Types of Auto Insurance (2024)

When purchasing a car insurance policy, picking and choosing the types of auto insurance coverage you need from the best auto insurance companies can be overwhelming. Not having enough coverage can result in high out-of-pocket costs, while having unnecessary auto insurance coverage types means paying higher rates.

While states require drivers to carry some coverages, other coverages, such as full coverage auto insurance, are optional, and the states leave it up to drivers whether they want extra coverage. Since each coverage is different in what it protects against, drivers should read up on each before deciding.

To help you find the cheap auto insurance types you need, we’ll go over each type of car insurance coverage in detail and explain what car insurance does.

Most Common Types of Auto Insurance Coverage Explained

Auto insurance protects drivers by paying the bills for accidents so drivers don’t end up in debt. Car insurance rates vary from state to state and company to company. On top of that, your car insurance rate can be affected by various factors like age, driving history, and even your credit rating.

Take a look at the chart below to see average rates for full coverage auto insurance in your state:

Full Coverage Auto Insurance Average Rates by State

Every insurance company differs in what coverages they offer. Still, most auto insurance companies will offer the following types of car insurance coverage because either states or lenders require them.

Liability Auto Insurance

Liability auto insurance is an important insurance coverage for drivers and one of the most affordable types of auto insurance. The two types of auto insurance coverages within liability insurance include bodily injury liability and property damage liability.

If you cause an at-fault accident, property damage liability insurance pays for the other parties’ damages. On the other hand, bodily injury liability auto insurance pays if the other driver or passengers are injured, and property damage liability pays for the other driver’s vehicle repairs or property damages, such as a broken mailbox.

Keep in mind that there are no liability auto insurance types that cover your accident costs. Almost every state requires drivers to carry this insurance so other parties’ costs get paid if a driver causes an accident.

Liability insurance is the lowest level of insurance you can legally carry. For more protection, you may want to consider full coverage, though it will cost you more. Here’s a look at how average monthly minimum rates compare to those for full coverage from a few of the top U.S. auto insurance companies:

Read on to learn more about the available add-on auto insurance coverage types.

Collision Auto Insurance

Unlike liability insurance, states don’t require collision insurance for drivers. However, drivers who have a loan or lease on their vehicle usually must carry collision insurance on their cars.

Collision auto insurance pays for vehicle damages if a driver crashes in the following situations:

• They hit another vehicle.
• They hit a stationary object, such as a fence.

Even if your lender doesn’t require collision, you should consider adding collision coverage to their policy to help pay for repairs or a new car if it gets totaled.

Comprehensive Auto Insurance

Similar to collision insurance, lenders may require drivers to carry comprehensive auto insurance on their vehicles, even though states don’t require it. Comprehensive insurance covers drivers in the following types of incidents:

• Collision with an animal
• Damages from weather, such as a hurricane or hailstorm
• Damages from falling objects, such as a tree falling on your car
• Damages from vandalism or theft

Once again, drivers who can not afford to pay to repair damages or replace their cars should add comprehensive coverage to their policies.

Personal Injury Protection Auto Insurance

Personal injury protection auto insurance, or PIP insurance, is required in a handful of states but is optional in most of the U.S. If you get in an accident, PIP covers your and your passengers’ medical costs, including emergency medical treatment bills, lost wages, or funeral costs.

Even if you aren’t required in your state to carry PIP, it’s worth buying if you can afford to add it to your insurance policy unless you have great health insurance. Even then, PIP covers things that health insurance doesn’t, such as lost wages from injuries.

Underinsured/Uninsured Motorist Insurance

Less than half of U.S. states require drivers to carry underinsured/ uninsured motorist insurance, which pays for your accident costs if the at-fault driver has inadequate or no coverage to pay your bills.

Does car insurance cover a hit-and-run? If the driver doesn’t have insurance, they may hit and run, meaning you’ll need extra protection. If you don’t have collision or comprehensive auto insurance, consider adding underinsured/uninsured motorist coverage to your insurance policy in case another driver can’t pay your bills after crashing into you.

Learn about the best underinsured motorist coverage auto insurance companies.

Medical Payments Insurance

Medical payments insurance, also known as MedPay, is required in Maine and New Hampshire. MedPay pays for you and your passenger’s medical bills if you are in an accident.

It’s more limited than PIP coverage, as it won’t pay for lost wages or funeral costs. However, if you want extra medical coverage, you may want to add MedPay to your insurance plan. Learn more about whether you need medical payment coverage on auto insurance.

SR-22 Auto Insurance

Some states may require drivers to file for high-risk auto insurance, also known as SR-22 insurance, if they have a DUI or other incidents on their record. You may have to shop around for cheap SR-22 auto insurance because not all insurance companies provide it.

Drivers who have to file for SR-22 coverage can expect rates to be higher than average as they’re considered high-risk drivers. Read more about how to find the best auto insurance for drivers with a bad driving record.

Non-Owner Auto Insurance

Drivers who don’t own their own car will have to purchase non-owner auto insurance. Non-owner insurance provides liability insurance if you crash a car, so the other parties’ bills will be paid.

However, non-owner insurance won’t cover the damages to the driver’s car — that will be up to the vehicle owner’s insurance. Your medical bills also won’t be covered under non-owner insurance.

The good news is that even though non-owner car insurance isn’t as comprehensive as owned car insurance, it’s usually cheaper than purchasing a regular auto insurance policy.

Rideshare Auto Insurance

If you drive for rideshare companies like Uber or Lyft, your regular auto insurance won’t cover you. States require all drivers to be insured to drive legally, so you must purchase rideshare auto  insurance to transport customers legally.

Not all insurance companies sell rideshare insurance, so you may have to shop around to find a policy.

Other Types of Auto Insurance Coverages

Unlike the most common types of auto insurance, the following coverages are completely optional, no matter what state you live in. Not all insurance companies offer them. Look at them below to see how auto insurance works with these add-on coverages.

Classic Car Coverage

Generally, insurance companies consider cars classic if they’re at least 25 years old. Classic car auto insurance is similar to a standard car insurance policy with liability, collision, and comprehensive bundles, but it’s cheaper than regular auto insurance. The reason it’s more affordable is because classic cars only get driven for occasional pleasure drivers. So, you’ll need a standard auto insurance policy if you use your classic car regularly.

Emergency Roadside Assistance Coverage

Some insurance companies offer optional emergency roadside assistance coverage. The best roadside assistance coverage helps with all of the following:

• Dead batteries
• Empty gas tank
• Flat tires
• Locked out of the car
• Tows

If you have an older car prone to breaking down, then adding roadside assistance to your plan can save you money in the long run.

Gap Insurance

All cars start losing value as soon as they leave the lot. If you have a loan or lease and total your car, the amount your auto insurance pays you will be based on your car’s actual cash value.

This depreciated amount can be significantly less than the amount left on your car’s loan or lease — this is where gap coverage comes in. Gap insurance pays the difference between the depreciated actual cash value and the amount left on your loan or lease.

Mechanical Breakdown Coverage

Mechanical breakdown insurance will pay for car repair costs if mechanical parts in your car break down, such as your engine or transmission, and is similar to extended warranty coverage.

Typically, insurance companies won’t sell mechanical breakdown coverage for old cars or cars with a high number of miles on them, as these types of cars are more prone to breaking down.

Modified Auto Coverage

Some auto insurance companies offer modified car coverage to drivers who have made expensive car modifications, such as a custom paint job or a new sound system. Without modified car insurance, the cost of modifications won’t be covered if the modifications are damaged in an accident. Learn about the best auto insurance companies that insure modified cars.

New Car Replacement Coverage

Only cars that are no more than a few years old can qualify for new car replacement coverage. If you total your car, new car replacement coverage will pay for a new car of the same make and model as your totaled car. What cars will qualify for this coverage depends upon the insurance company.

Rental Reimbursement Coverage

If your car is in the shop getting repaired under a covered loss, then rental car reimbursement will pay for your rental car until your car is fixed.

Keep in mind that what kind of rental car insurance companies will pay for and how long they will pay for the rental car depends upon the company.

Umbrella Coverage

Umbrella coverage is extra liability insurance if you cause an accident in which costs exceed your basic coverage limits. It will also help pay for costs if you are sued after an accident. How much umbrella coverage covers depends on the policy and company.

Usage-Based Auto Insurance Coverage

Usage-based auto insurance may be offered by some insurance companies. Drivers pay a daily rate and then pay a small fee based on how much they drive. Some insurance companies may also offer usage-based programs where drivers let the company track their driving data and then earn discounts.

More About Common Types of Auto Insurance Coverage

All drivers are required to carry liability insurance, no matter where they live. However, most other coverages are optional, leaving it up to the driver to decide what types of auto insurance coverage they want to carry.

So, what does car insurance do? Liability coverage pays for other drivers’ costs in an accident you caused, and most U.S. states’ auto insurance laws require it. On the other hand, collision and comprehensive auto insurance policies cover your vehicle damages and medical expenses.

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