Types of Car Insurance

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Here's what you need to know...

  • There are three major types of car insurance
  • Liability insurance covers your liability costs in an accident
  • Comprehensive car insurance protects your car against theft and non-car-accident damage
  • Collision car insurance covers the cost of your vehicle’s damages from an accident that you have caused

There are three major types of car insurance and several small categories of car insurance. The three major car insurance types are liability insurance, comprehensive coverage, and collision coverage.

The smaller categories of car insurance include coverage types such as personal injury protection, uninsured/underinsured motorist coverage, roadside assistance, towing insurance, and gap insurance. There can be more depending on the insurance company that you choose.

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What is liability car insurance?

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If you cause a car accident, you are liable for damages. Liability insurance covers your liability costs in an accident and protects you from lawsuits.

Say you cause an accident because you ran a red light while texting. If you didn’t have liability insurance, not only could you be sued for the damages caused by the accident, but you could also be sued for negligence because you were texting while driving.

Liability insurance is required in every state.

The amount is typically minimal, based on the average cost of an accident in your state. Most insurance companies recommend that you purchase more than the minimum amount, and this isn’t because they are greedy.

If you cause an accident and you don’t have enough insurance to cover the damages, then your personal assets are at risk. By carrying a middle-of-the-line coverage, you can ensure that you have enough insurance to cover most accident situations.

Although liability insurance typically applies to other drivers and passengers in other vehicles, it can also cover the passengers in your vehicle as well.

This insurance is broken up into two types: bodily injury and property damage.

Bodily injury coverage is usually shown with two numbers, such as $25,000/$50,000. These numbers show that your coverage will pay up to $25,000 in bodily injury damages per person in the accident but only to a max of $50,000 per accident.

Liability insurance does not cover your own damages in an accident. This insurance is meant to pay for damages to other people or property that you are responsible for causing.

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What is comprehensive car insurance?

Comprehensive car insurance protects your car against theft and damage that is caused by something other than a car accident. For example, if you live in an area that floods, comprehensive insurance would pay for any flood damage to your car.

Comprehensive insurance will also cover your vehicle if it is damaged during an act of vandalism.

For example, your car has graffiti on it or someone threw rocks through your window.

Comprehensive coverage does not cover the theft of personal property from your vehicle. If you have a laptop in your car and your car is stolen, your insurance will cover the car but not the laptop.

You will need homeowners insurance or renters insurance to cover the cost of your personal property. Your deductible will apply to your comprehensive insurance.

What is collision car insurance?

Collision car insurance covers the cost of your vehicle’s damages from an accident that you have caused. In addition, collision coverage covers your vehicle should you hit an animal or if an animal runs into your vehicle.

Collision insurance also covers the cost of damage caused by potholes, if you hit a tree or a wall, etc.

As with comprehensive insurance, you will have to pay a deductible if you use your collision insurance.

Do I need secondary types of car insurance?

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In most cases, the other types of insurance available, such as roadside assistance and even gap insurance, are incredibly affordable, costing between two and four dollars a month.

It is worth it to have insurance that can cover a tow if you break down on the side of the road or insurance that sends someone out to help you change a tire at no additional cost to you.

Uninsured/underinsured insurance coverage protects you if you are hit by another driver and that person doesn’t have enough insurance to cover the costs. While you may think you will just take the driver to court, the process can take months or even years.

What’s more, you could be suing a person with no assets and no ability to pay you for the damages.

Having good insurance in place can make all of the difference to you.

While these insurance options aren’t required, they are certainly ones you will want to consider. But before you do, you should compare the cost of adding these to your policy between several companies to see who has the best rates.

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