What Types of Car Insurance Are There?
Recognizing that not all motorists and vehicle owners need the same things from their policies, insurers have devised and developed many specialized types of car insurance coverage. Some are widely available from all providers, recognizing their mandatory status in most jurisdictions. Others are narrower in their scope and may only be available through niche providers or as part of specialized policies.
If you’re in the market for car insurance, or if you’re looking to expand your current coverage or get more value out of your policy, this guide will help. It explains both the major and lesser-known types of auto insurance available through licensed providers in the United States.
First: a note about how policies are configured
Below, you will find a list explaining the various types of car insurance coverage. Not all carriers offer every form of coverage, so if you’re interested in one of the narrower, more specific auto insurance products, you may need to shop around.
Once you’ve found a provider that offers every type of car insurance you need, you can go ahead and set up your plan. At this stage, keep in mind that most insurance companies do not issue separate policies for every type of coverage you opt for. Instead, they usually bundle all the coverage forms you want into a single plan with a consolidated cost.
The more forms of coverage you add to a plan, the more your premiums will rise. If you want to keep your premiums in check without sacrificing the comprehensiveness of your plan’s scope, you can adjust your coverage limits instead of eliminating specific insurance subtypes. Coverage limits refer to the maximum financial value of the benefits you are entitled to claim in specific situations, as indicated in your policy.
Mandatory in almost all U.S. jurisdictions, liability coverage covers bodily harm and property damage. If you are at fault in an accident, your liability coverage will pay for expenses associated with treating a victim’s injuries or repairing the resultant damage.
Jurisdictions vary in the amount of liability coverage a driver is legally obligated to carry. Opting for the legal minimum will keep your premiums low, but most experts strongly recommend carrying as much liability coverage as you can afford, as it will keep you better protected in the long run.
Liability coverage will pay for repairs to other people’s vehicles if they were damaged in an accident in which you were at fault. However, without collision coverage, you will be left to shoulder the costs of repairing your own vehicle out of pocket.
Collision coverage extends right up to “total loss” levels, which will compensate you for the total value of your vehicle if it is determined to be beyond repair. It is optional, and collision coverage can be valuable if you drive a newer vehicle or a higher-value car. However, it may not provide enough value if your car is old, in poor repair, or not worth very much money.
Uninsured and underinsured motorist coverage
If you are involved in an accident caused by another motorist and that motorist is uninsured or underinsured, you could be left on the hook to cover some or all of your own medical expenses. This optional form of coverage closes off that risk, providing you with financial protection in the event you are injured in such a situation.
Motorists can also opt for comprehensive coverage, which covers damage to your car that arises from factors or events not related to driving or accidents. Examples include:
- Weather damage
Note that while comprehensive car insurance is usually optional, you may be required to carry it in some situations. For instance, some car dealers, banks, and financial institutions will only offer lease or loan financing to borrowers who have it.
Medical payment coverage
Medical payment coverage will finance treatments and expenses associated with injuries to you or your passengers if you are in an accident. It can also be extended to cover other people you authorize to drive your vehicle.
This type of coverage may be optional or required, depending on where you live. If you’re unsure, double-check the guidelines for Virginia or jurisdiction.
Personal injury protection
Often referred to by its acronym “PIP,” personal injury protection functions like medical payment coverage. However, it extends to adjacent circumstances that could affect your ability to earn income or cover costs, including:
- Taking time off work to recover from injuries suffered in an accident
- Loss of earning potential or earning ability
- Childcare costs
PIP is not available in all states. Where it is available, it can be required or optional. Again, check your local laws and regulations to see if you must carry it in your jurisdiction.
Another form of optional coverage offered by some providers, stacked coverage allows you to draw multiple payouts if you insure more than one vehicle. This is called “stacking,” and it usually applies exclusively to uninsured and underinsured motorist coverage.
For example, suppose you carry $50,000 in uninsured and underinsured motorist coverage as part of a plan covering two vehicles, and you opt for stacked coverage. Then, if you are injured as the result of an accident with an underinsured or uninsured driver, you can draw up to $50,000 in benefits from each vehicle covered by the plan, resulting in a $100,000 coverage limit.
Other forms of coverage
Insurers also offer many other niche and specialized types of car insurance coverage, including:
- Rental reimbursement coverage: If your car needs major repairs and you will have to leave it with a mechanic for an extended period, rental reimbursement coverage will compensate you for expenses associated with renting a replacement vehicle. It is usually available for a modest premium increase, making it well worth considering.
- New car replacement coverage: This optional form of coverage entitles you to compensation equal to the amount needed to replace a stolen or destroyed vehicle with a brand-new replacement of the same make and model.
- Gap coverage: This useful but optional form of coverage applies to motorists with active car loans or financing plans. Gap coverage provides you with the difference between your car’s value and the amount of money you owe on your active auto loan. It protects you from situations in which you were not fully compensated for the value of a lost vehicle and are left to pay off a loan for a car you can no longer drive.
- Towing and labor coverage: Some policies leave you exposed to the costs associated with having your car towed. Others do not cover 100% of the labor involved in repairing damage to your vehicle. This form of coverage closes off those risks.
- Classic car coverage: If you own a restored, vintage, or classic vehicle that you rarely drive, you can get a specialized type of insurance to protect it. Experts strongly recommend carrying it if you own such a vehicle, as they are often valuable and difficult to replace.
- Pet injury coverage: Many standard car insurance plans cover the costs of injuries to human passengers and accident victims, but not pets. Pet injury coverage extends these protections to your animal companions for a modestly increased premium.
If you need help determining which types of coverage you need, consult an insurance professional.