Types of Car Insurance Coverage: An Expert Guide (2024)

Figuring out which types of car insurance coverage you need can take time and effort. In this article, we’ll break down the six most common types of coverage and additional coverages you may need.

For example, while most states require at least some car insurance coverage to drive legally, and this mandatory insurance is cheap car insurance to purchase, it doesn’t include much protection for your vehicle.

Keep reading as we dive into the different types of car insurance coverage and the best type of car insurance. Then, you can use our free quote comparison tool to ensure you get the cheapest rate on the best auto insurance coverages.  Get started by entering your ZIP code.

Commonly Required Car Insurance Types

The majority of states mandate drivers to possess a minimum level of car insurance, but each state establishes its unique set of regulations regarding car insurance, and the obligatory protections differ. This can create complexity in determining the essential coverages, including the named driver, that you should secure and those that you might consider omitting.

But what does car insurance do? Car insurance pays for damages to vehicles, other objects, and bodily injuries that involve a vehicle.

Read more: Does car insurance cover damage caused by landslides or mudslides?

There are six main car insurance coverage types, and various add-on coverages and features that may be useful. Where you live, and your vehicle’s make and model help determine which coverages you need.

Read more: Does my car insurance cover damage caused by a lightning strike?

Liability Car Insurance Coverage

The states that require car insurance mandate a certain amount of liability coverage. Liability car insurance pays for damages to others if you cause an accident. This type of coverage is broken into two parts. (For more information, read our article Cheap Liability Car Insurance).

First, bodily injury liability helps pay the medical costs of others in an accident, such as hospital visits, prescriptions, and doctor visits. Find the best bodily injury liability (BIL) coverage car insurance company.

Next, property damage liability covers physical damage to other vehicles and objects, such as a fence or pole.

Although most states mandate liability coverage, limits are typically very low and won’t cover costs in a significant accident. As a result, experts recommend increasing limits to cover more expenses.

Collision Car Insurance Coverage

Collision car insurance is just like it sounds. It pays for damages to your vehicle caused by an accident. In addition, collision coverage pays for repairs if your car is damaged from hitting another vehicle, an object, or in a one-car crash.

Read more: Does my car insurance cover damage caused by a runaway vehicle?

Although it’s not a required coverage, drivers who drive an expensive vehicle or who can’t afford to repair their car themselves should consider adding collision coverage. In addition, drivers with a car loan or lease may be required to carry collision coverage. (For more information, read our article How to Get Car Insurance Coverage).

Collision insurance has a deductible you must pay before coverage begins, and a collision claim may raise your car insurance rates. Find the best collision coverage car insurance company.

Comprehensive Car Insurance Coverage

Comprehensive car insurance covers damage to your vehicle unrelated to an accident that is out of your control.

Comprehensive insurance covers:

• Theft
• Vandalism
• Falling debris like tree limbs and hail
• Acts of nature, including floods, hurricanes, and tornados
• Animal damage
• Windshield damage

Read more:

• Does my car insurance cover damage caused by a tornado or other windstorm?
• Does car insurance cover damage caused by a collision with an animal if I only have liability coverage?
• Does my car insurance cover damage caused by a deer or other wildlife?
• Does my car insurance cover damage caused by a hailstorm or heavy rain?
• Does my car insurance cover damage caused by a flood or hurricane?
• Does my car insurance cover damage caused by a hit-and-run driver if I cannot identify them?

Comprehensive coverage is optional, but most lenders require it with collision coverage if you have a loan or lease. In addition, comprehensive coverage has a deductible, and filing a claim may raise car insurance rates. Find the best comprehensive coverage car insurance company.

Uninsured/Underinsured Motorist Car Insurance Coverage

How does auto insurance work if someone hits you without coverage? While around 13% of drivers nationwide don’t have car insurance, only about 20 states require uninsured/underinsured motorist coverage.

This coverage pays for damages to your vehicle if someone hits you without liability coverage and can be found at the best uninsured motorist (UM) coverage car insurance company.

If your state doesn’t require uninsured or underinsured motorist coverage, it’s still a good idea to add it to your policy. However, even if another driver has state-required car insurance, the limits may be too low to pay for your damages.

For example, let’s say your state mandates $15,000 in property damage liability. If you’re hit by a driver carrying only the state minimum and $20,000 of damage occurs to your car, their insurance won’t cover all of your damages. 

Medical Payments Car Insurance Coverage

Medical payment (MedPay) insurance helps pay for medical costs related to an accident. Coverage is required in Maine, New Hampshire, and Pennsylvania but is optional in other states.

MedPay helps cover costs for you and your passengers, such as doctor visits, X-rays, and prescriptions. In addition, it pays for funeral expenses and health insurance deductibles. 

Coverage is not tied to your vehicle. So, if you’re in another vehicle, riding a bike, or even walking down the street and are hit by another car, coverage kicks in.

While MedPay coverage is typically less than $10,000, it can ease the burden of medical expenses. Even if MedPay insurance isn’t required in your state, adding it to your policy is an excellent way to supplement other insurance coverages. Find the best medical payments (MedPay) coverage car insurance company. 

Personal Injury Protection (PIP) Car Insurance Coverage

Similar to MedPay coverage, personal injury protection (PIP) coverage helps pay for medical costs related to an accident. While PIP is optional in most states, coverage is mandatory in 12 states.

Learn more: Best Personal Injury Protection (PIP) Coverage Car Insurance Company

In addition to medical costs, PIP pays for related expenses, such as lost wages and childcare. Coverage is a good option for drivers who want to supplement other insurance, but it may not be necessary to carry both PIP and MedPay. (For more information, read our article Can I get reimbursed for lost wages if I am unable to work due to injuries sustained in the accident?).

Car Insurance Coverages Explained

Each state has a minimum amount of insurance required to purchase to operate a vehicle on State roads. These numbers will usually be presented as follows:

15/30/5

These numbers represent the minimum amount of coverage in each of the following categories: Bodily injury liability limits (individual and per occurrence) and property damage liability.

In the above example, which is taken directly from the State of California insurance requirements, the first two numbers are the bodily injury limits.

The 15 stands for $15,000 of bodily injury liability coverage per person, per accident. So if one person was injured and the total damage cost was $20,000, the insurance company would only pay up to $15,000. The remaining would be the responsibility of the insured.

In the example above the 30 stands for $30,000 of bodily injury coverage per accident (or occurrence).  What this part of the policy is saying is that no matter what happens, the insurance company will not pay more than $30,000 in bodily injury payments total.

For example, if the insured hits a van that has six people in it and each person sustains $10,000 worth of damage, the insurance company will only pay $30,000 because that is the maximum they will pay for bodily injury under this policy.

The third number in the example above represents property damage liability, and the 5 will offer $5,000 of coverage, maximum.

Property is considered to be things like cars, fences, buildings, etc. So if the insured caused an accident that resulted in $10,000 worth of damage to the other person’s car, the insurance company would pay $5,000 and the remaining $5,000 would be the responsibility of the at-fault driver.

Optional Types of Car Insurance Coverage

In addition to these main types of auto insurance coverage, most insurers offer individualized coverage for specific needs.

For example, gap coverage pays the difference between what you owe on your vehicle and its worth if your car is totaled. Most lenders require gap coverage until your loan is less than the car’s value.

Additional car insurance coverages include:

• Roadside assistance: Roadside assistance provides help if you have a vehicle problem on the side of the road. Services vary but typically include towing, jump starts, fuel delivery, tire changes, and lockout services. (For more information, read our article Can I get car insurance for a car that is used for towing or hauling?).
  
• Rental car reimbursement: This coverage pays for a rental car if your vehicle is being repaired from a covered claim. However, there are limits to what your insurance company pays per day and the time a rental is covered.
• Umbrella car insurance coverage: Umbrella coverage is a large bucket of liability coverage that allows drivers to use it as needed. Policies can offer around $1 million in liability coverage to protect your assets in an accident.
• Usage-based car insurance: Usage-based insurance isn’t typically its own coverage. Instead, your insurer offers discounts based on your driving habits monitored by a telematics program. Drivers receive a discount based on safe driving.
• Mechanical breakdown insurance (MBI): Similar to an extended warranty, this type of car insurance covers mechanical failure. MBI covers specific mechanical problems with your vehicle, such as clutch or electrical system issues. 
• SR-22 insurance: The best insurance for SR-22 coverage is a form that your car insurance company submits to your state showing you have at least minimum coverage. High-risk drivers may be required to show this proof of insurance for a mandated amount of time.
• Non-owner insurance: Non-owner insurance provides liability coverage for drivers without a vehicle, including drivers who borrow cars or need proof of insurance to reinstate their driver’s license.

Some coverages, such as roadside assistance and rental car reimbursement, are only available if you carry collision and comprehensive insurance. In addition, some insurers have other specialized coverages, including classic cars, sound systems, rideshare, and new car replacement coverages.

While each coverage offers a different level of protection, car insurance rates increase with each added coverage. So, carefully consider the types of coverage that best protect you and your vehicle.

Read more:

• Understanding SR-22 Insurance: What is it and who is it for?
• Non-Owner SR-22 Car Insurance: What It Is and How to Get It

How to Decide What Types of Car Insurance Coverages You Need

You’re now most likely asking, “What type of car insurance should I get?” There are a lot of car insurance coverage choices, and it can take time to determine which coverage you need. However, there are ways to figure out what you need. Here’s our car insurance shopping guide.

First, consider your vehicle. If you have a loan or lease, you’ll probably need collision and comprehensive coverage. Also, you’ll need those coverages if you can’t afford to repair or replace your vehicle.

Then, consider your finances. More coverage equals higher car insurance rates. However, while your state minimum required coverage is your cheapest option, it probably doesn’t provide much protection. So instead, increase your coverage to your financial ability.

Finally, consider add-on coverages. For example, if you drive a classic car or can’t perform minor repairs on the side of the road, you’ll need extra coverage. Remember, these add-on coverages raise your rates, so carefully choose the coverages you need.

Take a look at how coverage level affects rates below.

Monthly Car Insurance Rates by Coverage Level for the Top Companies

It is very well known in the insurance industry that state minimums often do not provide adequate coverage for the typical automobile driver.

For example, California requires a minimum of $5,000 of property liability coverage, which will generally cover the cost of a fender bender, but in the event of a three-car pile-up could be very inadequate.

This is what is called being underinsured and can pose a serious liability to the policy owner since they will be responsible for all costs above the insurance coverage.

When determining how much coverage you need, it is important to realize what would happen in the event of a large accident.

For example, if a young family of four who own a house and have $20,000 in savings caused an accident and were liable for $50,000 beyond the insurance coverage, it could be very detrimental to their overall financial security.

Auto insurance gives this family the ability to pass that risk onto the insurance company for a few extra dollars per year and helps to protect them in the event of a loss.

Factors That Impact the Cost of Car Insurance

Many things can affect the cost of car insurance and companies are very diligent about rating each driver to make sure their pricing is fair and reasonable based on the risk that they pose. When determining the price, here are a few things that are important in the decision:

Driving Record of the Insured: This includes accidents, traffic violations, and years of driving experience.

Many states have a maximum number of years that an insurance company can look back to when determining a driving record, so older violations or accidents have the potential to fall off.

Things like DUIs however, can hang around for a long time because they pose a very significant risk to the insurance company. See the best car insurance company for drivers with a bad driving record.

Take a look at how driving records can impact rates below.

Average Monthly Car Insurance Rates by Driving Record

Type of Automobile Being Insured: Sports cars are generally a higher risk than station wagons, and SUVs can do more damage to other cars than a compact. Other factors include engine size, number of doors, and the likelihood of theft, just to name a few.

Insurance companies look at a lot of data and determine which types of cars are more likely to result in a loss and adjust the premiums around those statistics.

Coverage Amount: The amount of liability the insurance company will be taking on is another big driver for the premium price. The higher the insurance amount the more exposure they have, therefore the more premium they will charge to the insured.

However, many people would be surprised when seeing how affordable additional coverage can be. For example, going from $30,000 of medical liability coverage to $100,000 is often a lot less expensive than someone would imagine since most accidents are minor.

That is why it is important to check quotes with different levels of coverage so you can see the price difference.

Car Insurance Premium Discounts

Insurance companies are often willing to give policy owners car insurance discounts for many different reasons. One of the easiest ways to get a discount is to carry multiple insurance policies with the same company, or if you own more than one car by setting up a multi-car policy. The more policies you carry in one place, the more you can potentially save.

Take a look at some common discounts and how much they can save you below.

Common Auto Insurance Discounts Offered by Company

You can also receive discounts on your liability insurance by maintaining a good driving record.

Insurance companies are constantly monitoring the Department of Motor Vehicles (DMV) records for any accidents or traffic violations their policy owners are incurring and often will issue discounts on policies for those that maintain a stellar record. The data shows that people with fewer violations are less likely to get in an accident.

Discounts can also be given for certain devices installed in the insured automobile.

Vehicle owners with LoJack typically pay 5% to 10% less for insurance than those without it. Some companies offer specific LoJack insurance discounts, which could lead to more savings.

For example, the Progressive LoJack discount is 20%. As for the Geico LoJack discount, they offer a 15% vehicle recovery system discount. And as for the State Farm LoJack discount, they offer a 5% vehicle recovery system discount. For the USAA LoJack discount, contact the company directly.

But note that because LoJack can reduce recovery time after a vehicle is stolen, discounts associated with the system primarily affect comprehensive coverage.

The Bottom Line: Types of Car Insurance Coverage

Car insurance isn’t one size fits all. Each driver has different insurance needs, and the best car insurance companies offer individualized policies to meet those needs.

Although there are various car insurance coverages to choose from, most states only require liability coverage. A few states also require uninsured/underinsured motorists, PIP, or MedPay coverage.

However, experts recommend full coverage, including state-mandated, collision, and comprehensive coverage. Full coverage provides the most protection for drivers and their vehicles. In addition, most insurers offer additional coverages, such as roadside assistance, rental car reimbursement, and usage-based insurance.

Once you determine what types of car insurance you need, shop around to find the cheapest coverage available. Each car insurance company offers different rates and coverages, so comparison shopping is essential.  

Compare car insurance rates online right now by entering your ZIP code below for fast, free quotes.