Different Types of Car Insurance

Most U.S. states require drivers to purchase car insurance to drive a car legally. However, there are many different types of car insurance. Therefore, when shopping for an auto insurance provider, it’s essential to know what the different types are so you can put together a policy that is just right for you.

What are the Different Types of Car Insurance

Many people do not even realize that there are different types of car insurance. Each type serves a specific purpose and covers other drivers or situations. There are six main types of car insurance, along with a few obscure types you may or may not ever need.

different types of car insurance

1. Liability

Liability insurance coverage is the most popular type of car insurance required by almost every state in the country. It pays for other people’s expenses such as medical bills if someone is injured and property damage after an accident.

Each state has specific laws about the fault of an accident, and those laws affect whose insurance company pays. Minimum coverage rates vary from state to state as well. Liability insurance is one type of insurance that you must have to drive legally in almost every state.

2. Collision

If you get into an accident with another vehicle or an object like a stone wall, collision insurance coverage will pay to replace your car or repair the damaged property. Collision coverage is almost always optional. However, if you lease or rent a vehicle, you may be required to purchase collision insurance to protect the car owner.

3. Comprehensive

Another type of insurance required when you lease or rent a vehicle is comprehensive auto insurance. It is optional for drivers who own their cars. Comprehensive insurance covers damage to the policyholder’s vehicle when something other than another car damages their vehicle. For example, if your car gets damaged by a hailstorm, you run into a deer, or your vehicle is vandalized, comprehensive insurance will pay for the expenses to fix the car.

4. Personal Injury Protection (PIP)

Personal injury protection, also known as PIP insurance, is not required in most states, but 13 states do require it. PIP helps pay for your medical expenses if you are injured in an accident. Personal injury protection also covers non-medical expenses like childcare or lost wages after an accident. In some cases, PIP insurance may cover up to 80% of your expenses.

5. Uninsured /Underinsured Motorist

If you suffer a severe car accident, relying on your own policy may not be enough. If your car is damaged by a hit-and-run driver and you are hurt, if you have uninsured motorist coverage, it will pay for your medical expenses and damages. If you are in an accident with someone who has only the bare minimum coverage, your underinsured motorist coverage will kick in and pay the rest. Twenty states in the U.S. require uninsured motorist coverage.

6. Medical Payments

Car accidents can cause serious injuries. Even if you are fully insured, your medical expenses could exceed the limits of your policy. A medical payments policy will pay the remainder of your medical expenses. If you are concerned that your policy may not cover all your medical costs, this is the add-on to choose.

Along with the different types of car insurance above, additional riders can be added to your policy to enhance your coverage. Some other types of car insurance include:

  • Guaranteed Auto Protection (GAP) - GAP insurance pays the differential between what your car is worth and what you still owe on it. If you have an upside-down loan, this is good coverage to have if you get into an accident that totals your vehicle.
  • Umbrella Insurance - Although not expressly car insurance, an umbrella policy will cover your personal property, which can include vehicles and lawsuits up to $1 million.
  • Rental Reimbursement - If you have an older car that needs frequent repairs, this type of insurance will reimburse you for the cost of a rental car. However, each policy may limit how much they will pay for rental vehicles and for how long. Read the fine print.
  • Emergency Roadside Assistance - If you do not have access to AAA services or some other roadside option, this can provide relief if you run out of gas, your car stops working, and needs to be towed to the shop, or you get a flat tire.
  • Mechanical Breakdown Insurance - Mechanical breakdown insurance acts like an extended warranty and can pay for parts and service if your car breaks down. Instead of having to pay an enormous bill when your vehicle is serviced, you can pay monthly with this type of policy.
  • Pay-as-You-Go Usage-Based Insurance - Some insurance carriers offer drivers discounts and usage-based insurance rates if they allow them to track your mileage and driving habits.
  • Non-Owner Car Insurance - Anyone who drives a car but does not own one might need this type of insurance. Someone trying to get their license back after a suspension would fall into that category.
  • SR-22 Insurance - SR-22 isn’t really a type of insurance but rather a form that insurance companies must file regularly, confirming that high-risk drivers do carry the legally required insurance limits. It is common after someone is convicted of a DWI/DUI.

Some insurance providers also offer specialty car insurance for classic cars, sound systems, ride-sharing services, towing, and other items.

How to Choose the Right Car Insurance Policy for You

When you contact an insurance provider to set up car insurance, they will take down your VIN and perform a VIN number check to match the details of the car with what you provided. They will also check whether the vehicle has been in any accidents, has open recalls, and other details so they can set your rates.

Some insurance providers will try to sell you the most expensive policy with all the bells and whistles. First, however, you should familiarize yourself with the state regulations regarding auto insurance and then decide what additional coverages you want to have based on your situation.