Car Insurance Types If you drive, own or lease a car, each of the 50 states requires you to either have car insurance or provide “proof of financial responsibility”. Proof of financial responsibility is usually met by having car insurance. Each state also sets the minimum coverage amount and specific types of insurance it requires. There are hundreds of car insurance companies with lots of options for car insurance … what kind of coverage do you want? What coverage do you need? Is the minimum coverage enough for you? What are your choices? Being informed as to the types insurance available will save you money and heartache when you are involved in an accident. CarInsuranceCalculator.info tells you the rules of the game: Liability Insurance Liability insurance is coverage that protects you from the cost of accidental damage you cause to others and their property while driving a car. This covers the cost of medical bills, general and special damages (wage loss, continuing medical care, etc.) and repair of property damaged in the accident. This coverage also entitles you to the cost of defense (paying for an attorney for you) if you are sued for the damage you cause in a car accident. If you cause a car accident, your own injury and property damage is not covered by this type of insurance (see collision, medical/PIP, and uninsured coverage below). Liability insurance coverage is usually listed with limits for bodily injury and property damage stated separately. For example, a 15/30/10 liability policy offers coverage up to $15,000 to one person for bodily injury, $30,000 for all bodily injuries to others, and up to $10,000 for coverage of property damage. You can also purchase a combined single limit policy, or CSL, which will cover all injuries and property damage up to the stated maximum caused by a single accident. All states have set a minimum amount of coverage/financial responsibility for car insurance/financial responsibility but choosing the minimum isn’t right for everyone. If you cause an accident, you have to pay for the damage you caused. If you are in a serious collision and the damages you caused are greater than the coverage limits you purchased, you may be personally liable to pay for those damages that exceed your insurance coverage. Insurance companies quote rates (also known as premiums) that can vary by hundreds of dollars a year so it pays to do your research. Once you decide what coverage you need, you are prepared to shop smart for car insurance. See advice on what kind and how much car insurance coverage you really need. Collision Insurance While liability insurance covers damages you cause to others in a car accident, collision insurance covers damage to your car, regardless of who caused the damage. So, even if you caused the accident, it will cover repairs to your car. Collision coverage only covers the repairs to your car up to the value of your car at the time just before the accident. If your car is worth less than the cost to repair it after an accident (commonly referred to as “totaled”), a collision insurance policy will pay you the value of your car. No states require that you have this coverage – but you may need it for other reasons. For example, if you have a car loan or lease a car, you may be required by your lender to have this coverage. You can save money by getting a policy with a deductable, a fixed amount that you pay towards your own repairs. See more advice on what kind and how much car insurance coverage you really need. Comprehensive Insurance Liability and collision insurance policies exclusively cover car accidents. There are many exclusions to those types of coverage, such as fire, theft or if you hit an animal while driving. Comprehensive insurance covers most of those other risks to your car. As with collision coverage, no states require that you have this type of insurance – but you may want to consider it or need it for other reasons – when your lender or car lease requires it. You can save money on this comprehensive insurance by getting a policy with a deductable. See more advice on what kind and how much car insurance coverage you really need. Uninsured or Underinsured Motorist Protection Despite all states requiring liability insurance, only a few require uninsured or underinsured protection. In theory, all drivers are required to have either liability coverage or provide proof that they will be financially responsible for accidents they cause. In reality, there will be drivers who have financial or other difficulties paying their premiums, resulting in no liability coverage. There are also other drivers who purchase the minimum insurance policy required which may not be enough money to pay for your damages. Uninsured or underinsured motorist protection can help you cover yourself in the event of an accident in which the at-fault driver has no insurance or inadequate insurance. This is often an overlooked but important part of car insurance. Medical (Medpay) or Personal Injury Protection Medical protection, also known as medpay, is coverage for medical care caused by injuries to you or your passengers after a car accident. You or your passengers can make a claim to pay you medical bills resulting from an accident, even if it is not your fault. Depending on what state you are in, you may be required to have medpay coverage. Medpay is sold with a maximum payment or reimbursement at a fixed amount for each passenger covered by your medpay. Personal injury protection, also known as PIP, is similar to medpay but operate very differently depending on the state you are in. In some states, usually states with no fault coverage, PIP is mandatory. PIP generally covers medical care but also may cover lost wages up to a specified amount. But in some states, if you make a claim against PIP insurance, you may be waiving your right to recover against the liability portion of the car insurance. When you are choosing a coverage amount for either medpay or PIP, get informed as to your state requirements and options available. With the cost of healthcare always increasing, this is a coverage you should consider. Rental Reimbursement This is a separate car insurance coverage that pays for renting a car when your car is inoperable due to a car accident. This coverage will specify the daily allowances or limits for car rentals which can vary by each insurance company or state. Gap Insurance Gap insurance is the insurance to cover the difference between the cost to repair your car and the amount you owe on your car, also known as the “gap”. If you have a loan or lease, you may want to consider gap insurance. If your car is “totaled”, this insurance will help you pay off what you owe on your loan/lease. Generally, this type of insurance is sold at the time you are financing your can loan or lease. Some lenders may require you to have it to be eligible for a car loan. New-car Replacement Insurance The coverage provides coverage for a new model year car replacement if your new or newer car is totaled in an accident. Most car insurance companies offer you new-car replacement insurance within a year of purchasing a new car and if the car is in its first 15,000 miles. With new-car replacement insurance, your insurance company will pay you for the current value of an equivalent new vehicle. This is different from gap insurance in that gap insurance only covered the difference between the value of your car at the time of the accident (without damage) and the amount of your loan. This coverage is only available for new or newer cars, depending on the car insurance company and if your state permits this kind of coverage. You may also be required to have collision and comprehensive coverage while you have new-car replacement insurance. Insurance companies generally offer such coverage for a limited period of time – generally within the first two years of ownership of your new car. If you are interested in this coverage, be sure to understand how long you have this coverage and what happens to your coverage at the end of that period. Some insurance companies will convert your new-car replacement coverage into gap insurance at the end of their new-car replacement policies. Collectors, Modified and Classic Cars If you made substantial modifications to your car or own a classic car you should consult our special guide on insuring modified and vintage cars.