Best Auto Insurance Coverage Options

Some of the best auto insurance coverage options include liability, uninsured and underinsured, and collision coverage. There are many auto insurance coverage options, so take your time when choosing.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Aug 30, 2021

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Here's what you need to know...

  • There are many options available for car insurance coverage, so take your time when choosing the coverage that is best for you
  • Weigh the pros and cons of more than just the insurance premium
  • Revisit your coverage plan at least once a year to ensure it covers all your needs

When it comes to car insurance, there are a number of coverage options. Some of them are more important than others, and the importance of some are dependent on the status of your vehicle.

The most useful types of coverage are those that protect you and your finances when you are involved in an accident with another party.

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When you are in an accident, there are two types of damages that can occur.

In order to protect yourself, it is best to be covered for both. Certain damages need to be taken care of right away while others can wait.

This can help you determine which types of car insurance coverage you should focus on, especially if you are on a budget and can’t afford full coverage.

Liability Coverage

Liability coverage is arguably the most useful and important insurance coverage that you should have. It is so important, in fact, that almost every state requires that drivers have a certain amount of liability coverage in place.

This type of coverage protects against legal action taken by someone who was injured due to negligence on your part. You can get sued even when you aren’t at fault for an accident because sometimes people don’t know they are legally liable until after the fact. Liability insurance provides protection against lawsuits filed by third parties such as passengers, pedestrians, etc.

The National Association of Insurance Commissioners will put you in touch with your state insurance department to find out if there are basic requirements in your state and what they are.

There are two kinds of liability: property damage and bodily injury. Both are important to protect you if you cause damage to someone else. If you are at fault in an accident, liability will help cover your expenses.

Property damage liability protects against any kind of accidental damage done to other vehicles, buildings, fences, etc., due to negligence on your part. This includes things like hitting curbs, trees, mailboxes, telephone poles, signs, etc.

Most people think that liability for property damage refers only to damage caused to another person’s car.

According to the Insurance Information Institute, however, it also covers damage to:

  • buildings
  • telephone poles
  • lampposts
  • fences
  • other structures that were hit by your vehicle

Car accidents often cause bodily injuries to both drivers and passengers. Liability for bodily injury helps cover expenses involved in seeking medical attention for these injuries.

If you injure or kill someone as a result of driving recklessly, this type of coverage could pay off big time.

Both property damage liability and bodily injury liabiity are crucial parts of your car insurance policy.

Without liability insurance, there is a good chance that you will be personally sued for damages.

This is why having liability insurance is so important. It is highly recommended that you purchase more liability than what is required by your state.

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Uninsured and Underinsured Motorist Coverage

Although most states require some sort of coverage for every driver, there are, unfortunately, a number of drivers who get by without purchasing insurance. In fact, the Insurance Institute shows that an average of 13.8% of drivers are uninsured.

If you happen to be hit by someone who is not covered by any insurance, you will be responsible for the expenses related to damages to both your vehicle and any person in your vehicle.

You always have the option of suing the other party for damages, but this is usually messy and takes a long time. In addition, if the driver couldn’t afford car insurance, there is a good chance that he will not be able to offer much in the way of restitution.

This is why uninsured motorist coverage as part of your driver insurance is important.

Even if the other party has car insurance, it may not be enough to cover all of the damages. If there were both bodily and property damage and the other driver only has the minimum state requirements, there is a good chance there won’t be enough coverage.

You are responsible for anything beyond what the insurance pays, so underinsured coverage helps cover the gap.

Uninsured and underinsured motorist coverage also covers you in hit-and-run situations.

Normally if you, as a pedestrian, or your vehicle is hit by an automobile and the driver leaves before sharing insurance information, you will end up being responsible for any damages.

Having uninsured coverage will take care of the damages for you.

Collision Coverage

If you are at fault for an accident and there is damage to both parties, liability insurance will only cover damages to the other party; you will still be responsible for expenses related to your car.

This would come out of your pocket unless you had collision coverage.

Collision coverage will help pay for damages to your vehicle that are caused not only from hitting another car but also from hitting another object or from your car flipping over. It will also help cover any damage that is caused by hitting potholes.

Collision coverage is not necessarily as important as liability but it is nice to have, especially if you have a car with parts that cost a lot to repair or replace.

If you have a teenage driver in your household, collision coverage is especially helpful.

According to the National Highway Traffic Safety Administration, teen drivers have the highest crash rates of any age group. Collision coverage will help cover all of the damage that your teenager may cause to the car.

What are some additional coverage types?

There are other types of car insurance coverage that you may decide are important to have as well.

Some may be unnecessary or not worth the extra cost, but since each individual’s situation is different, it is best to be informed of your options before choosing the coverage that is right for you.

Comprehensive coverage covers damage or loss that is caused to your vehicle by something other than a collision. This may include:

  • hitting animals such as deer or birds
  • vandalism
  • riot damage
  • flood damage
  • hail damage
  • windstorm damage
  • earthquake damage
  • explosions
  • falling objects
  • fire

Comprehensive coverage also covers theft of your vehicle and windshield glass damage.

As with collision insurance, choosing comprehensive insurance may depend on your car’s value. A nicer car would be more expensive to repair or replace if stolen, making comprehensive coverage a good idea, while having a used car would make the coverage less necessary.

Coverage to help with medical expenses may be a good idea, especially if your health insurance isn’t the best. With bodily injury liability, you are covered for the other driver and passengers, but not those in your own vehicle.

Depending on the state in which you live, you may have the option of purchasing personal injury protection (PIP) or medical pay.

These will help cover the expenses associated with medical care, but may also cover lost wages, funeral costs, and any costs to replace services that cannot be performed any longer.

Evaluate your situation with regard to medical coverage. If you have great health insurance through your employer with low deductibles and high limits, you may find that having insurance coverage for medical incidents is unnecessary.

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When you purchase car insurance, each type of coverage will be accompanied by a deductible.

The deductible is the amount of money that you have to pay before the insurance coverage kicks in. The higher the deductible, the more you pay. As a reward for paying more, the auto insurance company will charge you less for your premiums.

The amount of your deductible depends on your financial situation and will vary for each driver. If you have money saved up and don’t mind paying a larger amount in the event of an accident, you may choose to take the chance with a higher deductible.

On the other hand, if you live month-to-month, it may be a smarter choice financially to pay a higher premium in order to have a lower deductible.

Your deductible options may vary, but the deductible for comprehensive coverage usually goes between $100 and $300. The deductibles for collision coverage are usually higher, varying from $250 to $1,000.


You are also able to choose your upper limits for your coverage types. The limit refers to the highest amount that an insurance company has to pay for each incident.

After the limit is reached, you are responsible for the remaining expenses.

Although states require a certain minimum limit, it is often fairly low. It is recommended that you choose a higher limit than what is required.

A higher limit will protect you financially, especially if you are sued by the other party.

As with the deductible, your limit amount will affect how much you pay for your premium. If you have a higher limit you will pay more for your premium while a lower limit will result in a lower premium.

There are many options when it comes to car insurance coverage. Evaluate your situation, such as the type of vehicle you drive, how much money you have in the bank, and how often you get behind the wheel, before signing up for an auto insurance policy.

A fully comprehensive policy will offer you more protection than a basic one, so decide what you are comfortable with.

Also, revisit your auto policies on at least an annual basis and re-evaluate. Decide whether you still have the appropriate coverage or if changes need to be made. Your car insurance agent can help you make these decisions as you go along.

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