Types of Auto Insurance Coverage [2024]

If you’re new to car insurance, choosing a policy may feel overwhelming. Because there are so many different options regarding types of auto insurance coverage, you may wonder which coverage is best for you. What does car insurance cover? That depends on what kind of coverage you have. Understanding auto insurance is crucial for every driver to ensure they have the right coverage and protection in case of accidents or unforeseen events on the road.

Liability insurance is the most basic level of car insurance coverage. If you purchase a liability-only policy — sometimes called a minimum coverage policy — you can legally drive in your state. However, minimum coverage does not protect your vehicle if you’re at fault in an accident.

For better protection, many drivers purchase policies that also include coverages like collision insurance and comprehensive insurance. These coverages protect you and your vehicle in specific ways, and you may need to purchase a full coverage auto insurance policy that includes collision and comprehensive insurance if you currently have a loan or lease on your vehicle.

As you shop for car insurance, you need to find and compare quotes from several companies before you decide which is best. Comparing car insurance quotes will help you avoid paying too much for your car insurance. You can also research different companies you’re interested in to see what past and current customers have to say about them. 

Why are there different types of auto insurance?

Different types of car insurance protect you financially in various ways. Almost every state in the U.S. requires drivers to carry liability coverage at the very least. Liability insurance will protect you if you are at fault in an accident and you damage someone’s car or personal property. Liability also helps if you cause an accident and injure one or more people.

Unfortunately, state minimum car insurance does not help financially if your vehicle is damaged. If you cause an accident and your car is damaged, but you only have a minimum coverage policy, you will have to pay for repairs to your vehicle out of your pocket. Many people purchase additional coverage, like collision and comprehensive insurance, to help protect them from the financial burden of a car accident.

In addition to the coverage types mentioned above, many different add-on coverage options exist. These coverages help with all sorts of things, like rideshare insurance if you drive for Uber or Lyft, roadside assistance if you’re ever stranded and need help, and gap insurance if your car is totaled but you still owe money on your lease. 

Before purchasing car insurance, it’s important to consider how to buy auto insurance that meets your specific requirements. You may not need more than a liability-only policy, which could be helpful in lowering your monthly or annual car insurance rates. It’s important to assess your needs before buying car insurance to ensure you have the proper types and levels of coverage.

Read more:

• Does Auto Insurance cover damage from a hit and run?
• Auto Insurance FAQ

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What are the most common types of auto insurance?

The most common types of car insurance include:

• Liability insurance
• Personal injury protection (PIP) insurance
• Medical payments (MedPay) coverage
• Uninsured/underinsured motorist coverage
• Collision insurance
• Comprehensive insurance 

Each coverage is helpful in a specific way, and it’s essential to understand what they cover (or don’t) before you buy your car insurance policy. (For more information, read our “Are auto insurance companies allowed to charge a policy fee?“).

Liability Auto Insurance

Liability insurance coverage includes bodily injury and property damage coverage. Bodily injury liability insurance pays for medical bills from other drivers or bystanders associated with an accident you caused. Bodily injury liability covers these bills to a certain limit, and each state sets its own minimum coverage amount.

Read more: Does my Auto Insurance cover other drivers of my car?

Property damage liability helps if you cause a car accident and damage someone’s car or personal property and need to pay for repairs. Like bodily injury liability, property damage liability minimum limits are set by each state.

Nearly every driver in the U.S. needs liability auto insurance to drive legally. And while it may seem like an annoyance to purchase and pay for car insurance regularly, you’ll be happy you have adequate coverage if you’re ever in a car accident.

Personal Injury Protection (PIP) Auto Insurance

Personal injury protection insurance coverage, or PIP, pays for medical expenses for you and anyone in your car if you’re in an accident. PIP covers medical expenses associated with the accident, but coverage extends to indirect costs associated with injuries as well, like childcare, lost income, or even funeral costs.

Some states require PIP coverage in addition to liability insurance. Check with your local department of motor vehicles to learn whether you need PIP coverage. If your state does not require PIP, you should consider purchasing the coverage to help in case you’re ever in an accident and you or a passenger are injured. 

Medical Payments (MedPay)

Medical payments coverage, or MedPay, is similar to PIP in that it covers medical fees following a covered accident. MedPay covers fees like visits to the doctor, hospital bills, and more. Your MedPay coverage may also pay for copays and deductibles of other insurance policies, like health insurance and PIP coverage. 

Similar to PIP, some states require drivers to carry MedPay coverage. If your state does not require MedPay insurance, you can speak with a representative from your insurance company to decide whether you need it. If you’re unsure whether you need MedPay insurance in your state, check with your local department of motor vehicles for more information.

Uninsured Motorist Insurance

Uninsured or underinsured motorist coverage helps if someone else causes a car accident but does not have proper auto insurance. In addition, your uninsured motorist coverage will help pay for damage to your vehicle. While it’s unfortunate to have to pay for additional coverage simply because someone else doesn’t carry the proper amounts, it’s good to know you can purchase this type of car insurance for peace of mind.

Uninsured motorist insurance coverage is required in certain states. If you live in a state where this coverage is not required, consider purchasing uninsured motorist coverage to protect yourself against drivers who don’t have car insurance. 

Collision Auto Insurance

Collision auto insurance coverage pays for repairs to your vehicle if you’re at fault in an accident and your vehicle is damaged. With collision insurance, you simply need to pay your deductible, and your insurance company will pay for the repairs to your car up to a specific dollar amount.

If you’re wondering “does insurance cover hit-and-run accidents?” The answer is “yes” if you have collision insurance or uninsured motorist coverage.

Many people combine collision and comprehensive insurance into what’s known as a full coverage auto insurance policy. It’s worth noting that if you have a lease or loan on your vehicle, you may need full coverage insurance rather than a liability-only policy on your car. 

Comprehensive Auto Insurance

Comprehensive auto insurance coverage helps if your car is damaged by something other than a collision. Some of the most common comprehensive insurance claims include damage from inclement weather, wild animals, theft, and vandalism. 

Comprehensive is not required coverage unless you have a loan or lease on your vehicle. However, you may find a company that offers full coverage with both collision and comprehensive insurance that’s relatively cheap. The best way to find cheap car insurance is by comparing quotes from multiple companies in your area. 

What is add-on car insurance coverage?

In addition to standard coverage, many companies offer additional coverage options, or add-ons, that provide specific types of protection. Some of the most common options for add-on coverage include:

• Gap insurance: Gap insurance covers the difference between what you owe on your car and your car’s actual cash value if you have a relatively new car and it’s totaled. Without gap insurance, you would have to pay the balance on your loan even after your vehicle was totaled. Learn about how much gap insurance costs to decide if it’s worth it for you. 
• Umbrella insurance: Umbrella insurance is added liability coverage for things like auto and home insurance. Under umbrella insurance, you have extra protection if you injure or damage someone’s personal property in an accident. 
• Rental reimbursement: With rental reimbursement, your insurance company will reimburse you for what you spend on rental cars if your vehicle is in the shop after a covered event. 
• Rideshare insurance: Rideshare coverage is a special type of car insurance that provides additional liability insurance, and sometimes collision and comprehensive coverage, if you drive for a company like Uber or Lyft. 
• Roadside assistance: With roadside assistance, you can request help if you’re stranded on the side of the road and need flat tire repair, fuel delivery, lockout services, or a tow. Learn about which companies offer the best roadside assistance.
• Mechanical breakdown insurance: Mechanical breakdown insurance (MBI) covers the cost of repairs for specific mechanical parts and systems. 
• Usage-based coverage: Usage-based insurance (UBI) allows you to pay less for car insurance if you’re a safe driver. Many major car insurance companies offer UBI coverage, and you could save up to 40% on your car insurance if you don’t drive a lot, avoid distracted driving, drive mainly during the day, and obey traffic laws. 
• Non-owner car insurance: You may need non-owner car insurance if you regularly drive a vehicle you do not own. Some top non-owners car insurance coverage is often cheaper than a standard policy because you don’t drive as often as someone who owns their vehicle. 
• SR-22 coverage: SR-22 auto insurance coverage is technically not a type of insurance, it’s a certificate you may need if you are a high-risk driver. Not every car insurance company offers coverage if you need to file an SR-22 with your state, so check with several companies if you know this is something you need. 

The add-on options above are just some of the available coverages if you want to customize your car insurance policy to best meet your unique needs. If you know of an add-on coverage you want, research companies in your area that offer this coverage and compare quotes to see which provides the most affordable rates.

Read more:

• Top Auto Insurance Provider for People Who Don’t Drive Often
• What are the Lyft vehicle requirements?
• Which states require auto insurance?
• Does Auto Insurance cover damage from hitting a deer?
• Does Auto Insurance cover me if I borrow a car?
• How Much Auto Insurance You Should Have
• Will auto insurance pay for keys locked in a car?

Case Studies: Types of Auto Insurance Coverage

Case Study 1: Comprehensive Coverage Saves the Day

John, a diligent car owner, had comprehensive coverage for his vehicle. One stormy night, a tree fell on his parked car, causing extensive damage. Thanks to his comprehensive insurance, John was relieved to find that the repairs were fully covered, saving him from significant out-of-pocket expenses.

Case Study 2: Liability Insurance and Bodily Injury Coverage

Sarah was involved in a car accident caused by her negligence. The collision resulted in injuries to the other driver, who had to be hospitalized for an extended period. Fortunately, Sarah had liability insurance with bodily injury coverage. This coverage not only paid for the other driver’s medical bills but also protected Sarah from potential lawsuits and legal expenses.

Case Study 3: Uninsured Motorist Coverage Comes to the Rescue

Mark was driving when another driver ran a red light and crashed into his car. To Mark’s surprise, the at-fault driver didn’t have any insurance coverage. Luckily, Mark had uninsured motorist coverage, which paid for the damages to his vehicle and covered his medical expenses, ensuring he didn’t suffer financially due to someone else’s irresponsibility.

Case Study 4: Collision Coverage Eases the Burden

Linda, a careful driver, was involved in a collision when another driver failed to yield at an intersection. Her car suffered significant damage, requiring expensive repairs. Fortunately, Linda had collision coverage, which helped cover the repair costs, reducing her financial burden during an already stressful time.

Case Study 5: Personal Injury Protection Provides Support

David was injured in a severe car accident and had to be hospitalized for an extended period. Thankfully, he had personal injury protection (PIP) coverage, which covered his medical expenses, rehabilitation costs, and even a portion of his lost wages. This insurance gave David the support he needed during his recovery process.

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Types of Auto Insurance: The Bottom Line

If you own and drive a vehicle, you need proper car insurance. How does auto insurance work? That depends on what kind of coverage you have. At the very least, you will need liability insurance to protect you if you cause an accident. Your state may also require PIP, MedPay, and/or uninsured/underinsured motorist coverage. If your state does not require these coverages, you should consider purchasing them for added peace of mind. 

Full coverage is a popular option, but it’s often much more expensive than a liability-only policy. Get quotes from several companies to determine which offers the best price for full coverage in your area. Remember that you may be required to keep a full coverage policy if you have a lease or loan on your vehicle. 

Lastly, consider different add-on coverage options that could help you customize your auto insurance policy. Add-on coverage often costs just a few dollars a month and could help you stay safe when you’re behind the wheel.

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