Shopping for car insurance is much easier when you understand how the different types of coverages work. Getting to know your insurance coverages may also help you spare yourself from potentially huge out-of-pocket expenses in the event of an accident. If you’re not sure about what’s covered by your auto policy, here’s what you need to know about the different types of car insurance coverages that you can get.
In this article
The six most important types of car insurance at a glance
The minimum insurance requirements in most states are designed to hold you financially responsible for injuries and damage you cause in a car accident.
Unfortunately, the minimum requirements in most states don’t protect you as well as they protect others. Fortunately, there are key optional coverages you can get to protect yourself and your vehicle.
As you weigh the different coverages to add or remove from your policy, make sure to compare car insurance quotes from multiple companies to find the best rate.
|Coverage||What it covers|
|Liability||Injuries and damage you cause to other people and their property.|
|Collision||Damage to your own vehicle from a collision with another vehicle or object.|
|Comprehensive||Damage to your vehicle from any cause other than a collision, plus theft of the vehicle.|
|Uninsured motorist/underinsured motorist||Injuries to you and your passengers in an accident caused by a driver without any insurance or enough insurance. In some states, damage to your vehicle may also be covered.|
|Medical payments||Injuries to you and your passengers in any car accident, regardless of fault.|
|Personal Injury Protection||Injuries to you and your passengers in any car accident, regardless of fault, plus lost income and essential services.|
Are you paying too much for car insurance?
See how much you can save
For car insurance, liability coverage is typically split up to cover other people’s bodily injuries (BI) and property damage (PD) in an accident you cause.
Insurance companies usually offer BI liability with separate limits per injured person and per accident. PD liability typically comes with a single limit.
If your quote or policy lists your liability coverage at 50/100/50, your coverage includes:
- Up to $50,000 in medical coverage for any one person you injure in a car accident
- Up to $100,000 in combined medical costs for all people you injure in a crash
- Up to $50,000 to cover car repairs and other damage you cause
Some companies also offer BI and PD liability with a combined single limit (CSL), which distributes your coverage in a more flexible manner.
For example, a $150,000 CSL policy may cover medical bills exceeding $50,000 for any one person you injure, provided the combined costs for all injuries and damage do not exceed your $150,000 limit.
Collision coverage pays for damage to your car from a collision with another vehicle or an object, or if it overturns. Collision is not required by state law, but you typically need it for a car loan or vehicle lease.
Collision generally applies to damage to your vehicle in an accident you cause. However, you can also use it to cover damage caused by an uninsured motorist or hit-and-run.
If your car is damaged in an accident caused by another driver, the at-fault person’s liability insurance is supposed to cover your vehicle repairs. However, if it takes a while to determine fault, your insurance company may apply your collision coverage to your repairs and recoup its costs from the other driver’s insurance company later.
Comprehensive car insurance generally covers your vehicle for theft and damage from any cause other than a collision, such as flood, fire, falling objects or vandalism.
Like collision, comprehensive coverage is offered with a deductible and required for a car loan or lease, but not by any state’s laws.
Comprehensive coverage often also covers glass breakage, which may be offered with a separate deductible, depending on the insurance company.
Uninsured and underinsured motorist
Uninsured motorist (UM) insurance covers injuries you and your passengers suffer in an accident caused by a driver with no insurance. Underinsured motorist (UIM) insurance covers the portion of your medical bills that exceeds the at-fault driver’s liability limits.
Though UM and UIM are slightly different, insurance companies in some states consolidate them into a single coverage.
Insurance companies also sometimes further divide UM/UIM into separate coverages for bodily injury and property damage. The latter includes coverage for hit-and-run.
Medical payments coverage, aka MedPay, is optional insurance that covers injuries you and your passengers suffer in a car accident, regardless of fault.
Health insurance typically also covers injuries you suffer in a car accident. However, your share of costs from deductibles and copayments can quickly add up.
If you’re hurt in an accident caused by another driver, the at-fault driver’s liability insurance is likely to cover your injuries. However, MedPay can cover your initial bills while your health and car insurance providers hash out payment details with the other driver’s car insurance company.
MedPay typically also includes a death benefit for funeral expenses, if you or a passenger is killed in a car accident.
Personal injury protection
Like MedPay, personal injury protection, or PIP, covers injuries you and your passengers suffer in a car accident, regardless of fault, and includes a death benefit.
Unlike MedPay, PIP also covers a portion of your lost wages and certain essential services, such as housekeeping while you’re laid up from your injuries.
In states where PIP and MedPay are both available, you typically only need one. However, in Florida, you can use MedPay to cover the portion of your medical expenses that PIP does not cover.
Other types of car insurance
Although the following car insurance coverages are not considered essential, they may be worth considering, depending on your circumstances.
Guaranteed asset protection
Better known as gap insurance, guaranteed asset protection covers the difference between your car’s market value and your loan balance if your car is totaled before you pay off the loan.
Although not required by state law, gap insurance is often required for leases and certain car loans. Gap is also available from car dealerships and lenders, but it’s typically cheaper from an insurance company. Since some insurance companies don’t offer it, you may have to shop around for it.
If damage from a covered loss, such as an accident or fallen object, leaves your car in the shop for any length of time, rental reimbursement coverage may save you some serious coin. The coverage reimburses you for rental car costs you incur while your insured vehicle is being repaired.
Rental car coverage is typically offered with a daily limit, often between $25 and $50, for a specified period of time, such as 30 days.
Adding roadside assistance to your car insurance typically adds less than $5 a month to your insurance bill and may help you out if your car ever breaks down. If you don’t already have roadside assistance from AAA, your vehicle’s manufacturer or your cell phone provider, it’s relatively easy to add it to your car insurance.
Bear in mind that the coverage you get varies by insurance company. Some companies cap your coverage at $75 or $150 per tow and require you to submit a claim for reimbursement after you pay for the tow. Others make it more convenient by paying the towing company directly.
Umbrella insurance is typically offered as a single policy that adds to the liability limit of your car insurance and other personal insurance policies you may have, such as your home or renters insurance.
If you have a high net worth or earn a high salary, umbrella insurance can shore up the protection you have for your assets.
What insurance is required?
Insurance requirements vary by state, but here is a look at the types of coverage state laws typically require.
- Almost every state requires you to carry bodily injury and property damage liability car insurance with specified minimum limits. Notable exceptions include New Hampshire, which does not require car insurance, and Florida, which requires PIP and property damage liability, but not bodily injury liability.
- PIP is required in 18 states and optional in five others as well as the District of Columbia.
- UM/UIM is required in 21 states, including a few that also require PIP.
- In some states where PIP and/or UM/UIM are optional, insurance agents are required to offer either or both coverages. You usually have to sign a waiver to decline either or both.
Learn more about your state’s insurance requirements.
It’s important to remember that the current minimum insurance requirements in most states date back to the 1980s or so, when the costs of medical treatment and car repairs were much lower than they are today.
If the medical costs of someone you injure in a traffic accident exceed your policy’s limits, you may be held personally responsible for the shortfall, which can put your savings or other assets at risk. This is the main reason to consider liability limits that exceed your state’s minimum requirements, as well as an umbrella policy.
QuoteWizard.com LLC has made every effort to ensure that the information on this site is correct, but we cannot guarantee that it is free of inaccuracies, errors, or omissions. All content and services provided on or through this site are provided "as is" and "as available" for use. QuoteWizard.com LLC makes no representations or warranties of any kind, express or implied, as to the operation of this site or to the information, content, materials, or products included on this site. You expressly agree that your use of this site is at your sole risk.