Buying an auto insurance policy can be overwhelming. There are many types of car insurance coverage, and it can be difficult to know which type of coverage and limits are right for you. Learn about the critical aspects of auto insurance coverage and tips for determining which type of coverage you need.
- The main types of car insurance are liability, collision, comprehensive, medical payments, personal injury protection and uninsured/underinsured motorist coverage.
- Other coverages like collision and comprehensive are optional, although your lender might require you to carry them if you don’t own your vehicle outright.
- Carrying the minimum level of coverage can be risky because it probably won’t cover all the damages if you’re at fault in an accident.
What are the different types of car insurance?
There are a few main types of car insurance coverage: Liability (which has limits attached), full coverage (comprises comprehensive and collision), medical payments coverage, personal injury protection (PIP) and uninsured/underinsured motorist coverage (UIM).
Car insurance type No. 1: Liability coverage
There are two significant types of liability coverage:
- Bodily injury liability covers injuries that you cause to someone else.
- Property damage liability covers damages you cause to someone else’s property.
Most states require drivers to carry a minimum level of liability coverage, but drivers should consider purchasing more coverage than the state minimum. State minimum limits are extremely low and typically don’t offer much legal protection if you’re found at-fault in an accident.
If you get in a crash and are at fault, you will be held legally responsible for damages that exceed the dollar-amount limits of your coverage, says Rick Kautzer, associate director of personal lines product management for Dairyland, a Stevens Point, Wisconsin-based insurer.
“This can include another driver’s medical costs or the repair costs to their vehicle,” he says.
What does it cover?
Bodily injury liability covers the following for those you injure in an accident that’s your fault:
- Medical expenses
- Funeral expenses
- Loss of income
- Pain and suffering
- Legal defense if a lawsuit results from the auto accident
Property damage liability covers:
- Damage you cause to another driver’s car
- Damage to another’s property, such as fences
How much do you need?
The following are a few recommendations for coverage from CarInsurance.com editors to adequately protect your finances in case of an accident.
If your net worth is:
- less than $50,000, choose at least 50/100/50
- between $50,000 and $100,000, select at least 100/300/100
- more than $100,000, select at least 250/500/100
In a worst-case scenario – such as driving and badly injuring or killing someone – having the proper liability coverage can save you from financial ruin.
Car insurance type No. 2: Collision coverage
Collision coverage reimburses damages when your vehicle collides with another car or object. Collision coverage also protects you if your car flips in a single-vehicle crash.
Collision coverage is not mandatory in any state. However, your lender may require you to carry this protection if you finance your auto purchase.
Drivers who own their cars outright and no longer have a car loan can decide whether to continue to pay for this coverage. You might consider dropping collision coverage if your vehicle is old and not worth much.
However, if you do, you must pay out of pocket to repair the damages associated with these crashes.
What does it cover?
- Damage to your car from a collision
- Damage to your car if it flips or rolls over
How much do you need?
Collision coverage is optional in all states. It’s typically affordable, and it’s wise to have it if you have a newer car. If you finance or lease your car, you must buy collision coverage. Collision coverage has a deductible, the amount you pay before insurance kicks in, and it pays out up to the cash value of your car. Typical deductible amounts range from $250 to $2,500.
Coverage recommendations:
- If your car is less than 10 years old, you should consider buying collision
- If your car is over 10 years old, purchase collision if your car is worth $3,000 or more
- Buy collision if you can’t afford to replace your car
Car insurance type No. 3: Comprehensive insurance
This type of insurance reimburses you for damages to your car that result from something other than a collision. Comprehensive coverage helps to pay for the repair if someone vandalizes or steals your car or a flying object dents the car during a windstorm.
As with collision insurance, this coverage is optional, but a lender may require you to carry it. Also, some drivers drop this coverage when the value of their car drops to a low level.
How much do you need?
Coverage recommendations:
- If your car is less than 10 years old, you should consider buying a comprehensive
- If your car is over 10 years old, buy comprehensive if your car is worth more than $3,000
- Buy comprehensive if you can’t afford to repair your car
- Buy comprehensive if you live in a region prone to flooding, hail or animal strikes
Comprehensive insurance is usually optional, but you may be required to buy it if you take out a loan to purchase or lease a car. Comprehensive coverage has a deductible, the amount you pay before insurance kicks in, and it pays out up to the cash value of your car.
What does it cover?
- Damage to your car from flooding, hail, wind and fire
- Vandalism to your car
- Stolen cars
- Damage from hitting animals, such as deer, elk or moose
- Damage from falling objects, such as trees
Car insurance type No. 4: Medical payments insurance
Medical payments insurance (MedPay) can help cover your healthcare bills if you or a passenger are injured in a crash. There is a dollar limit on this type of coverage, and any expenses you incur above this limit are not covered. Requirements and availability of MedPay vary by state.
What does it cover?
This type of coverage can help pay for everything from doctor and hospital services to ambulance fees, X-rays and nursing services for you, your passengers, family members and people you let drive your car, regardless of who is at fault in the accident:
- Medical expenses include hospital visits and stays, surgery, dental, nursing and X-rays
- Funeral expenses
- Injuries if hit by a car or bike while walking (in some states)
- Injuries as a passenger in another driver’s car
How much do you need?
MedPay pays out, up to your limit, for each individual in the accident. It is usually available for up to $10,000.
- MedPay can work with your health insurance to cover the costs of an accident
- You may use MedPay to pay your health insurance deductible or co-pays
- If you have a high health insurance deductible, MedPay is recommended
Which states require medical payments insurance?
Medical payments coverage, also known as MedPay, is mandatory in Maine. The state laws require drivers to get a minimum of $2,000 in MedPay coverage per person. It’s interesting to note that New Hampshire doesn’t mandate car insurance. However, if you choose to get car insurance in New Hampshire, you must purchase at least $1,000 in MedPay insurance.
Car insurance type No. 5: Personal injury protection coverage
This type of insurance provides coverage when you or a passenger are hurt in a crash.
Personal injury protection (PIP) coverage also can help cover other expenses, such as lost wages, funeral expenses and the cost of services such as housekeeping that you may not be able to perform on your own after an injury. Some types of PIP coverage will even cover your health insurance deductible.
What does it cover?
Coverage for you, your passengers, family members and those you allow to drive your car, regardless of who is at fault for the accident:
- Medical expenses
- Lost wages (a percentage of your income)
- Funeral expenses
- Cost for house cleaning, child care and other tasks you cannot perform if injured (loss of essential services)
- Also covers you and your family members if hit by a car while walking
How much do you need?
You must carry PIP if you live in a no-fault state. Each state has its own minimum requirements for this type of coverage. If PIP is optional in your state, buying PIP coverage is a good idea if you have little savings to live on if you’re injured and lose your income.
“Living in a no-fault state makes personal injury protection a requirement, not an option,” Ark Insurance Group founder Noah White says. “Personal injury protection protects and covers medical expenses, hospital expenses and sometimes accidental death, depending on the policy.”
What states require PIP coverage?
Find below the list of states that require drivers to purchase PIP coverage:
- Delaware
- Florida
- Hawaii
- Kansas
- Kentucky
- Maryland
- Massachusetts
- Michigan
- Minnesota
- New Jersey
- New York
- North Dakota
- Oregon
- Pennsylvania
- Utah
Car insurance type No. 6: Uninsured/underinsured motorist coverage
Some drivers carry inadequate insurance or illegally drive without insurance coverage. One in eight drivers is uninsured, according to the Insurance Information Institute. In some states that number goes up to 20% — or more — of uninsured drivers.
Uninsured and underinsured motorist coverage protects you when you are hit by a driver who lacks proper insurance coverage.
“If you’re in an accident caused by another driver who doesn’t carry insurance – or enough of it – uninsured and underinsured motorist insurance can help cover your losses,” Kautzer says.
What does it cover?
Uninsured motorist coverage pays your medical bills and those of passengers when an uninsured motorist is at fault. It might also reimburse you for lost wages.
Uninsured motorist property damage (UMPD) pays for damages to your vehicle or property that are the fault of an uninsured motorist.
Underinsured motorist coverage helps reimburse you when you suffer damages due to a driver who has insurance, but not enough coverage to reimburse your claim entirely.
How much do you need?
Some states require this type of coverage, while others make it optional.
But without UM/UIM bodily injury coverage, you could be stuck either paying for your injuries or suing a driver with limited financial resources to recoup your costs.
What happens after an accident with an uninsured/underinsured driver depends on your state insurance laws.
In no-fault states:
- Your insurer would pay for medical expenses under personal injury protection (PIP). Personal injury protection limits in no-fault states are typically low, so even a minor accident could leave you with expenses after a claim payment. And, though your health insurance may help pay your leftover medical expenses, it won’t pay for lost wages or pain and suffering, which is where UM/UIM bodily injury coverage can help.
- No-fault (PIP) coverage does not cover physical damage to your car, so you need UMPD or collision to make a claim for your vehicle’s damage.
In a tort state (a state where you can sue for damages):
- To get compensated for an accident caused by an uninsured/underinsured driver, you may have to sue for damages. And, it’s likely the driver won’t have much money or any assets even if you take him to court.
- Your MedPay, if you have it, will cover you up to your limits in this instance, but if your limits are too low to cover all your costs, you will be stuck paying out of pocket or resorting to litigation.
- If you have PIP coverage and no collision, it will only cover medical expenses – not property damage – so you need uninsured motorist property damage to make a claim for your vehicle’s damage.
What states require UM/UIM coverage?
Here is a list of states that require uninsured and underinsured motorist coverage:
- Connecticut
- District of Columbia (DC)
- Illinois
- Kansas
- Maine
- Maryland
- Massachusetts
- Minnesota
- Missouri
- Nebraska
- New Hampshire
- New Jersey
- New York
- North Carolina
- North Dakota
- Oregon
- South Carolina
- South Dakota
- Vermont
- Virginia
- West Virginia
- Wisconsin
Other types of car insurance
Several other car insurance categories are optional:
- Gap coverage: Cars depreciate quickly, and you can easily find yourself with a car worth less than what you owe. Gap insurance covers the gap between how much your car is worth and the amount you owe on your car loan after a total loss.
- Rental car reimbursement: Rental reimbursement coverage reimburses you for using a rental car when your car is damaged in a covered claim and needs repairs that will take some time to complete.
- Towing/roadside assistance: This type of coverage can reimburse expenses such as jumping a dead battery to towing it to a garage.
Get an estimate for your car insurance costs by using our car insurance calculator
How do I choose the types of car insurance coverage I need
Choosing the right car insurance coverage doesn’t have to be complicated. Every state has minimum insurance requirements, covering liability for injuries and property damage you cause. It ensures you’re legal to drive but might not offer enough protection.
After meeting the minimum, consider how much more coverage you can afford. Comprehensive and collision coverages are optional but worth considering. If your car is new and valuable, these can be lifesavers. Besides, if you have a loan or lease on your car, your lender will likely require you to purchase both coverages. However, if your vehicle is older and its value is low, you can skip these to save on premiums.
To keep premiums low without sacrificing coverage, compare quotes from various insurers and research the average rates in your area to ensure you’re getting a fair deal.
Chris Kissell contributed to this story
Resources & Methodology
Sources:
- The Hartford. “Personal Injury Protection (PIP) Car Insurance.” Accessed April 2024.
- Insurance Information Institute. “Auto Insurance Basics.” Accessed April 2024.
- Insurance Information Institute. “Does auto insurance cover a rental replacement car after an accident?” Accessed April 2024.
- Insurance Information Institute. “Protect yourself against uninsured motorists.” Accessed April 2024.
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Laura Longero is an insurance expert and Executive Editor at CarInsurance.com, where she specializes in helping consumers navigate the complexities of the financial and insurance industries. She has 15 years of experience educating people about finance and car insurance. Prior to joining CarInsurance.com, she worked as a reporter and editor at the USA Today Network. Her expertise provides readers with practical guidance, helping them make informed choices about their financial and insurance needs.
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