In this article, we'll break down the various types of car insurance coverage so you can make an informed choice when you compare our best car insurance providers.
What Are the Different Types of Car Insurance?
The various types of car insurance coverage protect you in different ways, from covering repair costs after an accident to handling medical bills when injuries occur. Each type serves a unique purpose like safeguarding your vehicle, protecting against injuries, or providing essential services when unexpected incidents happen.
Here are the main types of car insurance coverage available:
- Liability insurance: Covers damages you cause to others in an accident
- Collision insurance: Pays for repairs to your car after an accident
- Comprehensive insurance: Protects against theft, weather damage, and other non-collision incidents
- Uninsured/underinsured motorist coverage: Safeguards you if you're hit by a driver with insufficient insurance
- Personal injury protection/medical payments coverage: Covers medical expenses for you and your passengers
- Gap insurance: Bridges the difference between your car's value and loan balance if your car is totaled
- Roadside assistance coverage: Provides help with breakdowns and other roadside emergencies
- Rental reimbursement coverage: Helps cover temporary transportation costs while your car is being repaired
Liability Car Insurance
Nearly every state requires drivers to have liability insurance by law. The only exception is New Hampshire, where, according to the State of New Hampshire Insurance Department, drivers aren't required to buy insurance but must prove they have enough money to pay for damages if they cause an accident. If New Hampshire drivers can't show they have this financial backup, they risk losing their license.
Liability car insurance protects others involved in accidents you cause, covering both injuries and property damage. It includes two main components:
- Bodily injury liability insurance: Covers medical expenses for other drivers and their passengers when you're at fault in an accident. This includes hospital bills, rehabilitation expenses, and related medical care.
- Property damage liability insurance: Pays for repairs or replacement of other people's property damaged in an accident you cause. This extends beyond just vehicles to include structures like fences, mailboxes, buildings, or landscaping.
Note: Liability insurance doesn't cover your own injuries or vehicle damage—it specifically protects others affected by accidents where you're responsible.
Collision Car Insurance
Collision insurance protects your vehicle when accidents happen, regardless of who's at fault. Unlike liability insurance, which only covers damage you cause to others, collision coverage pays for repairs to your own car after an accident.
This optional coverage kicks in when your vehicle collides with:
- Another car, whether you caused the accident or not
- Fixed objects like guardrails, street signs, or telephone poles
- Barriers or medians on the road
- Structures like garage doors or fences
For example, if you slide on ice and hit a guardrail, or if another driver runs a red light and crashes into your car—collision insurance would cover your repair costs (minus your deductible).
Comprehensive Car Insurance
While collision coverage protects your car in accidents, comprehensive insurance safeguards your vehicle against non-collision-related damage from events beyond your control. This coverage steps in when your car is damaged by:
- Natural disasters and severe weather (floods, hurricanes, hail)
- Theft and vandalism
- Fire
- Animal collisions
- Falling objects and windshield damage
Though comprehensive coverage is optional, it's particularly valuable for newer or more expensive vehicles. However, as your car's value decreases over time, you might consider dropping this coverage. Insurance experts suggest reevaluating your need for comprehensive insurance when your car's value drops below a few thousand dollars.
Uninsured and Underinsured Motorist Coverage
Despite laws requiring car insurance in most states, some drivers either carry insufficient coverage or none at all. Uninsured and underinsured motorist coverage protects you financially in these situations. This coverage helps pay for:
- Repairs to your vehicle after an accident with an uninsured driver
- Additional repair costs when an at-fault driver's insurance isn't enough
- Damages from hit-and-run accidents
- Medical expenses for you and your passengers
While not required everywhere, more than 20 states mandate this coverage, including Connecticut, Illinois, Massachusetts, New York, and Oregon. This requirement reflects the importance of protecting yourself against drivers who may not carry adequate insurance.
Personal Injury Protection (PIP) and Medical Payments Coverage
When accidents result in injuries, Personal Injury Protection (PIP) and Medical Payments (MedPay) coverage help with medical expenses, regardless of who caused the accident. While similar, these coverages offer different levels of protection.
Personal Injury Protection (PIP)
Also known as no-fault insurance, PIP provides comprehensive coverage for accident-related expenses, including:
- Medical and hospital bills
- Lost wages if you can't work
- Rehabilitation costs
- Essential services like childcare and household help
- Funeral expenses
PIP is required in 13 states, including Florida, Michigan, New York, and New Jersey, but can be valuable even where it's optional. For example, if you rely on your income to pay bills or don't have comprehensive health insurance, PIP can provide crucial financial protection after an accident.
Medical Payments Coverage (MedPay)
MedPay offers more focused protection, covering:
- Medical expenses
- Funeral costs
While only required in Maine and New Hampshire (if purchasing insurance), MedPay can provide supplemental medical coverage in states where PIP isn't available.
Gap Insurance
If your car is totaled in an accident, standard insurance only pays for your vehicle's current market value—which can be significantly less than what you still owe on your loan. Gap insurance bridges this financial difference, protecting drivers who:
- Have financed a new vehicle
- Made a small down payment
- Have a loan term longer than 48 months
- Lease their vehicle
For example, if you owe $25,000 on your car loan but your damaged vehicle is only worth $20,000, gap insurance would cover the remaining $5,000. This protection is especially valuable during the first few years of car ownership when depreciation is highest.
Other Optional Car Insurance Coverages
Beyond standard coverage options, several additional protections can enhance your car insurance policy based on your specific needs.
- Roadside assistance: Sometimes referred to as towing and labor insurance, roadside assistance coverage can help if your car breaks down or you get a flat tire. It pays for towing, tire replacement, or jumpstarting your car’s battery.
- Rental reimbursement: This helps cover transportation costs while your car is being repaired after a covered accident. It’s particularly valuable if you rely on your vehicle for daily commuting or don't have access to alternative transportation.
- New car replacement: If your new car is totaled within the first year or two of ownership, this coverage ensures you receive enough money to replace it with a similar new vehicle rather than just its depreciated value.
- Windshield insurance: Covers repair or replacement of your windshield if it's damaged by rocks or debris. Coverage details and deductibles vary by policy and state.
- Rideshare insurance: Essential for drivers working with services like Uber or Lyft, this coverage fills the gap between personal and commercial insurance when using your vehicle for business purposes.
How to Choose the Right Car Insurance Coverage for Your Needs
Selecting the right car insurance requires balancing protection with affordability. Consider these key factors when making your decision:
Vehicle considerations: The age and value of your car help determine your coverage needs. Newer or financed cars typically need full coverage, while older vehicles might only need liability. Leased vehicles usually require gap insurance.
Financial factors: Your budget affects both coverage and deductible choices. While higher deductibles can help lower monthly car insurance payments, they also mean more out-of-pocket costs after an accident. Consider your savings and ability to pay for unexpected repairs when choosing your coverage levels.
Risk assessment: Your driving habits and environment influence coverage needs. When choosing coverage levels, factor in your daily commute, typical road conditions, and parking situation (garage vs. street parking).
State requirements: Start with your state's minimum requirements, then add protection based on personal needs. Research potential insurers' financial strength and customer service ratings through independent sources like the National Auto Insurance Commissioners' (NAIC) complaint index.
