Different Types of Car Insurance

There are three different types of car insurance coverage: Liability, collision, and comprehensive. The average cost of full coverage is $1,009.38.

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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: Jun 30, 2020

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Here's what you need to know...

  • Collision insurance covers your car in the event that it is involved in a collision with another car or object
  • Comprehensive car insurance covers your car in non-collision situations such as theft, fire, or weather-related damage
  • Liability coverage covers bodily or vehicular damage to the other party or parties in the event of a crash
  • The average cost of all three types of coverage was $1,009.38.

What are the three types of car insurance? When shopping for a car, it is easy to become overwhelmed with all the options available to you.

But if you think the abundance of choice ends when you select the perfect car, you are in for a surprise.

Your innocent query to your friends, your partner, your parents, or the trusty Internet about what options for car insurance are available, will be met with a barrage of answers that make your car search seem like a simple process in comparison.

To start comparing car insurance options with personalized rate quotes from top companies simply enter your ZIP code above in now and get started on your car insurance comparison search.

Collision Coverage: A Good Starting Point

Collision car insurance falls under the umbrella of physical damage coverage. Collision car insurance is the policy under which your car is covered in the event that it is involved in a collision with another car or object.

Once you select your deductible (the portion of the damages you are comfortable covering with your own funds), your collision insurance policy will be responsible for kicking in the rest of the cost to repair or replace your vehicle.

Choosing a higher deductible means paying less for the collision insurance policy.

For example, say you choose a $1,000 deductible, then get in a fender bender that ends up, inexplicably, costing $1,200 to repair (how can replacing a piece of plastic and painting it add up to so much?).

In this scenario, you will pay $1,000 while the car insurance provider will cover $200. However, say you total your car. You still pay $1,000, while the insurance company coughs up the rest of the cost for a replacement car. The latter scenario makes even your high deductible seem like a good deal.

If you have an old clunker that’s fully paid for, collision is probably not necessary. Repairing damages to such a car may cost more than the car is worth, making it cost-effective to start fresh with a new (or new-to-you) car.

If you already own a new car, however, or one that has a high value attached to it, collision is a practical necessity.

In the unfortunate case that your showpiece of a car is damaged beyond repair, the lack of collision coverage will make it so that you are forced to take a major loss on that car while paying out of pocket for another one.

If you have taken out a loan to pay for your car, or if you are leasing it, the lien holder will require collision insurance.

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Comprehensive Coverage: Ratcheting It up a Notch

Comprehensive coverage may be a good addition to your policy. Comprehensive car insurance falls under the same umbrella as collision car insurance: physical damage coverage.

It covers your car in non-collision situations such as the following:

  • theft
  • fire
  • weather-related damage
  • Cracked windshields resulting from rocks on the road

Liability Coverage: Almost always Required

What other types of car insurance are there? Most state minimums require liability coverage. Liability car insurance does not cover you or your car.

Instead, it covers bodily or vehicular damage to the other party or parties in the event of a crash. All states except New Hampshire and Wisconsin require drivers to purchase a minimum level of insurance; in most cases, liability coverage is the specified minimum.

An important factor when it comes to liability coverage is the “liability limit.” That is the maximum amount your insurance provider will pay out for an accident caused by you.

If the damage exceeds your coverage, you may be sued for the remainder. While many states stipulate bare bones limits in the $20,000 to $25,000 range, this may not be enough to protect your lifestyle and even your livelihood if you are sued.

You should do your research before settling on the liability insurance policy that’s right for you.

Uninsured/Underinsured Motorist Coverage

Uninsured or underinsured motorist coverage can help protect you. Uninsured/underinsured motorist coverage will pay out for injuries to your person (or that of covered family members and passengers) caused by an uninsured or underinsured driver or as part of a hit and run crime.

In addition to providing for your medical care, it can provide money toward lost wages and help around the house.

Today’s poor economic conditions have led to new levels of uninsured or underinsured drivers, and certain areas are more susceptible than others to the threat.

Uninsured or underinsured motorist coverage helps protect you and your passengers from an accident that adds insult, in the form of non-existent insurance coverage, to your injuries.

You can compare car insurance quotes using all the different types of auto insurance categories discussed in this article.

To find out which collision, comprehensive, liability, and/or underinsured-uninsured motorist policy is right for you, enter your ZIP code below to compare car insurance quotes today.

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