All drivers in the U.S. are required to carry car insurance coverage. It is always worth investing in auto insurance because having valid auto insurance will protect you from financial burdens like car repair costs and medical expenses in case of an accident. Whether you’ve never purchased car insurance before or even if you have, understanding the basic types of car insurance coverage can be very useful. Each car insurance policy includes multiple types of coverage, and it is important to understand each one of them.
Most states, however, have very specific regulatory requirements for the minimum amount of coverage you must carry. This means you will not be able to purchase any sum below the minimum required coverage limits.
Which insurance coverage is best for your car? What are the different car insurance coverage types? What is recommended for car insurance coverage? These basic questions on types of auto insurance would have made you wake up at night with cold sweats. Let’s help you understand the most common types of car insurance coverage across all states.
Types of Car Insurance Coverage
Types of Coverage |
What Does it Mean? |
| Liability Insurance | The element of a car insurance policy that offers financial protection for a driver who injures someone else or their property while driving a car is liability insurance. Liability insurance only covers injuries or property damage to third parties, not the driver or the driver’s property, which may be covered separately by other portions of their policy.
Bodily injury liability and property damage liability are the two parts of liability car insurance. Except for New Hampshire, every state requires drivers to have liability insurance. |
| Collision Coverage | If you are involved in a covered accident, collision coverage will pay for the repairs to your car. Depending on the value of your car, it may not be worth getting collision coverage on it if it is older. However, if your car is brand new and expensive, collision coverage can help you get back to where you were before your car was damaged. This coverage is essential if you have a lienholder. |
| Comprehensive Coverage | Will your insurance provider cover the loss if anything happens to your car that isn’t related to a covered accident? Like damage due to weather, hitting a deer, or having your car stolen? These circumstances are covered by comprehensive coverage (other than Collision).
Comprehensive coverage is nice to have if it fits inside your budget. Car anti-theft and tracking equipment can make this coverage slightly more inexpensive, but having this form of insurance can be expensive and unnecessary, especially if your car is easily replaceable. On the other hand, this coverage is essential if you have a lienholder. |
| Personal Injury Protection | The costs of an accident can quickly build up, and Personal Injury Protection is available to cover those costs. This coverage will pay your medical claims, regardless of who is to blame in an accident. It should be noted that this coverage is not provided in all states. |
| Uninsured/Underinsured Insurance Coverage | While state regulations require all drivers to have insurance, this is not always the case. Furthermore, if a motorist has liability insurance, many jurisdictions would require you to lower the minimum coverage requirements. This may not be sufficient to pay all of the accident costs. In that case, you will either not receive any money if they do not have coverage or receive less than you need to cover the cost of damages if your damages exceed their coverage amount.
This is the kind of situation in which Uninsured and Underinsured Motorist Protection would come in handy. Adding uninsured/underinsured motorist coverage to your auto insurance policy is usually relatively inexpensive, especially given the amount of protection it provides. |
Optional Insurance Coverages
Types of Coverage |
What Does it Mean? |
| Medical payments coverage | Medical bills after an accident can be quite costly. Regardless of who is at fault, medical payment coverage can assist in paying for medical expenses incurred due to a covered accident. |
| Gap Insurance | Subsequently, the value of a car depreciates quickly, therefore, an auto insurance settlement may not be sufficient to meet the loan’s cost. After a total loss or theft, gap insurance may help certain drivers cover the amount owed on a car loan. |
| Towing Insurance | Towing insurance is available if you evidently have comprehensive auto insurance. All in all, towing insurance will compensate you for a tow as well as labor charges to fix your car. |
| Rental Insurance | It can be costly to figure out how to travel around following an accident. At the same time, rental insurance will help you pay for a rental car. |
| Classic Car Insurance | Classic car insurance provides specialist coverage tailored to the specific demands of collectors of vintage and classic cars. Determine whether classic car insurance is appropriate for you. It’s critical to purchase auto insurance as quickly as possible if you already have it. Get a free quotation for the forms of car insurance outlined above to ensure that you’re covered in the event of an accident. |
Sara Sam may not look like your typical car and finance expert, but don’t let that fool you. With over four years of experience in the industry, she knows all the ins and outs of cars, car insurance, and refinancing. You can trust Sara to help you navigate the often-confusing world of automobiles and financing.
