The Complete Guide to the Most Common Types of Car Insurance

When you’re looking at car insurance options, there are a lot of coverage types to consider. Some types of car insurance coverage are mandatory, and some are optional, depending on your state’s insurance requirements.

Continue reading for more information on the main types of auto insurance, optional types of car insurance, and tips for selecting the types of auto coverage that best fit your insurance needs. 

The 6 Main Types of Auto Insurance

Six of the most common car insurance coverage types are listed below. Depending on your state, you may be required to have some of these protections, while others may be voluntary.

Liability

Liability insurance protects your legal interests if you cause a car accident that causes bodily injuries or property damage to others. Almost every state has its own required legal limits of liability insurance for both property damage and bodily injury.

Comprehensive

Comprehensive insurance assists in reimbursing you for the cost of replacing or repairing your vehicle if it is damaged or stolen in an incident unrelated to an accident. It typically covers damage caused by fire, vandalism, or falling objects. Comprehensive coverage usually includes a deductible — the amount you have to pay before the insurance pays out.

Collision

Collision coverage pays for car repairs after an accident or replacement if it is totaled, subject to a deductible. Your collision coverage does not cover the other driver’s vehicle. Collision and comprehensive coverage are optional, but if you have a loan, your lender may mandate both.

Uninsured/Underinsured Motorist

Uninsured/underinsured motorist coverage pays for vehicle damage and medical expenses due to a collision caused by a driver that doesn’t carry insurance, or not enough of it. It is mandated by law in 20 states.

Personal Injury Protection (PIP)

Personal injury protection (PIP) covers medical expenses for you and your passengers. It also often covers medical costs, lost wages, domestic chores, and funeral expenses. If you live in one of the 16 states that require PIP, you must include it in your auto policy.

Medical Payments

Medical payments coverage is part of a car insurance policy. It helps pay for medical bills for you or your passengers if you get hurt in a car accident. It’s sometimes called medical expenses coverage, also known as MedPay. 

What other types of auto insurance coverage are there?

There are several other types of additional auto insurance that you can buy. Let’s look at the most common.

Rental Reimbursement

Rental reimbursement pays for a car rental or public transportation while your vehicle is being repaired after an accident. The cost is usually very low, so it’s not a bad thing to have on your policy.

Towing and Labor

In the case of an accident, towing and labor coverage pays for the cost of a towing service to get your car to a repair shop so that it can be fixed. Towing may also include tire changes, jump-starting your car, gas delivery, or lockout help, depending on your insurance company and what you need to be towed.

Roadside Assistance

Roadside assistance is an optional coverage that pays for your car if it breaks down or has a flat tire. It also pays for gas and tow trucks. Some auto clubs also offer roadside assistance if you don’t have it in your auto insurance plan.

Travel Insurance

Travel insurance is a special type of optional insurance coverage for people who drive their cars to other countries.

GAP Insurance

If your car is stolen or destroyed in an accident, GAP insurance can help you pay off your car loan. It covers the difference between how much you owe on your car and how much it is worth. 

Which type of coverage should I select when purchasing auto insurance?

You should check your state’s minimum liability insurance requirements when determining how much car insurance you need. Liability insurance is required in nearly every state, so you don’t have any choice but to buy it.

In most cases, if you get a loan for your car, the lender will also require you to have comprehensive and collision insurance to protect their stake in the car. If the lender wants you to have comprehensive and collision insurance, they may also set the deductibles you have to carry for your auto insurance policy.

Beyond that, you’ll need to decide which types of coverage you’ll need to have the most peace of mind and make sure you can cover your expenses.

Helpful Tips for Picking the Right Type of Car Insurance for Your Situation

Finding the best insurance for your unique circumstances doesn’t have to be difficult. Here are a few tips that may help you get started:

• Use the internet for comparison shopping if you don’t have time to go to your insurance agency’s local office.
• Use auto insurance comparison websites that allow you to compare multiple car insurance quotes side by side.
• Use reputable resources such as the Insurance Information Institute (III) to answer your questions about car insurance.
• Before buying a policy, use insurance rating organizations like A.M. Best to research an insurance company’s reputation and financial stability.

If you shop around and do your research, you will find the right type of car insurance to protect you and your family.

Then, try using a free car insurance comparison tool to compare different types of coverage and think about how much each type of insurance costs. The goal is to get the best coverage for the least amount of money.

Case Studies: The Complete Guide to the Most Common Types of Car Insurance

Case Study 1: Liability Insurance at Work

Sarah is driving home from work when she accidentally rear-ends another car at a red light. The other driver sustains minor injuries and her car is significantly damaged. Sarah is found at fault for the accident, and her liability insurance comes into play. Her liability coverage pays for the other driver’s medical expenses and repairs to their vehicle. Without liability insurance, Sarah would have had to pay for these costs out of pocket.

Case Study 2: Comprehensive Coverage for Theft

John parks his car in a shopping mall parking lot and goes inside to do some shopping. When he returns, he discovers that his car has been stolen. Fortunately, John has comprehensive coverage as part of his auto insurance policy. He files a claim, and his insurance company reimburses him for the value of his stolen vehicle. Without comprehensive coverage, John would have been responsible for replacing his car on his own.

Case Study 3: Uninsured Motorist Coverage in Action

Lisa is driving on the highway when another driver suddenly changes lanes without signaling and collides with her car. The other driver speeds away without stopping. Lisa’s car is badly damaged, and she sustains minor injuries. Luckily, Lisa has uninsured motorist coverage, which protects her in situations like this.

Her insurance company covers the repair costs and medical expenses, ensuring that Lisa is not left with the financial burden caused by an uninsured driver.

Case Study 4: Personal Injury Protection for Medical Expenses

Mike and his family are on a road trip when they are involved in a serious car accident. Mike and his wife suffer severe injuries and require immediate medical attention. They are rushed to the hospital, where they undergo surgeries and extensive treatments.

Thanks to their personal injury protection (PIP) coverage, their medical expenses are covered, including hospital bills, surgeries, rehabilitation, and ongoing care. PIP provides them with the necessary financial support during their recovery.