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 cover the medical bills and repair costs afterward. How much your policy will pay out depends on the types of car insurance coverage you buy and the limits you choose.
Here’s a guide to the most common car insurance types, what they pay for and when you might need them.
8 types of car insurance (plus 1)
If you cause a car accident, your liability insurance covers the other driver’s bills for any damage, injuries or even death. Almost every state (except New Hampshire and Virginia) requires this coverage for all drivers, and you’ll need proof of insurance to buy a vehicle from a dealership.
There are two types of liability coverage:
Bodily injury liability covers the medical expenses from an accident.
Property damage liability covers the repair costs to other vehicles, fences, mailboxes or buildings.
Different liability types offer different coverage amounts. These amounts are usually written as three numbers. For example, 100/300/50 means $100,000 bodily injury for each nonpassenger injured, $300,000 total possible payout for all bodily injuries and $50,000 total payout for property damage. These numbers apply to each accident you cause.
Your car insurance may pay only up to the limits included in your policy. You’ll be responsible for additional expenses from the accident. So if the property damage comes out to $52,000 and your insurance covers $50,000 of that, you’ll need to pay the remaining $2,000.
Personal injury protection and medical payments coverage
Personal injury protection, or PIP, and medical payments coverage, or MedPay, cover your medical expenses after a car accident no matter who was at fault. They also cover medical expenses for injured passengers if you were the at-fault driver.
Personal injury protection, sometimes called no-fault insurance, may also cover funeral costs, child care or lost wages due to injuries from an accident. PIP or MedPay is required by law in 17 no-fault states.
Uninsured and underinsured motorist coverages
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 8 drivers didn't have car insurance in 2019, according to a 2021 study by the Insurance Research Council.
Underinsured motorist coverage, on the other hand, pays out 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:
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 out if the cost of injuries and repairs is more than an at-fault driver’s bodily injury liability limits.
Underinsured motorist property damage coverage, or UIMPD, pays for repair costs that surpass the at-fault driver’s property damage liability limits.
Collision and comprehensive coverages
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 coverage types is the value of your car at the time of the wreck, and they pay to fix your car or pay out its value if it’s stolen or damaged beyond repair.
Collision insurance pays for damage to your car after an accident, regardless of who was at fault. It will also pay for pothole damage or damage from hitting an object like a pole or tree.
Comprehensive insurance pays out if your car is stolen or damaged by anything other than a car accident. That includes damage from storms, floods, falling objects, explosions, earthquakes, vandalism or hitting an animal (deer, raccoon, armadillo, etc.).
Comprehensive and collision coverage generally come with a deductible, which is an amount you’ll have to cover before your insurer pays anything. Choosing a higher deductible means your premium will be lower. But because that payout is limited by your car’s value, comprehensive and collision might not make sense for older cars with little cash value, especially if you also have a high deductible.
A new car’s value starts to drop the moment it leaves the car lot. In fact, the value drops faster than the loan balance at first.
If you total a new car that hasn’t been paid off, gap insurance will cover the difference between what the car is worth and how much you still owe on your loan.
And if you’re leasing a car, the leasing company will 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 coverage you can typically get cheaper through an insurer.
Other car insurance types
You can choose from a variety of extra car insurance types to add to your policy. Most of these “extras” don’t cost much to add, but you may need to buy collision and comprehensive insurance to become eligible for more coverage types.
Rental reimbursement covers a rental car while your car is in the shop for a repair covered under an insurance claim.
Roadside assistance gets you help if you break down and need a battery jump or towing service, but it may be cheaper from noninsurers.
New-car replacement insurance works a lot like gap insurance, which pays for the value of a new car if yours is totaled in an accident.
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. Most rideshare companies only cover you when you have a passenger or are heading to pick one up; rideshare insurance extends to include 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.
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 you get at least three quotes to make sure you’re getting the best possible deal on the types of car insurance coverage you choose.