Insuring your car, or other vehicle, is one of those things that is required, but you probably don’t spend a lot of time thinking about it. When you buy a car, you need insurance. Simple, right? Well, not quite.
You probably don’t talk about it a lot either, except in passing. You almost certainly don’t have lengthy conversations with your friends about what type of auto insurance coverage everyone has.
But maybe you should.
Auto insurance is not always as straightforward as people imagine. For one thing, there’s more than one or two types of car insurance, and the various types of coverage offer different levels of protection. We think it’s important for everyone to have at least some understanding of the coverage options most insurers have available, so we made this list to help you get up to speed:
1. Liability coverage
Liability car insurance comes in two parts: Bodily injury liability and Property Damage liability. They’re pretty self-explanatory as to what they cover, but it’s worth noting that liability coverage only covers other people, and not you or your passengers. You’ll need another type of coverage for that.
If the accident is determined to be your fault, liability coverage may help pay for the other party’s medical bills and vehicle repairs. Most states have a minimum requirement for the amount of liability coverage that drivers must have. You can find your state here.
2. Collision coverage
In a covered accident, Collision car insurance will help you pay for your own repairs. This often includes accidents that involve another driver, as well as an object such as a tree or a fence. Policies might even cover an accident with no collision, such as a flipped vehicle.
Sometimes, however, the cost of the repairs exceeds your car’s value, and this means your car is totaled. If your car is totaled as a result of a covered accident, collision coverage will pay you up to your car’s actual cash value, minus your deductible. With this in mind, some people opt not to carry collision coverage on older vehicles.
Many states don’t require you to carry collision coverage, but if you’re still paying off your auto loan or leasing your vehicle, you are most likely required to have it.
3. Comprehensive coverage
Comprehensive car insurance does not actually mean you’re protected from everything. It more or less means you’re covered for everything that the other types of coverage don’t protect you from. This includes things like theft, fire, hail, or vandalism.
Comprehensive coverage is often not required, but it’s great to have if you can fit it into your budget. Like collision coverage, comprehensive coverage is almost always required by auto loan lenders and lessors.
4. Personal injury protection (PIP)
Personal injury protection helps with any injury to you or your passengers, regardless of fault, and extends to any drivers covered by your policy. It may also cover other expenses resulting from your injury, such as child care or even a funeral.
PIP coverage is required in 15 states and optional in many others, but it is not available everywhere. Unlike comprehensive or collision coverage, this is a type of coverage you really don’t want to pass up if it’s available to you.
5. Medical payments (MedPay) coverage
MedPay car insurance is a lot like PIP coverage, but its scope is more limited. It still covers you, anyone on your policy, and any passengers at the time of the accident. It may cover things like hospital visits, x-rays, surgery, and more.
MedPay coverage is mostly optional, but some states do require it. If you have medical insurance already, it can act as a nice supplement to cover those medical bills, and it will help you regardless. It may also cover the copays and deductibles of other insurances, including PIP and regular health insurance.
6. Uninsured and underinsured motorist coverage
Unfortunately, you can’t rely on everyone involved in an accident to have car insurance. What’s more, many drivers carry only the required minimum coverage, which might not be enough to cover all of your expenses.
For these situations we have uninsured and underinsured motorist coverage, which is required in about half of the United States. The good news is that this type of coverage is usually relatively inexpensive to add to your policy.
7. Guaranteed Asset Protection (GAP)
The final type of coverage is Guaranteed Asset Protection (GAP) insurance. If your vehicle is totaled or stolen, you will likely receive the actual cash value of your car. This is okay for those who own a car outright, but what happens if you’re still paying off your auto loan?
If you still have a car loan, there’s a decent chance that you owe more than your car’s actual cash value, especially during the first few years of the loan. That’s where GAP insurance comes into play. This insurance covers you for the difference between the remainder of your auto loan and your insurance payout.