Different Types of Car Insurance Coverage

There are so many different types of car insurance coverage to choose from. In some cases, we don’t even have a choice, because certain types of auto insurance are required by law in certain states. So how do we know which types of auto insurance to buy? And how much car insurance coverage do we really need?

The following information will help you choose the right car insurance policy to meet your needs.


Types of Auto Insurance

Here is a list of the 15 most common types of car insurance coverage available to policyholders in America. Not all of these coverage types are available in all states, or from all car insurance companies.

1. Bodily Injury Liability: This type of coverage is sometimes called “third party coverage.” If a driver causes an accident, liability insurance will cover the cost of bodily injury to people other than the at-fault driver and his or her passengers. The coverage includes payment of medical bills, rehab services, nursing care, and other injury-related expenses.

2. Property Damage Liability: If a driver causes an accident, this insurance will cover property damage, including vehicle repairs, to people other than the at-fault driver and his or her passengers. Most states require some minimum amount of property damage liability insurance for car owners.

3. Personal Injury Protection (PIP): This insurance covers the cost of bodily injury to the driver and/or passengers involved in an accident. The medical expenses of the driver and passengers are covered under this plan, regardless of who is at fault. That’s why PIP is sometimes called “no fault insurance.” This insurance also covers costs not normally covered by health insurance policies, such as lost wages, child care, household services, and even funeral expenses.

PIP is not available in every state, but a state mandated minimum PIP coverage is required in the following 15 states:

Delaware ($15,000 per person, $30,000 per accident, $5,000 funeral expenses),

Florida ($10,000 per person),

Hawaii ($10,000 per person),

Kansas ($4,500 per person for medical expenses, $4,500 per person for rehab, $2,000 in funeral expenses, $900 a month for disability, $25 per day for in-home expenses),

Kentucky ($10,000 per person),

Maryland ($2,500 per accident),

Massachusetts ($8,000 per person),

Michigan (Unlimited medical expenses, up to more than $5,000 in lost income, and $20 a day in coverage for replacement services),

Minnesota ($20,000 for medical expenses, $20,000 for lost income),

New Jersey ($15,000 per person, $250,000 for severe injury or impairment),

New York ($50,000 per person, $2,000 death benefit, up to $2,000 a month in lost income, $25 per day for home services),

North Dakota ($30,000 per person),

Oregon ($15,000 per person),

Pennsylvania ($5,000 per accident)

Utah ($3,000 per person for injury, $1,500 per person for funeral expenses, $3,000 death benefit, as much as $250 a week in lost income, and $20 a day for home services)

4. Auto Medical Payments (MedPay): This insurance is a limited form of personal injury protection (PIP) that covers medical costs related to an accident. MedPay covers the medical expenses of the driver and any passengers who were riding in the same vehicle. MedPay can also cover the copays and deductibles on health insurance policies.

5. Uninsured/Underinsured Motorist Insurance (UMI): These types of car insurance cover the cost of accidents involving uninsured or underinsured drivers. Every state is afflicted with quite a few uninsured drivers. States are also plagued with underinsured drivers, partly due to the fact that legal state minimum liability requirements do not cover the costs of bad accidents. A driver needs several types of car insurance with much higher limits to really cover costs in the event of a serious accident.

UMI is a legal requirement in the following 22 states: Connecticut, Illinois, Kansas, Maine, Maryland, Massachusetts, Minnesota, Missouri, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Oregon, Rhode Island, South Carolina, South Dakota, Vermont, Virginia, Washington and West Virginia, as well as Washington DC. In the remaining 28 states, UMI is still one of the best types of car insurance you can buy.

6. Collision Coverage: This insurance covers the cost of crashing your car into anything other than an animal. Collision insurance also covers vehicle replacement cost. What’s more, collision coverage pays damages for a car that has flipped over (in other words, collided with the ground). Collision coverage typically must be purchased along with Comprehensive coverage. Both types of car insurance are recommended.

7. Comprehensive Coverage: This insurance coverage is also known as OTC (other than collision). It is designed to cover the costs of damage to your vehicle that was not caused by a traffic accident. Comprehensive coverage promises reimbursement for incidents such as fire, theft, vandalism, falling objects, and natural disasters, not to mention deer collisions, which are quite common during the fall season. Comprehensive coverage is usually purchased in conjunction with Collision coverage.

8. Personal Umbrella Policy (PUP): A personal umbrella policy offers an extra level of protection beyond the normal policy limits. This policy covers one million dollars or more in assets in the event of a lawsuit. A PUP policy also covers the legal costs of libel and slander, false arrest, malicious prosecution, mental anguish, defense attorneys, and liabilities when traveling abroad. This type of coverage appeals especially to people of high net worth.

9. GAP Coverage: Your vehicle starts decreasing in value from the moment it leaves the lot. Guaranteed Auto Protection (GAP) coverage will pay the difference between the actual value of your totaled vehicle and the money you still owe on it. If you purchase GAP coverage, remain aware of the value of your vehicle. When the value of your car is higher than the amount you still owe on it, you can safely cancel the GAP coverage, and feel safe with your other types of car insurance.

10. Interior Vehicle Coverage: This coverage insures a driver’s personal belongings that are located inside the vehicle. This could be anything from a laptop computer or a smartphone to a purse full of money or a pricey sound system. Of all the types of car insurance available to you, this one is the most avoidable. If you don’t leave anything valuable in your car, you probably don’t need this type of coverage.

11. Rental Reimbursement Coverage: This optional insurance covers the cost of a rental car, while the car you normally drive is being repaired or replaced after an accident. In general, you can only purchase rental reimbursement coverage in connection with Comprehensive and Collision coverage. All three types of car insurance are needed.

12. Replacement Car Coverage: If your car is totaled, this coverage guarantees you (if possible) a replacement car of the same make and model, which is less than one year old.

13. Pet Injury Insurance: This coverage handles the medical expenses of pets who are injured in auto accidents.

14. SR-22 Coverage: An SR-22 is a form that must be filed with the state by drivers who have been involved in DUIs, and drivers caught driving without even the minimum insurance coverage required by state law. These people are known as “high risk drivers.”

An SR-22 is a court-ordered filing, which is the first step in getting a license reinstated. Although high risk drivers are avoided by many auto insurance carriers, some carriers will cover high risk drivers, at a cost. Naturally, an SR-22 attachment to your car insurance policy is accompanied by much higher premium rates.

An SR-22 is actually not one of the types of car insurance, nor is it a type of coverage. However, you cannot get a court-ordered SR-22 without purchasing a car insurance policy.

15. Business Auto Insurance: This type of coverage insures vehicles that are used for business purposes, such as taxi cabs, limos, buses, boats, and other fleet vehicles. Businesses have roughly the same types of car insurance as personal vehicle owners do.

State Mandated Minimum Requirements For Car Insurance

Many people buy just enough types of car insurance at the lowest legal limits to be allowed to drive their vehicles. However, insurance experts and statistical analysts all over America suggest that drivers purchase more than the minimum amount of car insurance required by state laws. Experts recommend that drivers all across America buy at least $100,000 in personal injury protection (PIP), plus $300,000 insurance to cover the cost of injury to others, and at least $50,000 in coverage against the cost of property damage. These coverage amounts are more likely to cover the cost of a serious auto accident, although the legal state minimum requirements are typically only 10 to 25 percent of these amounts.

Auto liability insurance features two components that are always offered in conjunction with each other: bodily injury liability and property damage liability. Each state has its own legal minimum requirements for purchasing both kinds of liability insurance.

Below is a table that lists all 50 states and Washington DC, along with the minimum amounts and types of car insurance coverage required for each state.

StatePer InjuryPer AccidentPropertyOther
New Hampshire$25,000$50,000$25,000MedPay/UMI
New Jersey$15,000$30,000$5,000PIP
New Mexico$25,000$50,000$10,000
New York$25,000$50,000$10,000PIP/UMI/Death
North Carolina$30,000$60,000$25,000UMI
North Dakota$25,000$50,000$25,000PIP/UMI
Rhode Island$25,000$50,000$25,000
South Carolina$25,000$50,000$25,000UMI
South Dakota$25,000$50,000$25,000UMI
West Virginia$25,000$50,000$25,000UMI

Why So Many Types of Car Insurance?

According to statistical reports and various personal injury lawyers, there are approximately 16 million auto accidents each year in the United States. Although most of these accidents are of the non injury kind, about 3 million people are injured (and more than 30,000 people are killed) each year in automobile accidents. In fact, traffic accidents are the number one killer of Americans between the ages of 4 and 34.

Drunk driving is a problem in every state. Each year, more than 1.5 million people are arrested for driving under the influence. More than a quarter of the drivers arrested for DUI are between the ages of 18 and 24. In more than half of all DUI arrests, the driver was drinking only beer. Yet each year, more than 10,000 people die in drunk driving accidents.

Further complicating the problem is the financial strain of so many uninsured drivers on the road. The states with the highest percentage of uninsured drivers are Oklahoma (26%), Florida (24%), Mississippi (23%), New Mexico (22%), and Michigan (21%). The states with the fewest uninsured drivers are Georgia, Delaware, Minnesota, Arizona, and New Jersey, according to the Insurance Research Council. Still, all states have uninsured drivers.

Overall, your best kind of car insurance (in addition to those listed on your policy) is simply to practice safe driving. Staying sober and remaining alert won’t cost you a dime.