The Complete Guide to the Most Common Types of Car Insurance
Car insurance includes liability insurance, collision insurance, comprehensive insurance, personal injury protection (PIP), uninsured and underinsured motorist coverage, and medical payment insurance. You can also choose GAP insurance, roadside assistance, and travel insurance for additional protection.
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UPDATED: Mar 24, 2022
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- Liability insurance protects other people in an accident, and it’s required in most states
- PIP covers medical expenses, funeral expenses, lost wages, and other personal injuries
- Collision and comprehensive insurance pay for repairs if your vehicle sustains damage
Car insurance can help you prevent financial loss if you’re involved in an accident. Without it, you could be responsible for accident-related injuries and damage. Fortunately, there are many types of car insurance coverages available, and we can help you choose the best insurance coverage for your needs.
In this article, we’ll discuss the main types of auto insurance, other types of car insurance coverage, and some tips for picking the right kinds of car insurance and comparing car insurance rates.
The Six Main Types of Auto Insurance
Learning about the main types of auto insurance can help you select the best policy for your needs.
Liability insurance pays for other people’s medical and repair expenses if you have an accident and the court determines that you’re at fault. It’s required in most states.
Collision insurance covers the cost of repairs to your vehicle after an accident. If your car is totaled, collision will pay for the current value of the vehicle. However, the replacement cost could be higher, and you could have to pay more than your policy will cover to replace the car.
Comprehensive insurance covers damage that’s not from an accident.
For example, your vehicle could get stolen, or it could sustain hail damage or damage from a falling branch during a storm. You could also become injured while driving your car in a flood or a snowstorm.
Personal Injury Protection (PIP)
Personal injury protection (PIP) covers medical expenses, funeral expenses, lost wages, and other personal injuries from an accident. It’s most common in no-fault states where people don’t have to participate in a court battle to determine who was at fault after an accident.
Uninsured and Underinsured Motorist Coverage
According to the Insurance Research Council (IRC), about 12% of people drive uninsured, even though some form of insurance is required in 49 states. Uninsured motorist coverage pays for your repairs if you’re in a no-fault accident with an uninsured, underinsured, or hit-and-run driver. In many cases, the insurer recovers the deductible from the other driver. This lets the company compensate drivers with injuries or damaged vehicles fully when they’re involved in an accident that wasn’t their fault.
In 14 states and Washington, D.C., no-fault insurance is mandatory. Uninsured and underinsured motorist coverage isn’t necessary in these areas because the policy owner’s insurance company will take care of damage no matter who caused it.
Several types of car insurance coverage can include medical payments, including collision insurance, liability insurance, personal injury protection, uninsured and underinsured motorist insurance, comprehensive insurance, and medical payment insurance.
While medical payment insurance only pays for your or your passengers’ medical expenses, other forms of insurance like Personal Injury Protection can also pay for child care, household chores, lost wages, and funeral expenses.
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What other types of auto insurance coverage are there?
Travel insurance is designed for drivers who take their cars into other countries. In Canada, it’s optional but not required by law. In Mexico, it’s mandatory because U.S. car insurance isn’t valid there. To avoid arrest or a hefty fine, stop at a travel insurance broker before you drive across the Mexican border.
GAP insurance stands for Guaranteed Automobile Protection, and it covers the difference between the actual cash value of a car and the amount you owe on the loan or lease. If your car is totaled in an accident or stolen, your insurance company will only pay its cash value, which may not cover your loan balance. Without GAP insurance, you could end up paying off a car that’s already totaled while struggling to afford a new vehicle.
You might also consider roadside assistance and rental reimbursement insurance. Roadside assistance insurance pays for towing after a breakdown. It can also send someone to unlock your car if you lock your keys in it. Rental reimbursement will cover your costs (up to the amount you choose) for renting a car while yours is being repaired.
Helpful Tips for Picking the Right Type of Car Insurance for Your Situation
If you have an older vehicle that’s not worth much, you can get only liability insurance. This protects you from having to pay for damages or medical expenses for someone else if you get into an accident with them.
For a newer car, consider GAP insurance, comprehensive insurance, and collision coverage. If you live in a no-fault state, your policy will likely come with PIP, as well.
Compare Different Types of Auto Insurance
No matter what type of car insurance you choose, comparing car insurance quotes from different companies can help you save money. Finding affordable insurance can be tricky, but with the right discounts you can choose the right policy and company for you.
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