency roadside assistance
Roadside assistance covers expenses that occur from calling a locksmith, tow truck or other similar issue. It may also cover battery jump starts or fuel delivery. It's great if you don't have a service like AAA. Towing is often covered up to a specified distance.
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