Car insurance can help prevent a financial loss if you’re involved in an accident. Without it, you could be liable for accident-related injuries and damage. Luckily, there are many types of insurance coverage to choose from. The amount of protection you receive depends on the kinds you purchase.
The most common types of car insurance coverage include liability, collision, personal injury protection, uninsured and underinsured motorist, comprehensive, and medical payments. When shopping for a new policy or reviewing your existing one, it’s important to understand how each can help protect you as you compare quotes.
6 Common Types of Car Insurance Coverage
When purchasing a car insurance policy, there are six main types of coverage to choose from. Here’s a description of each to help you decide what’s best for you.
1. Liability Coverage
Except in New Hampshire and Virginia, all states require licensed drivers to maintain liability coverage. Why? Because it helps protect other people on the road. If you cause an accident, your liability coverage kicks in to pay for injuries and damage you cause to someone else, up to your policy’s limits.
Without it, you could be responsible for covering the cost of medical bills andrepairsout of pocket. Plus, you could face fines and other penalties for driving uninsured. Also, when selecting liability limits for your policy, remember that your state’s minimum requirements probably aren’t high enough to cover injuries and damage after a severe accident. That’s why opting for higher limits provides greater protection.
2. Collision Coverage
Collision coverage is optional in all 50 states. However, if you have an auto loan or lease, your lender or leasing company will probably require it.
- Accidents with other cars. When you get into an accident with another vehicle, collision coveragepays for your car’s repairs up to itsactual cash value, no matter who is at fault.
- Hit stationary objects. If you hit a stationary object like a fence or garage, collision pays for the damage.
- Repair costs exceed value. Should the cost to repair your vehicle exceed its current fair market value, the insurer will declare it atotal loss. If this happens, the company will cut you a check for the car’s actual cash value and you can use the money to help purchase a new vehicle.
3. Personal Injury Protection Coverage
Personal injury protection (PIP) coverage is mandatory in some states and optional in others. So, be sure to check your state’s requirements.
Coverage under PIP varies by state. It may include payment for medical expenses, lost wages, and funeral expenses for you and your passengers.
4. Uninsured and Underinsured Motorist Protection
Although nearly every state requires drivers to carry liability coverage, many people drive without it. According to theInsurance Research Council, an estimated one in eight drivers in the United States was uninsured in 2019.
Uninsured and underinsured motorist (UM/UIM) coverage helps pay for accident-related expenses. This coverage kicks in if you get hit by an uninsured driver or a driver whose policy limits are too low to cover your bills.
Some states require drivers to carry UM/UIM coverage, while others don’t.
5. Comprehensive Coverage
Comprehensive insurance coverage protects drivers against damage not caused by a collision unless the crash occurs with a deer. It helps protect against severe weather, fire, theft, vandalism, animal damage, and more.
Like collision, comprehensive coverage is optional in all states. However, if you have a loan or lease, your lender or leaseholder will probably require it.
6. Medical Payments
Medical payments coverage can help pay for you and your passenger’s medical bills or funeral expenses after an accident. However, unlike personal injury protection, this optional coverage doesn’t typically cover lost wages.
Also, medical payments can help pay for treatment if you’re injured as a passenger in someone else’s car. It also covers payments if you get hit by a vehicle as a pedestrian.
Medical payments coverage doesn’t have deductibles or copayments. But policy limits are typically much lower than limits for personal injury protection.
Other Types of Car Insurance Coverage
Many insurance companies offer optionaladd-onsto help protect you in specific situations. Common selections include:
Rental reimbursem*nt coverage/transportation expense coverage
With rental car reimbursem*nt, the insurer pays for the cost of a rental car if your vehicle needs to be repaired because of a covered loss. However, reimbursem*nt amounts aren’t unlimited. Insurance companies typically pay a specific dollar amount per day up to a certain number of days.
GAP coverage
GAP coveragehelps pay the difference between what you owe on your auto loan orleaseand your car’s actual cash value if it’s totaled in a covered event.
New car replacement coverage
When an insurance company declares a car a total loss, they typically write a check for its current market value. However, if you have new car replacement coverage, the insurer will cover the cost of a brand-new vehicle. You must be the car’s original owner to purchase this type of coverage. It’s typically only good for about a year after buying a vehicle.
Towing and labor cost coverage
Sometimes known as roadside assistance, towing and labor coverage can help cover your costs if you need a tow, run out of gas, lock yourself out of the car, or get a flat tire.
Ride-sharing coverage
Your personal auto insurance policy won’t cover you while driving for a rideshare company. Rideshare companies typically maintain insurance that covers drivers when they’re transporting passengers. But if you’re waiting for a fare, neither policy is likely to protect you. Rideshare coverage can help fill the gap.
Sound system coverage
Standard insurance policies typically have low limits for custom equipment. If you install custom AV equipment, sound system coverage can provide extra protection if damaged or stolen.
Classic car insurance
If you have a classic or vintage automobile, you need more than standard auto insurance to protect it. Traditional car insurance provides specialized coverage for vintage vehicles. But, you typically need to meet certain conditions to qualify. So, be prepared to limit the number of miles you put on your classic car and keep it in storage when you’re not driving it.
Full coverage
In general,full coveragerefers to a combination of liability and property damage coverage, including collision and comprehensive. But remember, no type of insurance can protect you from every possible mishap you may encounter.
How to Choose the Right Coverage
To determinehow much car insurance you need, it’s a good idea to review a few different factors. First, you’ll want to take a look at your financial situation. Experts often recommend having liability limits that are at least equal to your assets to protect your finances if someone sues you after an accident.
For example, you might need to use your savings to pay for accident-related medical bills and damage if you don’t carry enough coverage.
Another factor to consider is the cost of your vehicle. For example, if you couldn’t afford to repair or replace it, maintaining collision coverage can help get you back on the road if it’s damaged in an accident. And if you live in an area with frequent severe weather or high rates of theft and vandalism, having comprehensive will help protect you.
Where to Buy Car Insurance
Buying car insurance is pretty simple. But it’s a good idea to get multiple quotes from different insurers so that you can compare prices and coverage options. You can get a quote over the phone, online, or in-person from three primary sources:
- Insurer. Purchasing coverage directly from the insurer is fast and easy. However, if you want to compare options, you’ll need to contact each company separately.
- Broker.Brokers work with multiple different insurance companies, making it easy to compare coverage and prices from different insurers. Brokers can help you evaluate other policies to decide which is best for your needs.
- Captive agent. Captive agents work for a single insurer. They can help you explore the different types of coverage a single insurance company offers and serve as your point of contact if you purchase a policy. Sadly, they can’t help you compare policies from different companies.
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