8 types of car insurance coverage

Liability insurance

Liability insurance is car insurance designed to cover damages and injuries you cause to others in an accident. However, it does not cover your own vehicle repairs or medical expenses. Instead, it helps pay for the other party’s property damage, medical bills and legal costs if you're found at fault.

Liability insurance has two main components: bodily injury and property damage:

• Bodily injury liability: This covers medical bills, lost wages and other costs incurred by the injured party when you are at fault. This can also extend to legal costs if the injured party sues you for damages.
• Property damage liability: This helps pay for repairs to the other party's vehicle or other property you damaged in the accident, such as fences or buildings.

While the federal government sets broad insurance guidelines, each state determines its own minimum liability insurance requirements.

For example, Texas follows the 30/60/25 rule: drivers must have at least $30,000 of coverage for injuries per person, up to $60,000 per accident and $25,000 for property damage. In Connecticut, the minimum liability coverage is $25,000 for bodily injury per person, $50,000 per accident and $25,000 for property damage.

Since each state has its own requirements, it’s important to carefully research the rules in your state to avoid legal or financial trouble.

What happens if I don’t have liability insurance?

If you're caught driving without liability insurance, the consequences can be severe. If you are underinsured, you could be responsible for paying the difference between your insurance coverage and the actual costs.

For example, in California, drivers may face fines, license suspension and even vehicle impoundment (the towing and storage of a vehicle by authorities). In Texas, while the state law requires minimum liability limits, the Department of Insurance recommends carrying higher coverage to avoid potentially significant out-of-pocket expenses in the event of a serious accident.

Collision insurance

Collision insurance is a type of car insurance that helps pay for repairs to your vehicle if it’s damaged in an accident, regardless of who is at fault. Unlike liability insurance, which covers the other party’s expenses, collision insurance covers your vehicle. It can also help cover the cost of replacing your car if it’s totaled in an accident.

Here’s what collision insurance covers:

• Vehicle repairs: If your car is damaged in a collision, collision insurance helps pay for the repair costs up to the actual cash value of your car.
• Total loss: If your vehicle is totaled (when the damage exceeds the car’s value), collision insurance can help cover the cost of replacing it, minus your deductible (the amount you pay out of pocket before your insurance kicks in).

Collision insurance typically has a deductible. According to Allstate, when you purchase collision coverage, you can choose the deductible amount. Common options include $0, $500 or $1,000. Generally, if you pick a lower deductible, your premium may be higher, but if you select a higher deductible, your premium may decrease.

Unlike liability insurance, which is required by law in most states, collision insurance is optional unless you have a car loan or lease. If you’re financing or leasing your vehicle, the lender or leasing company may require you to have collision insurance until the car is paid off.

What happens if I don’t have collision insurance?

If you don’t have collision insurance and you’re in an accident, you’ll have to pay for repairs or replacement costs yourself unless the accident was caused by another driver. If they have liability insurance, it should cover the damage to your car. Without collision insurance, you also won’t receive compensation if your car is totaled.

Collision coverage usually has a limit based on your car's actual cash value (ACV), which is the amount your car is worth today after depreciation (how much value your car loses over time). If your car is totaled, your insurer will pay the depreciated value, minus your deductible. This amount might not be enough to replace your car with one of the same make and model, so you may need to pay the difference.

Comprehensive insurance

Comprehensive insurance is a type of car insurance that helps pay for damage to your vehicle caused by events other than a collision with another car. This can include natural disasters, theft, vandalism or hitting an animal. Unlike collision insurance, which covers damages from accidents, comprehensive insurance covers a wider range of incidents, including non-collision-related damage.

Here are some examples of what comprehensive insurance covers:

• Theft: If your car is stolen, comprehensive insurance helps cover the loss up to the actual cash value (ACV) of your vehicle.
• Vandalism: If your vehicle is damaged intentionally by someone, comprehensive coverage can help pay for the repairs.
• Natural disasters: Events like hurricanes, tornadoes, earthquakes or floods can cause serious damage to your vehicle. Comprehensive insurance helps cover these situations.
• Animal damage: If you hit an animal and your vehicle is damaged, comprehensive insurance can help pay for repairs.

Comprehensive insurance usually comes with a deductible, which is the amount you pay before your insurance kicks in. Like collision coverage, you can choose your deductible. A higher deductible often results in lower premiums, while a lower deductible may increase your premiums. However, keep in mind that you’ll need to pay your deductible out-of-pocket before the insurer covers the repair costs.

While comprehensive insurance covers a wide range of events, it typically has a coverage limit. Similar to collision insurance, the amount your insurer will pay is based on the ACV of your car. If your car is totaled, the insurer will pay the depreciated value, minus your deductible.

What happens if I don’t have comprehensive insurance?

If you don’t have comprehensive insurance and your vehicle is damaged by something like theft, vandalism or a natural disaster, you’ll have to pay for repairs or replacement out of pocket. Without comprehensive coverage, you also won’t receive compensation for events like hitting an animal or experiencing damage from severe weather.

Additional coverage options

In addition to the standard coverages, several optional insurance add-ons can provide extra protection in specific situations. These additional coverages can help fill gaps in your policy. We’ll go over these additional coverage options below.

Uninsured Motorist (UM) and Underinsured Motorist (UIM) coverage

Uninsured Motorist (UM) and Underinsured Motorist (UIM) coverage are important types of protection that can be added to your auto insurance policy. They come into play if you're involved in an accident with a driver who either doesn't have insurance or whose insurance doesn’t cover the full extent of the damages. These coverages can help protect you financially when another driver is at fault, but they don’t have enough coverage to pay for your medical bills or vehicle repairs.

Here’s what each coverage type provides:

• Uninsured Motorist (UM) Coverage: If you’re in an accident caused by a driver who doesn’t have car insurance, UM coverage helps pay for your medical bills and vehicle repairs. This protection can be essential, especially if the at-fault driver has no insurance or is unidentifiable (as in the case of a hit-and-run).
• Underinsured Motorist (UIM) Coverage: If you’re in an accident with a driver who has insurance, but their coverage limits aren’t enough to fully cover the costs, UIM coverage helps make up the difference. This can be especially important in cases of serious accidents where medical costs and vehicle repairs can exceed the other driver’s insurance policy limits.

While UM/UIM coverage can be critical, it’s important to note that not all states require it. Some states, like Connecticut, Illinois and Minnesota, mandate both UM and UIM coverage. On the other hand, New Hampshire allows drivers to show proof of financial responsibility instead of carrying auto insurance, which means UM/UIM coverage may not be required.

Medical Payments (MedPay) and Personal Injury Protection (PIP)

MedPay and PIP coverage are designed to help pay for medical expenses if you or your passengers are injured in an accident, regardless of who was at fault. While both offer similar benefits, there are some notable differences:

• Medical payments (MedPay): MedPay helps cover medical bills, such as doctor visits, surgery and hospital stays, for you and your passengers after an accident. This coverage is available regardless of fault and it often applies to injuries sustained in non-collision incidents, such as hitting a deer.
• Personal Injury Protection (PIP): PIP is similar to MedPay but offers a more extensive range of coverage, including medical bills, lost wages and sometimes even childcare costs if you're unable to work due to injuries sustained in an accident. PIP is often available in “no-fault” states, where drivers are required to carry this type of insurance. According to Liberty Mutual, In no-fault states, each driver's own insurance covers their medical expenses, regardless of who caused the accident.

Other coverages

Two additional coverage options can provide more help from your insurance: towing and labor coverage and rental car coverage. Here’s a short overview of each:

• Towing and labor: Pays for towing services if your car can't be driven. It also covers labor costs, such as changing a flat tire or jump-starting your battery.
• Rental car: Helps pay for a rental car if your vehicle is in the shop for repairs after a covered accident or loss. This add-on can be a lifesaver when you're without a car and need a temporary replacement while your vehicle is being fixed.

While these additional coverages are optional, adding them to your car insurance policy can help reduce out-of-pocket expenses when you’re in an accident or faced with unexpected car troubles.