The 8 Key Types of Car Insurance
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Car insurance won’t keep you from getting into an accident, but it can help you deal with the medical bills and repair costs afterward. The most common types of car insurance are:
Other types of car insurance coverage include rental reimbursement, roadside assistance, new-car replacement insurance and rideshare insurance.
» MORE: What is auto insurance?
Liability coverage includes two types of car insurance
If you cause a car accident, your liability insurance covers the other driver’s bills for property damage, injuries or even death. Almost every state requires this coverage for all drivers, and you’ll need proof of insurance to legally drive a vehicle.
There are two types of coverage included in liability insurance:
Bodily injury liability covers the medical expenses from an accident you caused.
Property damage liability covers the repair costs to other vehicles, fences, mailboxes or buildings from an accident you caused.
These two categories of liability insurance offer different coverage amounts, usually written as three numbers. For example, 100/300/50 means a policy offers up to $100,000 of bodily injury coverage for each person injured, a $300,000 total possible payout for all bodily injury expenses per accident and a $50,000 total payout for property damage per accident. Your policy may pay only up to these limits, so if property damage from an accident you cause comes out to $52,000 but your liability insurance only covers $50,000, you’ll need to pay the remaining $2,000.
Collision and comprehensive insurance
Collision and comprehensive insurance are optional in every state, but they may be required in certain situations, like if you financed or leased your vehicle. The limit on these types of car insurance is the value of your car at the time of the wreck, and the coverage pays to fix your car or pay out its value if it’s stolen or damaged beyond repair.
The differences between these car insurance types is that:
Collision insurance pays for damage to your car after an accident, regardless of who was at fault. It will also pay for damage to your car from hitting a pothole or an object like a tree.
Comprehensive insurance pays out if your car is stolen or damaged by something other than a car accident. That includes damage from storms, floods, falling objects, explosions, earthquakes, vandalism or hitting an animal.
Because comprehensive and collision payouts are limited by your car’s value, It might not not make sense to have these types of coverages for older cars with little cash value, especially if you also have a high deductible.
Personal injury protection and medical payments coverage
Personal injury protection, or PIP, and medical payments coverage, or MedPay, cover you and your passengers’ medical expenses after a car accident no matter who was at fault. These types of car insurance differ from bodily injury liability coverage because they’ll pay out no matter who caused the accident, up to your policy limits.
PIP, sometimes called no-fault insurance, covers medical bills caused by a car accident regardless of who is at fault. Depending on where you live, PIP may also cover lost wages, disability costs and funeral expenses.
MedPay covers your or your passengers’ medical bills and even health insurance copays for doctor or hospital visits caused by a car accident, regardless of who is at fault.
PIP or MedPay is required by law in no-fault states, but may be an optional type of car insurance depending on where you live.
Uninsured and underinsured motorist coverage
Uninsured motorist coverage pays for expenses that result from an uninsured driver hitting you. This could be more important than you might expect because about 1 in 7 drivers didn't have car insurance in 2022, according to a 2023 study by the Insurance Research Council.
Underinsured motorist coverage, on the other hand, pays when the at-fault driver’s insurance limits are too low to cover all of the injuries or damage they caused.
Some states require a minimum amount of uninsured or underinsured motorist coverage. Here are four coverage types that might be required, depending on your state’s minimum requirements:
Uninsured motorist bodily injury coverage, or UMBI, pays for medical expenses caused by an uninsured driver.
Uninsured motorist property damage coverage, or UMPD, pays for repair expenses caused by an uninsured driver.
Underinsured motorist bodily injury coverage, or UIMBI, pays for medical bills that cost more than an at-fault driver’s bodily injury liability limits.
Underinsured motorist property damage coverage, or UIMPD, pays for repair expenses that cost more than an at-fault driver’s property damage liability limits.
Gap insurance
In most cases, a new car’s value can drop faster than the loan balance at first. If you total a new car that hasn’t been paid off yet, gap insurance will cover the difference between what the car is worth — which would be covered by comprehensive or collision insurance — and how much you still owe on your loan.
If you’re leasing a car, the leasing company may require you to carry gap insurance.
Dealerships sometimes include gap insurance as part of a lease payment. They may also try to get you to purchase gap coverage when you buy a new car and then roll that into your car loan. However, both scenarios result in paying interest on types of car insurance you can typically get cheaper through an insurer.
Other types of car insurance
You can choose from a variety of other car insurance types to add to your policy. Most of these “extras” don’t cost much and provide additional, situation-specific coverage for your vehicle.
However, you may need to buy collision and comprehensive insurance to be eligible to add some car insurance types to your policy.
Rental reimbursement pays for a rental car while your car is in the shop for a repair covered under an insurance claim.
Roadside assistance gets you help if your car breaks down and you need a battery jump or towing service.
New-car replacement insurance pays for a brand-new car of the same make and model, minus your deductible, if you total your new car.
Full glass coverage pays to repair or replace chipped or broken window glass.
Rideshare insurance covers you when you’re driving for a rideshare service such as Uber or Lyft by providing coverage for the time when you’re waiting between fares.
Mechanical breakdown coverage pays for repairs or replacement parts if your vehicle breaks down even if there is not an accident or external cause of damage.
Custom parts and equipment value coverage will repair or replace modifications to your vehicle, like a new stereo system or those sweet, sweet spinner rims.
Classic car insurance covers repairs on classic or antique cars. It will also insure your vehicle for its full appreciated value, as agreed upon by you and your insurance company.
Business or commercial auto insurance covers you when you’re using your vehicle for commercial or small-business purposes.
Once you decide which coverage options you need, you’ll also want to shop around to compare auto insurance rates. NerdWallet recommends getting at least three quotes to make sure you get the best possible deal on the types of car insurance coverage you choose.
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