Types of Car Insurance Coverage

Your state’s minimum mandatory car insurance coverages won’t go very far, especially if you cause a serious wreck. And there are other types of car insurance you should consider, too.

By , J.D. · Villanova University School of Law
Updated by Dan Ray, Attorney · University of Missouri–Kansas City School of Law

Every state requires vehicle owners to prove they're able to pay for injuries and vehicle damage if they cause a car accident. Most drivers meet this requirement by buying auto insurance. But if you buy only the minimum car insurance required by your state's laws, you could be in for a surprise—not the good kind—if you cause a wreck that results in serious injuries.

We'll review the different types of car insurance coverages that are available, explaining the protection each offers. At the same time, we'll discuss the kinds and amounts of auto insurance that state laws typically require, and let you know why those coverages might not be enough to protect you when something goes wrong.

Liability Coverage

Liability insurance—the only coverage that most states require—comes in two varieties. Bodily injury (BI) coverage pays for personal injuries suffered by others (including pedestrians) in an accident that's your fault. Property damage (PD) coverage pays for losses to vehicles and other property in a wreck you cause. Note, importantly, that these coverages don't pay you for your personal injuries or property damage.

Most states require minimum BI coverage of around $20,000 to $25,000 for injuries to one person and $40,000 to $50,000 for injuries to all persons. In addition, a minimum PD coverage requirement of between $25,000 and $50,000 per accident is typical.

How much liability car insurance coverage do I need?

The minimum coverage amounts won't go very far if you cause an accident that results in moderate to severe injuries or property damage. Keep in mind that you're on the hook for all damages you cause, whether you have insurance or not. Having enough coverage might be all that stands between you and financial disaster.

If you can afford it, buy more liability coverage than what your state requires. Ask your insurance agent to do a coverage analysis and help you decide how much liability coverage is right for you.

Collision Coverage

Collision insurance pays to repair or replace your vehicle if it's damaged in a wreck. This coverage is a type of no-fault insurance, meaning it will pay even if you caused the accident. While the policy language varies, most often collision coverage applies if you collide with another vehicle or a stationary object, or if your car rolls over. But it might not cover vehicle damage that results from hitting an animal.

Collision coverage usually pays up to the actual cash value of your car, minus your deductible. You can buy replacement cost coverage, but it'll cost you more.

States don't require that you buy collision coverage. But your lender almost certainly will require it if you finance a car purchase with a loan or a lease.

Comprehensive Coverage

Comprehensive insurance pays for non-collision damages to your vehicle resulting from things like a falling tree branch, fire, a hail storm, or theft. And if your car gets damaged or destroyed in a collision with an animal, you can usually make a car insurance claim under your comprehensive coverage, and get your vehicle repaired or replaced.

As with collision insurance, standard comprehensive coverage typically only pays for the actual cash value of your vehicle, but you can buy replacement cost coverage for an additional premium. Your new car lender or lessor will require that you have comprehensive coverage for the life of your loan or lease.

Uninsured/Underinsured Coverage

While most states require minimum amounts of auto liability insurance, many drivers go without it. And lots of drivers who buy liability insurance only get the minimum required by state law. What happens if you're in an accident with an uninsured or underinsured at-fault driver?

The answer is that you might find yourself without compensation for your personal injuries or property damage unless you buy uninsured (UM) or underinsured motorist (UIM) insurance. In a nutshell, these coverages take the place of the at-fault driver's missing or inadequate liability insurance and will pay for your personal injuries and property damage up to your policy limits.

Only a few states require drivers to buy UM coverage.

How much UM and UIM coverage do I need?

You're generally allowed to buy the same UM and UIM coverage amounts as you have for your liability insurance. So, for example, if you have liability insurance coverage of $100,000 per person and $300,000 per accident, you can buy UM and UIM coverages with the same limits. If you can afford that much, buy it. Otherwise, get as much as is within your budget.

Personal Injury Protection (PIP)

Personal injury protection (PIP), also known as no-fault car insurance, is required in every no-fault state and is optional in several other states. PIP pays benefits to you and anyone else covered by your policy—usually family members and others riding in your vehicle who have no auto insurance of their own.

The amounts and kinds of benefits PIP pays vary widely from state to state. Typically, though, PIP covers at least some of your medical bills, lost wages, and the cost of household replacement services. Many states also require death benefits for surviving family members, as well as funeral and burial benefits.

As a kind of no-fault insurance, PIP pays even if you're to blame for the accident. In no-fault states that require PIP, the minimum coverage requirements vary from a few thousand dollars up to $50,000 or more.

Medical Payments (MedPay) Car Insurance Coverage

As the name suggests, medical payments coverage (sometimes called MedPay), pays your medical expenses, as well as those of your passengers, up to the limits of your coverage. MedPay will pay even if you're to blame for the wreck. MedPay isn't required by state law, but it's a popular add-on coverage and it tends to be fairly inexpensive.

"Gap" Car Insurance and More Coverage Options

If your car is totaled before you pay off your car loan or lease, its actual cash value may be less than what you still owe on it. If that happens, you must pay the difference between the loan or lease balance and the actual cash value—the "gap" amount—to your lender. Gap coverage protects you by paying most or all of this gap amount.

Do I Need Roadside Assistance/Service Car Insurance Coverage?

If you're already a member of a road service company like AAA, you don't need this coverage. If you aren't, you'll have to decide whether you're willing to pay for this convenience. Should you decide to get it, shop around for the best price.

Do I Need Rental Reimbursement Car Insurance Coverage?

The answer depends on your transportation situation. Do you have access to another vehicle you can use while yours is out of service? Can you get rides from friends or coworkers? If so, then you don't need rental reimbursement insurance. That said, it's usually pretty inexpensive and you might decide the cost is worth the convenience.

What Insurance Should I Get?

In general, the answer will depend on many factors, including:

  • your aversion to risk
  • how much insurance you can afford
  • the value of your car
  • how much you owe on your car
  • what state you live in, and
  • what other insurance coverage you have.

For example, if a health insurance plan covers you and your family, you might not need PIP (unless you live in a no-fault state) or MedPay coverage. At least some of what PIP and MedPay take care of likely is covered by your health insurance policy. If you're insuring an older car that's not worth much, it might be more cost-effective to forego collision or comprehensive coverage.

Get Help With Your Auto Insurance Needs

Auto insurance is one of those things you tend not to think much about—until you need it. Unfortunately, by that point, it's likely to be too late. If you cause a car accident and you don't have enough liability insurance or other coverage, you can't add it after the fact. Act now, before the worst happens. Speak to your attorney or your insurance agent about the kinds and amounts of insurance that are best for you.

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