When you buy car insurance, you’re actually purchasing a combination of coverages that make up your policy. That’s why it’s helpful to know what types of car insurance you need and how to set your coverage limits.
In this article, we will discuss standard car insurance coverages and extras that you can add to your policy. Then, we will break down a few of our findings from our review of the best car insurance companies in the industry. So, buckle up and let’s get rolling.
Whenever you shop for car insurance, we recommend getting quotes from multiple providers so you can compare coverage and rates. Insurers personalize prices, so what’s best for your neighbor might not be best for you.
Use our tool above or call (844) 246-8209 to start comparing personalized car insurance quotes:
What Are The 6 Difference Types Of Car Insurance?
The six common types of car insurance that make up a standard policy are liability coverage, collision insurance, comprehensive insurance, medical payments coverage, personal injury protection, and uninsured and underinsured motorist coverage.
When you purchase a policy from any insurer, you’ll be mixing and matching these types of auto insurance along with any non-standard, additional coverage options you want to include. Depending on your state, some coverages may be mandatory, while some are optional.
Let’s take a closer look at each of the standard types of car insurance:
1. Liability Insurance (BI/PD)
Liability auto insurance covers you against damages to other people and their property. It is made up of bodily injury liability coverage and property damage liability.
When you cause an accident, liability insurance covers the damages, medical expenses, and legal fees if the other party leverages a lawsuit. It also covers the other party’s funeral expenses. Liability insurance will not cover any damages or injuries to you or your vehicle.
2. Collision Insurance
Collision insurance covers the cost of damages to your car from other cars or objects like telephone poles or guard rails. Generally, collision coverage also protects against rollovers and other similar accidents.
3. Comprehensive Insurance
Comprehensive car insurance picks up the slack where collision insurance leaves off, covering you against any other damages to your vehicle that aren’t due to a collision. Comprehensive insurance covers damages due to theft, vandalism, natural disasters, civil disturbances, and more.
4. Medical Payments Insurance (MedPay)
MedPay is self-explanatory: It covers the costs of vehicle-related medical treatments for both yourself and your passengers, regardless of whether you or another driver is at fault in an accident. This type of insurance is not available in all states.
5. Personal Injury Protection Insurance (PIP)
PIP is similar to MedPay, but there are a few differences between the two. While MedPay only covers the medical bills, PIP covers medical treatment and other injury-related losses such as lost wages from days you were unable to work.
No-fault states require PIP coverage, so PIP is also known as no-fault insurance.
6. Uninsured/Underinsured Motorist Insurance (UM/UIM)
While almost every state requires drivers to have car insurance before they get on the road, that doesn’t stop some motorists from breaking the law.
Underinsured and uninsured motorist coverage protects you in the case that you get into an accident with a motorist who doesn’t have sufficient insurance and consequently can’t cover your expenses. In most states, uninsured motorist coverage can cover damage from hit-and-runs, as well.
Use our tool below or call our team at (844) 246-8209 to start comparing car insurance quotes:
Other Types Of Car Insurance
While the six standard types of car insurance above are the backbone of every auto policy, they aren’t the only options available. Most car insurance companies have other coverage options, including:
- Rental car reimbursement: This covers the cost of a rental car in the case that an accident renders your car undrivable for an extended period of time.
- Accident forgiveness insurance: This insurance prevents your car insurance rates from going up after your first at-fault car accident. Read our full article to learn more about accident forgiveness insurance.
- Gap insurance: Gap insurance covers the difference between what you owe on a financed vehicle and what the car is actually worth in the case of a serious accident.
- Mechanical breakdown insurance: Similar to an extended car warranty, mechanical breakdown insurance covers the costs of repairs that are not related to an accident.
- Rideshare insurance: This covers drivers who are using their vehicle to drive for Uber, Lyft, and other ridesharing companies.
Many insurers also provide roadside assistance as an add-on that can cover towing and related services whether the cause is an accident or not.
Minimum Coverage Vs Full Coverage Insurance
To make things a bit simpler, car insurance policies are often divided into two camps: full coverage and minimum coverage policies. Each includes different types of car insurance.
Minimum coverage insurance policies cover the bare minimum insurance requirements that drivers need to have in place before legally hitting the road in their state. In Arizona, for example, all motorists need to have at least:
- $15,000 per person in bodily injury liability insurance
- $30,000 per accident in bodily injury liability insurance
- $10,000 per accident in property damage liability insurance
However, in Maine, state law requires drivers to have a minimum of:
- $50,000 per person in bodily injury liability insurance
- $100,000 per accident in bodily injury liability insurance
- $25,000 per accident in property damage liability insurance
- $50,000 per person in uninsured/underinsured motorist insurance
- $100,000 per accident in uninsured/underinsured motorist insurance
- $2,000 in medical payments coverage
Because of variations in minimum amounts of coverage, the cost of car insurance can be significantly higher in one state versus another.
For example, Maine car insurance laws require drivers to purchase more types of car insurance in greater limits than Arizona, so the average cost of insurance in the state is naturally higher.
Although purchasing an insurance policy that meets your state’s requirements may allow you to drive without breaking the law, low coverage limits don’t offer sufficient protection from a financial perspective.
Many states only require drivers to have liability insurance, for example. However, this means that in the case of an accident, drivers can incur tens of thousands of dollars of damage that they can’t cover on their own, sometimes even leading to financial ruin.
For this reason, many drivers prefer to take out so-called “full coverage” car insurance policies, which meet their state’s minimums and then some. While there is no universally agreed-upon definition of full coverage, the term usually refers to policies that offer a combination of the following types of car insurance:
By purchasing a full coverage policy, drivers won’t need to worry that a single accident will send them plummeting toward bankruptcy.
If you have a car loan, your lender will usually require you to have full coverage, anyway. Your lender owns your car until you pay it off, after all.
How Much Car Insurance Do You Need?
When deciding which types of auto insurance and how much car insurance coverage you need, you’ll need to consider:
- Your state’s minimum requirements
- How much you can afford to pay for insurance
- Your own personal risk tolerance
At the very least, you need minimum coverage – that part’s a given. Without having a minimum coverage policy, you could end up spending a few months in jail.
There are some circumstances that require you to take out more coverage. If you drive for Uber or Lyft, for example, you need rideshare insurance. Similarly, if you’re financing or leasing your vehicle, your lender may require you to have gap insurance.
Beyond that, you’ll have to consider how much you can reasonably afford to spend on insurance and what your own risk tolerance is. In general, we recommend you take out optional coverage including comprehensive and collision for extra financial protection.
To save money, you can choose a higher deductible for your collision and comprehensive coverage. Deductibles can go as high as $2,500. Even though that’s a lot of money to pay in an at-fault accident, it’s still less expensive than replacing someone’s totaled BMW.
Our Recommended Car Insurance Providers
n our research, we ranked USAA and Geico as two of the best car insurance providers in the United States. While researching any insurance company, make sure to review all of the types of car insurance available, along with details like cost, customer reviews, company reputation, and your discount eligibility.
USAA Insurance: 4.8 Stars
USAA receives our highest ratings across the board, ranking highly in customer service, level of coverage, and price. The provider has an A++ financial strength rating from AM Best, and it was rated highly in the J.D. Power 2021 U.S. Auto Claims Satisfaction StudySM.
What’s more, USAA tends to have the cheapest full coverage insurance policies out of every provider that we reviewed, proving that top-notch coverage need not come at a premium.
Unfortunately, USAA car insurance is only available for military members and their families, so most motorists won’t be able to take advantage of USAA insurance coverage. However, if you are eligible for USAA, we recommend you take a look at what the company has to offer.
To learn more, read our full USAA insurance review.
Geico Insurance: 4.6 Stars
Geico receives our second-highest ratings after USAA, and because it is available to non-military members, the provider is our first choice for customers overall.
We rank Geico highly for its great customer service, financial strength, reasonable rates, and convenience. Geico received an A++ financial strength rating from AM Best, which indicates that it has the financial wherewithal to fulfill claims, and it received a favorable ranking in J.D. Power’s Auto Claims Study. Along with standard types of auto insurance coverage, Geico has extras like rental reimbursement and mechanical breakdown insurance.
Geico puts an emphasis on technology, making it easy to file claims and receive quotes online and through an app in addition to traditional phone and in-person filing procedures. Geico’s app also has 4.7 out of 5 stars on Google Play with over 400,000 reviews.
While average premiums from Geico are generally higher than USAA, they are still quite reasonable and a cheap car insurance alternative.
To learn more, read our full Geico review.
FAQ About The Types Of Car Insurance
In an effort to provide accurate and unbiased information to consumers, our expert review team collects data from dozens of auto insurance providers to formulate rankings of the best insurers. Companies receive a score in each of the following categories, as well as an overall weighted score out of 5.0 stars.
- Industry Standing: Insurers with strong financial ratings and customer-first business practices receive the highest scores in this category.
- Availability: We consider availability by state as well as exclusions for specific groups of drivers.
- Coverage: This rating is based on types of insurance available, maximum coverage limits, and add-on policies.
- Cost and Discounts: Our research team reviews auto insurance rate estimates generated by Quadrant Information Services for a variety of drivers in every state. Companies with lower prices and many car insurance discount opportunities receive the best scores.
- Customer Service: We comb through customer reviews and consumer feedback studies from experts like J.D. Power.
- Technology: Auto insurers with mobile apps, advanced online services and telematics are more likely to meet consumer needs.