Purchasing auto insurance can be a complicated process with many options to consider. However, having the right policy is crucial to protect yourself financially in the event of an accident or vehicle damage. When shopping for coverage, it is important to understand the most common types available.
The optimal car insurance policy depends on several factors:
Your state's minimum insurance requirements
The make, model, age, and value of your vehicle
Your driving history and record
Your budget and desired protection
This guide will provide an overview of the major auto insurance categories including liability, collision, comprehensive, and uninsured motorist coverage. We will also discuss additional options like medical payments, rental reimbursement, and more that you may want to consider when putting together your policy.
Liability Insurance/Coverage
Liability insurance provides critical financial protection in the event you cause an accident resulting in bodily injury or property damage. It covers the costs you become legally responsible for related to damages suffered by other parties.
Though requirements vary by state, most mandate drivers carry a minimum level of liability coverage. Even in places where it is not compulsory, liability insurance is highly recommended.
Liability coverage has two components:
Bodily injury (BI) liability insures medical expenses, lost income, pain and suffering damages resulting from injuries to other motorists, passengers, and pedestrians.
Property damage (PD) liability pays for repairs or replacement costs to others' vehicles and property that you may damage in an at-fault collision.
Type |
What It Covers |
|---|---|
Bodily Injury Liability |
Injuries to others |
Property Damage Liability |
Damage to others' property |
Importantly, liability insurance does not apply to your own vehicle repairs or medical bills. It solely covers damages for which you are legally responsible.
While minimums vary, it is wise to purchase higher liability limits such as:
$100,000 bodily injury per person
$300,000 bodily injury per accident
$100,000 property damage per accident
Higher limits prevent significant out-of-pocket expenses if you cause a major accident. Overall, liability insurance provides affordable peace of mind, with premiums averaging just $30-$60 per month. For all drivers, it is a critical safeguard.
Collision Insurance/Coverage
Collision insurance is an optional coverage that pays for damage to your own vehicle resulting from an accident. While not legally required in any state, it provides important financial protection for most drivers.
Collision typically covers:
Repairs after colliding with another car, object, barrier, etc.
Rollover accident damage
Hit-and-run crashes where the other driver flees
Accidents where you are at fault
Conversely, collision does not apply to:
Non-collision damage from vandalism, weather, theft
Injuries to yourself or other parties
Harm to other vehicles or property
Type |
What It Covers |
|---|---|
Collision Insurance |
Damage to your own car after an accident |
Though optional, many lenders mandate collision coverage for financed vehicles. It is also wise for most drivers given today's high repair costs. Without it, you must pay these bills out-of-pocket.
Typically recommended limits are a $500 or $1,000 deductible along with actual cash value or replacement cost coverage. Premium costs range from $150-$600 annually depending on your vehicle, driving history, and deductible.
Drivers with older paid-off cars may remove collision coverage to save money. But for most, this affordable coverage provides essential protection by covering major repair bills.
Comprehensive Insurance/Coverage
Comprehensive insurance is an optional coverage that pays for damage to your vehicle unrelated to collisions. This includes:
Theft
Vandalism
Falling objects
Fire
Flood
Hail
Animal strikes
In essence, comprehensive protects against random non-crash incidents.
Type |
What It Covers |
|---|---|
Comprehensive Insurance |
Non-collision damage from weather, theft, vandals, etc. |
What comprehensive does not cover:
Collisions with other vehicles or objects
Rollovers
Injuries to you or occupants
Mechanical failures
While optional, many lenders require comprehensive coverage for financed vehicles, just like collision insurance. Carrying both provides complete protection from both collision and non-collision damages.
Typical recommended limits are a $500 or $1,000 deductible along with replacement cost value coverage. Average yearly premium costs range from $100-$300 depending on your vehicle, location, driving record, and deductible.
Other Coverage Options
Beyond the primary types of auto insurance, there are optional add-on coverages to consider:
Uninsured/Underinsured Motorist Protection
Uninsured (UM) and underinsured (UIM) motorist coverage protects you if hit by an uninsured or under-covered driver:
UM pays for injuries caused by uninsured at-fault drivers.
Covers medical bills, lost wages, pain and suffering.
Protects if the at-fault driver flees.
UIM covers gaps when the other driver's limits are inadequate.
Pays the difference between their limits and your total damages.
Type |
What It Covers |
|---|---|
UM |
Injuries from uninsured drivers |
UIM |
Injuries when other driver's coverage is insufficient |
Though not universally mandated, UM/UIM provides essential protection considering:
13% of drivers are uninsured.
Many only carry minimum liability limits.
UM/UIM fills coverage gaps to cover your injuries.
Recommended limits:
$100,000 per person
$300,000 per accident
Medical Payments Coverage
Medical payments (MedPay) cover accident-related medical bills up to set limits:
Pays regardless of fault.
Covers you, family, and passengers.
Typically $1,000 - $10,000 limits.
Includes ambulance, hospital, and rehab.
Not offered in all states.
Type |
What It Covers |
|---|---|
MedPay |
Medical bills from an accident up to limit |
MedPay benefits:
Covers health insurance deductibles/copays.
Quick no-fault payments.
Inexpensive addition.
Personal Injury Protection
PIP covers medical and other accident-related expenses:
Pays regardless of fault.
Covers medical, lost wages, and funeral costs.
Often required in no-fault states.
Limits typically $5,000 - $10,000.
Type |
What It Covers |
|---|---|
PIP |
Medical expenses and lost wages after an accident |
PIP offers comprehensive post-accident coverage:
Deal directly with your insurer.
Essential for drivers lacking health insurance.
Limit payouts with high deductibles.
Rental Reimbursement
Rental reimbursement covers rental cars while yours is repaired after a covered loss like an accident.
Pays up to policy limits - usually $15-$30 daily.
Lasts until your car is fixed or replaced.
This means no out-of-pocket rental costs if your car needs repairs.
Conclusion
When buying a car insurance policy, it is crucial to look beyond basic liability and consider other important coverage options:
Collision and comprehensive pay for damage to your own vehicle after an accident or incident.
Uninsured and underinsured motorist protection covers injuries caused by drivers who lack sufficient insurance.
Medical payments and personal injury protection (PIP) help pay medical expenses after an accident, regardless of fault.
Rental reimbursement provides coverage for car rental costs while your vehicle is being repaired.
Roadside assistance covers services like towing if your vehicle breakdown.
Classic car insurance offers specialized protection for collector vehicles.
Carefully review all of the auto insurance types available in your state. Compare options from multiple providers to find the right balance of premium affordability and adequate coverage for your situation.
Discuss your needs thoroughly with an agent to ensure you obtain the proper protection. Educating yourself on policy choices and picking options wisely is key to driving with peace of mind.
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