While car insurance will not prevent you from being in an accident, it can help cover your medical bills and repair costs. The type of coverage you purchase and the limits you select will determine how much your policy pays out. This guide will show you the most popular types of car insurance, their costs […]

While car insurance will not prevent you from being in an accident, it can help cover your medical bills and repair costs. The type of coverage you purchase and the limits you select will determine how much your policy pays out.

This guide will show you the most popular types of car insurance, their costs and when you might use them.

8 types (plus one) of car insurance

Liability Insurance

Your liability insurance covers you for damages, injuries, and even death if you cause an accident. This coverage is required by almost every state, except New Hampshire and Virginia. To purchase a vehicle at a dealership, you will need proof of insurance.

There is two types of liability coverage.

  • Bodily Injury Liability Covers the medical expenses resulting from an accident.

  • Property Damage Liability Covers the cost of repairs to other vehicles or structures, such as mailboxes, fences, mailboxes, and buildings.


Different liability types provide different amounts of coverage. These amounts are often written in three numbers. For example, 100/300/50 would mean $100,000 for every nonpassenger injures, $300,000. total payout for all bodily injury, and $50,000 for property damage. These numbers are applicable to every accident you cause.

Your policy may limit the amount of your car insurance. Additional expenses resulting from an accident will be your responsibility. If the property damage is $52,000, and your insurance covers $50,000, then you will need to pay $2,000.

Coverage for personal injury and medical payments

No matter who is at fault, personal injury protection (or PIP) and medical payments coverage (or MedPay) cover you for your medical expenses following a car accident. If you were the at fault driver, they also cover injured passengers’ medical costs.

No-fault insurance is also known as personal injury protection. It may cover funeral costs, child support, and lost wages from injuries resulting from an accident. In 17 states that have no fault, PIP and MedPay are required by law.

Coverage for uninsured or underinsured motorists

Uninsured motorist coverage covers expenses resulting from an uninsured driving hitting you. This coverage could be even more important than you think, as 1 in 8 drivers did not have car insurance in 2019, according a study by the Insurance Research Council.

Underinsured driver coverage pays out when the at fault driver’s insurance limits do not cover all the damages or injuries they cause.

Some states require minimum coverage for uninsured and underinsured motorists. These are the four types of coverage that may be required.

  • Uninsured motorist body injury coverage – This covers medical expenses incurred by an uninsured motorcyclist.

  • Uninsured motorist damage coverage or UMPD pays for repairs expenses caused by uninsured drivers.

  • Uninsured motorist bodily Injury coverage , or UIMBI pays out if injuries and repairs exceed the at-fault driver’s bodily injury liability limits.

  • Uninsured motorist property damages coverage , or UIMPD pays for repairs that exceed the at-fault driver’s property damage liability limits.

Collision coverage

Although comprehensive and collision insurance are not required in every state, they might be required in certain circumstances, such as if your vehicle was financed or leased. These coverages pay for your vehicle’s repair or replacement, or they pay the cost of repairing it if it is stolen or damaged beyond repair.

No matter who caused the accident, collision insurance covers damage to your vehicle. It also covers pothole damage and damage caused by hitting an object such as a pole or tree.

Comprehensive insurance covers your car if it is stolen or damaged in an accident. This includes damage caused by storms, floods and falling objects, explosions or earthquakes, vandalism, and hitting an animal (deer raccoon, armadillo). ).

A deductible is a cost you will have to pay before your insurance company pays. A higher deductible will result in a lower premium. However, the payout is dependent on your car’s cash value so comprehensive and collision may not be a good idea for older cars, especially if you have a high-deductible.

Gap insurance

The value of a new car starts to decline as soon as it leaves the lot. The value actually drops faster than the initial loan balance.

For a total of a new vehicle that hasn’t been paid off, gap coverage will pay the difference between the car’s value and the amount you owe on the loan.

If you lease a car, you will need to have gap insurance.


Sometimes, dealers offer gap insurance as part a lease payment. Dealerships may try to convince you to buy gap insurance when you purchase a car. Then they will roll it into your car loan. Both scenarios lead to interest charges on coverage that you can usually get cheaper through an insurance company.

TL:DR to learn more about these types of car insurance.

Coverage type

What it costs for

Medical expenses for injuries or death caused by an accident and property damage.

Repair and medical costs following an accident with an uninsured motorist.

Injuries resulting from an accident involving a driver who is not insured. This coverage is available once the coverage limits of an underinsured driver have been met.

Repair costs resulting from traffic-related injuries, regardless of who is to blame.

Repair costs resulting from events beyond your control, such as weather, vandalism, theft, and hitting an animal while driving.

You and your passengers will be covered for medical expenses after an accident, regardless of fault.

Medical expenses, lost wages, funeral costs, and other losses due an accident, regardless of fault.

The difference in what you owe and what your car is worth.

Other types of car insurance

There are many options for additional car insurance that you can add to your policy. These “extras” are usually not expensive to add to your policy. However, you might need to purchase collision or comprehensive insurance in order to be eligible for additional coverage types.

  • Rental reimbursement Covers a rental car while you wait for your car to be repaired under your insurance.

  • Roadside assistance helps you if you have a breakdown and need towing or battery jump. However, it might be more affordable from non-insurers.

  • Full coverage pays to replace or repair chipped or broken windows.

  • You are covered by rideshare insurance if you drive for Uber or Lyft. Rideshare companies typically only cover you if you have a passenger, or are going to pick one up. However, rideshare insurance covers you while you wait between fares.

  • The mechanical breakdown coverage covers repairs and replacement parts for vehicles that have suffered damage from an accident.

  • Coverage for custom parts and equipment value will cover modifications to your vehicle such as a new stereo system, or sweet spinner wheels.

  • Classic car insurance covers repairs to antique or classic cars. You can also get your vehicle insured for its full value.

After you have decided on the coverage options that you want, it’s time to start comparing auto insurance rates. NerdWallet recommends that you obtain at least three quotes in order to get the best deal possible on the type of car insurance you want.