Paul Sanchez
There are several types of auto insurance, and each covers specific circumstances or events. While not all states require the same coverage types, most states require drivers to have at least minimum liability coverage. Here are some of the most common types of auto insurance:
- Liability insurance
- Collision insurance
- Comprehensive insurance
- Uninsured motorist insurance
- Underinsured motorist insurance
- Medical payments coverage
- Personal injury protection insurance
- Gap insurance
- Towing and labor insurance
- Rental reimbursement insurance
- Classic car insurance
| Characteristics | Values |
|---|---|
| Number of Types | 6 Common Types |
| Mandatory or Optional | Some are Mandatory, Some are Optional |
| Liability Insurance | Pays for other people’s medical bills and property damage if you cause a car accident |
| Collision Insurance | Covers the repairs to or replacement of your vehicle after an accident |
| Comprehensive Insurance | Covers damage to your vehicle caused by something other than a collision |
| Uninsured Motorist Insurance | Covers medical bills and repairs to your vehicle if you’re hit by an uninsured driver |
| Underinsured Motorist Insurance | Covers medical bills and repairs if you’re in an accident with a driver whose insurance is not enough to cover the costs |
| Medical Payments Coverage | Covers certain medical expenses, funeral costs and health insurance deductibles for motorists who end up in car accidents |
| Personal Injury Protection | Covers certain medical bills, funeral costs and child care services after car accidents |
| Gap Insurance | Covers the difference between your vehicle’s value after an accident and the amount of money left on your car loan |
| Rental Reimbursement | Covers the cost of a rental car while your car is being repaired |
| Emergency Roadside Assistance | Provides assistance with towing, flat tires, jump starts, etc. |
| Mechanical Breakdown Insurance | Covers the costs of repairs to mechanical parts and systems |
| Usage-Based Insurance | A way to pay for insurance where the insurer tracks your mileage and driving habits in exchange for discounts |
What You'll Learn
Liability insurance
When choosing liability insurance, it is important to consider the coverage limits. There are typically separate limits for bodily injury liability per person, bodily injury liability per accident, and property damage liability per accident. The coverage limits should be chosen based on the policyholder's net worth to ensure adequate protection.
While liability insurance is crucial, it is important to note that it does not cover the policyholder's own injuries or vehicle damage in an accident. For that, additional coverages such as collision coverage or comprehensive coverage are needed.
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Collision insurance
The cost of collision insurance varies depending on factors such as the car you drive, your driving history, and your location. On average, it costs around $381 per year, but this can be higher or lower depending on your specific circumstances.
When deciding whether to get collision insurance, consider the value of your car and the cost of the coverage. If the cost of the coverage plus the deductible is higher than the value of your car, it may not be worth it. Additionally, if your car's value is less than or equal to the deductible, the coverage will not pay out if you file a claim.
If you decide to get collision insurance, you will need to choose a deductible amount, which can range from $100 to $1,000 or more. A higher deductible will result in lower insurance rates, as you will pay more out-of-pocket if you need to file a claim.
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Comprehensive insurance
Comprehensive coverage is different from collision coverage, which protects your car from damage caused by hitting another vehicle or object, regardless of fault. Collision coverage is also not required by state law but is required for leased or financed cars.
In addition to auto insurance, you can also add comprehensive coverage to other types of vehicle insurance, such as motorcycle, boat, and RV insurance.
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Uninsured motorist insurance
Uninsured motorist coverage includes two types of protection: uninsured motorist bodily injury (UMBI) and uninsured motorist property damage (UMPD). In the event that you are hit by a driver with no insurance, UMBI may cover medical bills for both you and your passengers, while UMPD may cover damage to your vehicle. If you are hit by a driver with insufficient insurance, underinsured motorist coverage, which is usually offered alongside uninsured motorist coverage, will protect you. This includes underinsured motorist bodily injury (UIMBI) and underinsured motorist property damage (UIMPD).
When deciding how much uninsured motorist coverage you need, you can choose the insurance limits of your coverage. For bodily injury coverage, it is recommended to match the amount of your liability coverage. For UMPD coverage, you can select a limit that reflects the value of your vehicle.
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Underinsured motorist insurance
Underinsured motorist coverage typically includes two parts:
- Bodily injury coverage, which covers medical bills and may cover lost wages
- Property damage coverage, which covers the cost to repair or replace your vehicle
However, in some states, only bodily injury coverage is available.
Underinsured motorist coverage is required in some states, including Connecticut, Kansas, Maine, Maryland, Minnesota, Nebraska, North Carolina, North Dakota, Oregon, South Dakota, and Vermont. In other states, it can be purchased as an endorsement on your car insurance policy.
Whether you need underinsured motorist coverage depends on a range of factors, including the laws in your state. It's a good idea to add this coverage to your policy if you want protection against the risk of paying for expensive repairs or replacement costs in the event of an accident with an underinsured driver.
Underinsured motorist coverage is different from uninsured motorist coverage, which covers cases in which the at-fault driver has no insurance at all.
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Frequently asked questions
The six most common types of auto insurance are liability insurance, collision coverage, comprehensive insurance, uninsured motorist coverage, medical payments coverage (MedPay), and personal injury protection (PIP).
Liability insurance covers damages caused to other people, while collision coverage takes care of repairs to your car.
Comprehensive insurance covers damage to your car caused by something other than a collision, such as vandalism, certain weather events, or accidents with animals.
