Types of Auto Insurance Coverage

Last updated April 5, 2022

Auto insurance protects you financially in the event of a car accident. Depending on the coverage you have, your auto insurance can help cover the costs associated with repairing property damage and paying medical bills if you cause an accident or are in a no-fault accident. This greatly decreases any financial stress that can follow an already-stressful event.

However, different types of auto insurance coverage cover different costs. It’s important to know what costs your policy covers, so that you’re not blindsided if you’re ever in an accident.

To help you choose the coverage you need, we’ll break down the different types of auto insurance coverage available and how they can protect you on the road.

1. Liability Insurance

Liability insurance covers the other involved party’s costs when you cause an accident. Most states require drivers to carry bodily injury and property damage liability insurance. Bodily injury liability covers the costs of injury to another person when you’re in an at-fault accident while property damage liability covers the costs of damage to another person’s car or property.

Important note: liability insurance does not cover expenses associated with your own injuries or vehicle damage when you’re at fault.

2. Collision Insurance

Collision insurance can provide financial assistance up to your vehicle’s actual cash value (minus your deductible) in two scenarios:

You get into an accident with another vehicle. Collision coverage helps pay for repairs to your car, regardless of who caused the accident.
You hit an object with your car. Collision coverage helps pay for repairs to your vehicle if you hit an object like a fence, building, or tree.

While not all states require drivers to carry collision insurance, you may want to add it to your policy to receive additional financial protection in case of an at-fault or no-fault accident.

3. Personal Injury Protection

Personal injury protection (PIP), also known as no fault insurance, can include payment for medical expenses, loss of income, childcare, and funeral costs for you and your passengers due to a covered accident, regardless of who is considered at fault for the accident. How much your PIP insurance covers depends on the limits of your policy.

PIP is optional in some states and required in others. Even if you aren’t required to carry personal injury protection, you may opt to add it to protect yourself and your passengers from unexpected medical bills.

4. Uninsured and Underinsured Motorist Protection

Uninsured and underinsured motorist protection can provide financial assistance for drivers in three scenarios:

You get into an accident with an uninsured driver. Uninsured motorist coverage helps pay for accident-related expenses when the at-fault driver doesn’t have insurance to help you.
You get into an accident with an underinsured driver. Underinsured motorist coverage helps pay for accident-related expenses when the at-fault driver’s insurance cannot cover the costs of damages or bodily injury.
You get into a hit-and-run accident. Uninsured and underinsured motorist coverage helps pay for expenses when the other person flees the scene.

Although most states require drivers to carry liability insurance, some drive without it. In fact, 1 in 8 drivers on the road are uninsured in the US. If you spend a lot of time driving for work or pleasure, you may want to add uninsured and underinsured motorist coverage to your policy for additional protection.

5. Comprehensive Insurance

Comprehensive insurance coverage is optional in all states, but many drivers choose to add this additional coverage as an extra layer of financial protection in a non-vehicle-related collision. It helps protect against damage to your car due to severe weather, fire, vandalism, theft, and accidents with certain animals.

You may consider purchasing comprehensive insurance if you have a brand-new car or live in a location where environmental factors like bad weather or theft are likely to damage your vehicle.

6. Medical Payments Coverage

Most states do not require drivers to carry medical payments coverage. However, for those who want the extra protection, medical payments can help cover the cost of medical bills or funeral expenses for you and your passengers due to an accident, regardless of who was at fault.

7. Other types of car insurance

There are situations where it makes sense to add other, special types of car insurance to your policy, such as:

Rental reimbursement coverage/transportation expense coverage
New car replacement coverage
Gap coverage
Classic car coverage
Sound system coverage
Towing and labor cost coverage
Ride-sharing coverage

When receiving a car insurance quote from a provider, be sure to ask if they offer the coverage you’re looking for and what it covers to ensure you receive a quote for all the protection you want.

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What type of auto insurance coverage do you need?

The answer to this question depends on where you live and what expenses you want covered in the event of an accident.

First and foremost, you need coverage that meets your state’s minimum requirements. Every state (except for New Hampshire and Virginia) requires resident drivers to carry some car insurance. You will need to be sure the policy you purchase meets your state’s legal requirements for both the type of coverage and limit amounts.

Adding additional coverage to your policy is usually a personal preference, but if you lease or finance your vehicle, your lender may require you to carry full coverage for the duration of your loan.

Beyond the minimum coverage required, it’s often smart to purchase a policy with more coverage just in case. For example, it’s a good idea to get collision and comprehensive insurance for a vehicle that will be expensive to repair out-of-pocket. Accidents can happen to anyone, so it’s better to be safe than sorry.

Finding the best car insurance policy for you

Now that you understand the different types of auto insurance coverage, it’s time to find the best policy for your needs. You can get free, no-obligation quotes from several insurance companies by entering your information into our quote tool. By comparing rates, you can find the policy that fits your needs and budget. Don’t wait – submit your information to start comparing car insurance quotes today!

Sources

Insurance Research Council – 1 in 8 drivers uninsured

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