There are several standard types of car insurance coverage, each with its own purpose. When selecting your coverage options, you’ll need to consider what’s required in the state where you live and what’s best for your situation.
Minimum coverage consists of the types and amounts of coverage your state requires. That typically includes liability insurance (for property damage, bodily injury, or both), with some states adding medical coverage or uninsured/underinsured motorist protection.
Full coverage generally includes liability insurance, as well as collision coverage and comprehensive coverage. When you have a loan or lease on your vehicle, your lienholder–the lender or leasing company–will typically require you to carry full coverage on the car until your loan is paid off or your lease ends.
Types Of Car Insurance
Below, we’ll explain six of the most common types of car insurance. Liability insurance, which is mandatory in most states, can be combined with the five other standard coverage types and optional add-ons to create the custom insurance coverage that works for your needs and budget.
Liability car insurance protects other drivers and their passengers in the event of an accident that’s your fault. It’s required in all states except for Virginia and New Hampshire.
If you’re at fault for an accident, your liability coverage will pay for the other parties’ injuries and property damage, up to the limits of your auto policy. Without property damage and bodily injury liability insurance, you’d be responsible for paying these costs out of pocket, which could be financially devastating.
Minimum liability limits required by your state may not be enough to cover the damages in a severe accident, so it’s recommended to opt for higher policy limits for greater protection.
Collision insurance covers repairs or replacement for your vehicle up to its actual cash value (ACV) regardless of who’s at fault for an accident. This type of coverage also covers vehicle damage from objects you hit, such as a fence.
If the repair costs are more than your vehicle’s ACV, your insurance carrier can declare a total loss. When that happens, your insurance company reimburses you for your vehicle’s ACV to put toward a new car.
Comprehensive insurance covers damage to your vehicle that isn’t caused by a collision with another vehicle. This can include:
- Natural disasters
- Extreme weather events
- Hitting an animal, such as a deer or a moose
Uninsured/Underinsured Motorist Insurance
Even though it’s against the law in most states, some people drive without auto insurance. Uninsured motorist coverage (UM) protects you, your vehicle, and any passengers in your car if you’re in an accident with someone who doesn’t carry insurance. Underinsured motorist coverage (UIM) provides the same protection if you’re in an accident with a driver whose policy limits are too low to cover all of your damages.
UM and UIM insurance can cover bodily injuries (UMBI/UIMBI) and property damage (UMPD/UIMPD).
Personal Injury Protection (PIP)
PIP insurance provides coverage for medical expenses, lost wages, and funeral expenses for you and your passengers. One of the benefits of PIP is that it doesn’t matter who’s at fault for the accident.
This coverage is required in no-fault states, where each party seeks reimbursement for medical expenses through their own car insurance regardless of who caused an accident.
Medical Payments Coverage (MedPay)
MedPay coverage also helps you pay for medical bills or funeral expenses for yourself and your passengers. Unlike PIP insurance, MedPay doesn’t cover lost wages. This type of insurance is available in at-fault states and doesn’t carry a deductible like other PIP often does.
In addition to the six most common types of auto insurance coverages, many insurance companies offer add-ons like these:
- Rental reimbursement: Pays for a rental car while your vehicle is in the repair shop after an insurance claim
- Roadside assistance: Covers the costs of services such as towing and fuel delivery
- New car replacement coverage: Gets you a new model of your totaled car instead of just paying out its depreciated value
- Gap insurance: Pays the difference between your car’s ACV and the amount left on your auto loan
- Rideshare insurance: Additional coverage that protects you if you drive for a company such as Lyft or Uber