7 Types of Car Insurance

With so many different types of car insurance out there, it can be pretty overwhelming. It might even be tempting to just throw up your hands and say, “I’ll just go with my state’s minimum.”

But wait. Don’t do that. With just a little education, you can make sense of the wild world of car insurance (and we won’t even need help from geckos or emus).   

Let’s break down the seven main types of coverage so you can figure out which type of car insurance is best for your situation.

1. Liability Insurance

If you’re wondering what’s the most important type of car insurance you should buy, this is it. Liability insurance is the foundation of any dependable policy. It works alongside comprehensive and collision, making up the foundation of rock-solid car insurance coverage.

Liability insurance covers expenses you are found liable for. So if you cause an accident, liability insurance will save you from having to pay thousands of dollars out of pocket. With liability insurance, your insurer will pay to repair or replace the other person’s damaged property up to a certain limit. (It doesn’t cover your costs. That’s where things like collision or your health insurance kick in.) It will also cover the medical bills of anyone injured, including legal fees if you’re sued.

You don’t need every type of car insurance out there, but you definitely need liability insurance. It’s even required by law in every U.S. state except New Hampshire and parts of Alaska.

2. Comprehensive Insurance 

Comprehensive insurance protects your vehicle from a comprehensive list of bad things that could happen—things like wildfires, fallen trees, debris from other cars, theft, vandalism, riots, fire, explosions, earthquakes, landslides, other weather events and damage caused by wildlife.

You pick a deductible—the amount you have to pay before your insurer chips in. There’s also a policy limit based on what your car is currently worth (not what you originally paid for it).

No matter where you live—or how good your luck may be—bad things can happen. With comprehensive insurance, you’ll be covered. It’s optional but some lenders or leaseholders will make you get it.

3. Collision Insurance

Remember how liability insurance covered the other person’s property? Collision insurance is the other side of that coin. Collision covers the cost of repairing or replacing your car after an accident. It’s not required by state law, but it’s still a good idea to get—even if you’re driving around a paid-off vehicle (good for you!).

Like comprehensive, collision insurance isn’t mandatory unless your lender or leaseholder requires it. But if you can’t afford to replace your car with cash, you need collision insurance. This way, if you total your car, you won’t bust your budget replacing it.

4. Full Coverage 

The next type of car insurance is full coverage. First, there isn’t technically a policy called “full coverage” you can buy—it’s a combination of coverages. Full coverage consists of liability, comprehensive and collision. So if you have all three, congratulations! You’re fully covered.

Full coverage can also mean you have certain add-ons, like roadside assistance, uninsured/underinsured motorist coverage, guaranteed auto protection, medical expenses coverage, personal injury protection or towing and breakdown coverage.

Each add-on will increase your premium to some degree. But if you can get full coverage at a good price, you should do it. You’ll have extra security and peace of mind.

5. Uninsured and Underinsured Motorist Coverage 

Uninsured motorist coverage is not coverage for people who don’t have insurance (that makes no sense). Instead, it covers your medical expenses (and your passengers) if an uninsured driver hits you or if you’re involved in a hit-and-run. It can also cover damage to your vehicle if you don’t already have collision insurance.

Underinsured motorist insurance protects you if you’re hit by a driver who doesn’t have enough insurance—they’re underinsured. It protects you if the other driver doesn’t have enough liability limits to cover your medical bills.

6. Medical Payments Coverage

Medical payments coverage (MedPay) helps pay for medical expenses for you and any passengers in your vehicle after an accident. These costs could include surgery, X-rays and hospital visits. It also doesn’t matter who was at fault. So with medical payments coverage, you’re protected no matter what. And depending on where you live, this coverage may be required.

7. Personal Injury Protection 

Personal injury protection (PIP)—also known as no fault insurance—is kind of like medical payments coverage. If you’re seriously injured in an accident, it can help pay for costs like childcare or lost wages if you can’t work. It’s also required in certain states.

Okay, now that we’ve seen seven of the main types of auto insurance, let’s look at a few extras.

Other Types of Car Insurance

Rental Car Reimbursement

If you’re worried about transportation while your car’s in the shop, you can get something called rental car reimbursement. Your insurer will cover the costs of a rental car while you’re waiting to get your vehicle back.

GAP Insurance

Guaranteed auto protection—fondly referred to as GAP insurance—covers the difference between what you still owe on your vehicle and how much it’s actually worth. For instance, let’s say you owe $20,000 on your vehicle and you end up totaling it. Your car’s actual cash value is only $16,000 due to depreciation. Ouch! GAP insurance can help fix this problem when you’re stuck paying a loan for a car you can’t even drive. It really comes in handy if you’re leasing or have a car loan.

Temporary Car Insurance

Temporary car insurance is coverage for a vehicle you’re only planning to drive for a little while—normally six months or less. So if you’re going on a road trip for a few weeks and plan to drive your friend’s car, temporary car insurance is helpful. However, it’s not available from most reputable insurance companies. Instead, it comes in the form of non-owner car insurance or rental car insurance.

High-Risk Insurance

There are a couple different reasons an insurance company could decide you’re high risk. If you are, you’ll definitely end up paying more. But if you behave—and let time do its thing—you’ll eventually break out of the car insurance doghouse and your premiums will come back down.

Classic Car Insurance

If you’re into classic cars (who isn’t?), there’s a special kind of insurance for you. Classic car insurance can help you protect your investment in the event your baby-blue ’69 Mustang is damaged or stolen.

Rideshare Insurance

If you’re driving for a rideshare company, you’ll want to look into an extra layer of protection called rideshare insurance. If you’re driving for Uber or Lyft, your personal policy won’t cover you. And the rideshare companies don’t offer full coverage. Rideshare insurance can make up that difference.

Covering Other Drivers

At this point, we hope you know exactly what types of vehicle insurance you need to hit the road with confidence. But what happens when your best friend, brother or grandma offers to take a turn behind the wheel? We don’t blame you for letting them—but before you hand over the keys, make sure your car insurance covers other drivers.

Here’s the quick scoop: If they’ve got your permission and your policy allows it, they’re probably covered. But not always. Your liability insurance may help cover damages or injuries they cause to someone else—but it usually won’t pay for their injuries or damage to your car. That’s where collision and comprehensive come in. And if they don’t have insurance? You could be stuck footing the entire bill. Always check your policy first, and never let someone without coverage drive your car.

Get the Right Coverage

Car insurance can be tough. We’ve just seen there are tons of different options, and it can be hard to figure out what you actually need.

That’s why we recommend using a RamseyTrusted^® insurance pro who can look at your specific situation and figure out how much insurance is right for you. They might even be able to find some ways you’re overpaying for car insurance and save you some money.

Connect with a RamseyTrusted insurance agent today!