Buying a car insurance policy can be a frustrating process, leaving you worried you may not have the right types of car insurance. There are many coverage types to choose from, some of which might be required in your state. You want to be sure that you have the appropriate coverage while not overpaying because of coverage you don’t need.
But with a base knowledge of the most common types of car insurance, you can put together a solid car insurance policy that’s tailored specifically for your needs. Here’s a guide to get you started.
Liability car insurance pays others when you cause a car crash that results in damage or injuries to others. Liability insurance also pays for your legal defense in case you’re sued because of an accident. Here are some examples of what liability insurance covers:
- You crash into your neighbor’s fence
- You rear end someone at a traffic light and damage their car
- You cause a car accident and the other driver is hurt
Liability car insurance is required in every state, except in New Hampshire and Virginia (but even those states have some liability requirements under certain conditions). The minimum required amount will vary depending on your state.
It’s better to buy more than your state’s minimum. That’s because state minimums can be woefully inadequate if you cause an accident with multiple injuries. You’ll be on the hook for any medical expenses above your policy limits. You’ll want enough liability insurance to cover what can be taken from you in a lawsuit.
Uninsured Motorist Insurance
Uninsured motorist (UM) insurance and underinsured motorist (UIM) insurance pay for your medical expenses if someone crashes into you who has no insurance or not enough. Uninsured motorist coverage does not pay the driver who’s uninsured.
UM can also pay for your medical expenses if another driver’s insurance denies coverage or goes out of business.
UM coverage pays for:
- Medical bills of you and/or your passengers
- Lost wages if you can’t work due to injuries from a car accident
- Pain and suffering
- Funeral expenses
- Car damage, depending on your state
Uninsured motorist insurance is required in some states. In other states your car insurance must offer you this coverage, but you can typically reject it in writing. UM is generally a good coverage to have. You’ll usually purchase UM in coverage amounts that match your liability insurance.
Collision and Comprehensive Insurance
If you want coverage for car repair bills, collision and comprehensive insurance cover a wide range of problems. You can buy these types of car insurance separately, but they’re often sold together. If you have a car loan or lease, your lender or leasing agent will likely require you to carry both of them.
- Collision insurance covers car repair bills for car accidents, regardless of who caused the accident. For example, if you back into a pole, your collision insurance will pay to repair your bumper. If someone crashes into your car, you can file a claim under your collision insurance to pay for repairs—or sue the other driver under their liability insurance.
- Comprehensive insurance covers car theft and repair bills for problems such as vandalism, floods, fire, hail, falling objects (like tree branches), riots and collisions with animals (like deer).
If you file a claim under one of these types of auto insurance, your insurance claims check will be reduced by your deductible. For example, if you have a $500 deductible and your car repair bill is $2,000, you’ll have to pay $500 to the repair shop and your insurance company will pay $1,500.
Medical payments coverage, sometimes called “MedPay,” covers medical bills for you and your passenger for injuries suffered in a car accident, regardless of who caused the accident. It’s usually sold in small amounts of coverage, often between $1,000 to $5,000. MedPay is not available in every state.
Personal Injury Protection
Personal injury protection (PIP) coverage is similar to MedPay and covers medical expenses for injuries suffered in a car accident for you and your passengers, no matter who caused the accident. PIP generally pays for:
- Medical bills for car accident injuries
- Lost wages if you cannot work due to injuries
- Rehabilitation costs
- Replacement services for things you can’t do because of injuries, like child care or cleaning services
- Funeral expenses and survivor benefits
Many states require PIP and it’s sometimes part of the “no-fault auto insurance” laws, which generally require you to make smaller injury claims on your own PIP insurance. PIP is an optional coverage in some states and not available in others.
Other Types of Car Insurance Coverage
You can typically fill gaps in your car insurance policy by purchasing optional coverage types such as
- Accident forgiveness coverage. If you cause a car accident and have this coverage, your insurance company will “forgive” the accident and your insurance premiums won’t increase. While the rules for accident forgiveness vary by state and insurer, it’s not an unlimited pass and is typically limited to one forgiven accident per policy for a certain timeframe, such as one at-fault accident every three years.
- Gap insurance. If your car is totaled due to a problem covered by your policy (like a car accident), gap insurance covers the difference between what your car is worth and what you owe on the loan. For example, if you have $20,000 outstanding on your loan but the value of your totaled car was only $18,000, this coverage pays the $2,000 “gap.”
- New car replacement insurance. If your car is totaled due to a problem covered by your policy, this coverage will give you money for a brand new car of the same make and model. This can be a good coverage option for cars that quickly depreciate in value.
- Rental reimbursement insurance. This coverage pays for a rental car or substitute transportation (such as public transportation fees) if your car is being repaired for a problem covered by your policy.
- Rideshare insurance. If you drive for a rideshare company like Lyft or Uber, there may be a coverage gap between the time you’re waiting for a ride request and driving to pick up a passenger. If you get into a car accident during one of this periods, you could be stuck paying for car repair bills and medical expenses out-of-pocket. This coverage can help cover those gaps.
- Roadside assistance insurance. If your car breaks down on the side of the road, this coverage pays for help such as a tow truck, locksmith and other services, such as fuel delivery or a jump-start for a dead battery.
Types of Car Insurance FAQ
What type of car insurance do I need if I own a classic car?
If you own a classic or antique car, a traditional car insurance policy might not fit your needs. Classic car insurance has some traditional coverage types, like liability, comprehensive and collision insurance, but also coverage types designed specifically for classic car owners, such as cherished salvage coverage and vehicle under construction coverage.
While the definition of a classic car will depend on the insurance company, vehicles used for commuting, commercial purposes and off-road or recreational vehicles typically won’t qualify for classic car insurance.
What car insurance types are included with full coverage car insurance?
While there’s no special policy type called full coverage car insurance, it’s generally a term that refers to an insurance policy that includes liability, collision and comprehensive insurance. You can add other optional insurance types to build a car insurance policy that meets your specific needs, such as gap insurance or roadside assistance.
What types of auto insurance do I need if I’m a delivery driver?
It’s a good idea to check with your auto insurance company if you make deliveries, such as restaurant takeout meals, groceries or other goods. That’s because using your vehicle to make deliveries is considered business use, not personal. You might need to buy a commercial auto insurance policy if you use your car for work.