Researching Different Types of Car Insurance? Here’s What You Should Know.
Most states have laws requiring car owners to purchase insurance that meets at least the minimum state requirements.1 That means most Americans are required to carry some form of auto insurance.2 Most car policies are made up of a few different types of coverage. Understanding what each type means can help, especially if you’re faced with a claim.
But how much do you know about the different types of car insurance coverage and how they protect you? Here’s what you need to know.
Bodily injury liability insurance
One important coverage commonly required by most states is bodily injury liability coverage. If you, a family member, or someone else you allow to drive your car causes an accident, and there’s an injury to another person, bodily injury liability can help pay for medical bills, lost wages and even pain and suffering.3These expenses can add up quickly, depending on the severity of the crash. For example, in 2018, the average liability claim for bodily injury was $15,785.4
Here’s how it works. Let’s say you rear-end another driver. During the crash, the other driver suffers a back injury that requires medical attention. Your bodily injury liability coverage can help pay for these medical bills. If the driver is also out of work, your policy can help reimburse lost wages, too.
Remember, without bodily injury coverage, you could be held responsible for paying these bills out of your own pocket. While most states require only a minimum amount of bodily injury liability coverage, many drivers opt for greater protection by selecting higher liability limits.
Property damage insurance
If you’re at fault for hitting another car, property damage liability insurance can help cover the cost of repairing the other vehicle, which can be a large expense. In 2018, there were about 5 million car accidents across the U.S.5 Over the years, the cost of repairing damaged cars has gone up, with the average property damage claim being $4,525.6
Remember, this is insurance you would use to pay for the other driver’s car, not yours. Property damage insurance is usually required by law and without it, you could be held responsible for the total cost of repairing the vehicle you hit as well as other damage to guard rails, mailboxes and more.
If you hit another vehicle or an object, like a tree or building, collision coverage can help cover the damage to your own car. That’s why nearly three-fourths of Americans with auto insurance add collision coverage to their policies. It makes sense considering the average collision claim in 2018 was $3,574.4,7
Here are a few scenarios where collision coverage may apply:
- You change lanes and hit a car in your blind spot.
- You hit a curb, and your wheel suffers damage.
- You slide on black ice and hit a neighborhood mailbox.
Usually, your policy has a collision coverage deductible that’s $250, $500 or $1,000. This means you pay your deductible amount and your policy will cover the remaining amount needed to repair or replace your vehicle.7
Sometimes damage happens to your car and it’s not from an accident. For example, a large tree branch could fall on the hood of your vehicle during a windstorm. Or someone could break your windshield and steal items from your car. Either way, these are costly damages that require repair—and comprehensive coverage is there to help.
You can use comprehensive coverage to help pay for non-accident-related damages. For example, you may use it if:7
- Someone breaks into your car or steals parts of your car, like its stereo.
- Your car experiences damage from a fire or flood.
- Someone severely vandalizes your car (keying it, breaking its windows or slashing its tires).
- A natural event, like a windstorm, tornado or hail, damages your car.
If you’re driving and hit an animal, like a deer, you can also use comprehensive coverage to pay for repairs. An accident involving an animal does not fall under collision coverage.
Uninsured and underinsured motorist coverage
Here’s a sobering fact. About one in eight drivers is uninsured, despite coverage laws in most states.8 The truth is, you never know who is in the car next to yours. It’s very possible that other drivers on the road are uninsured or underinsured. Worse, if you get injured in a car accident with one of them, you may be on the hook to pay for your own medical expenses and car damage.
That’s why uninsured and underinsured motorist coverage exists. It protects you by paying your expenses if another driver doesn’t have sufficient liability insurance. Usually uninsured and underinsured motorist coverage is an add-on to a policy. It can help cover: 9
- Medical bills and ongoing care related to the accident
- Lost wages if you have to stop working
- Funeral expenses if you or a passenger pass away
- Pain and suffering
If you’re looking into a new auto policy now, it may be worth asking an insurance professional about uninsured and underinsured motorist coverage.
Medical payments coverage (MedPay) and Personal Injury Protection (PIP)
What happens if you get injured in an accident—either a car accident that’s your fault or the fault of another driver? Some states offer no-fault insurance, in the form of Medical Payments Coverage (MedPay) or Personal injury Protection (PIP).
If you have MedPay, it can help cover your medical expenses up to your limit, regardless of who was at fault in the accident. It should also cover medical expenses for any passengers that are in your vehicle.10 Personal Injury Protection coverage, also known as PIP, covers medical expenses too, plus lost wages, childcare, house cleaning and more. Depending on where you live the auto insurance that’s available, you may want to consider getting MedPay and PIP coverage.11
Roadside assistance coverage
The average cost of getting your car towed is between $75 to $175.12 For the most part, that’s more expensive than just buying roadside assistance coverage, which covers complimentary tows and much more.
You can also use roadside assistance for other emergency services, such as:
- Jumpstarting a battery
- Changing a flat tire
- Getting gasoline delivered
- Accessing your car after getting locked out
- And much more
Here’s the bottom line: Purchasing roadside assistance is a smart decision and it doesn’t cost much. With just a phone call, you can get help when you’re in need. This is especially important if you’re alone, in a remote area or it’s late at night. This coverage can help you stay safe when the unexpected happens.
Guaranteed Asset Protection (GAP) insurance
Let’s say you total your car or it’s stolen, but the amount you owe is more than the car’s value. This means you’ll have to pay off part of your auto loan out of your own pocket.
Fortunately, GAP insurance can help. This coverage is important if you’re leasing a car, or your loan is more than what your car is worth. Remember, as soon as your loan is worth less than your car, you should end your GAP insurance.13
If you think you need even more protection than your auto policy provides, you can always purchase umbrella insurance. This type of coverage can offer extra liability insurance.14
Here’s an example of how umbrella insurance works. Let’s say you cause a major car accident on the highway. At least five cars are involved, and there are multiple injuries. If your bodily injury liability insurance doesn’t cover all of the costs, umbrella insurance can pay the difference. Medical bills add up quickly when multiple people are injured and out of work. Without umbrella insurance, you may be responsible to pay for these expenses after your policy limits have been exhausted.
Knowing the language is the first step
Now that you’ve read an overview, it’s easy to plan for the coverage you need. Call one of Amica’s insurance professionals to ask about coverage types and your level of risk. Our team will walk you through all your options and help you customize a policy that fits your budget and protects you on the road.
- These States Do Not Require Auto Insurance, The Balance, 2020.
- Auto insurance statistics and facts, Bankrate, 2021.
- Common types of car insurance coverages, Bankrate, 2021.
- Facts + Statistics: Auto insurance, Insurance Information Institute, n.d.
- The Ultimate List of Driving Statistics for 2021, DrivingTests.org, n.d.
- Property Damage Liability Car Insurance: What Is It? How Does It Work? Value Penguin, 2021.
- Comprehensive Vs. Collision Auto Insurance: Here’s What You Need To Know, Forbes, 2020.
- Facts + Statistics: Uninsured motorists, Insurance Information Institute, n.d.
- What Is Uninsured Motorist Coverage? Forbes, 2021.
- Medical payments coverage, Bankrate, 2021.
- Understanding Personal Injury Protection, NerdWallet, 2020.
- The ultimate guide to roadside assistance coverage, Bankrate, 2021.
- How does GAP insurance work? NerdWallet, 2021.
- What Is Umbrella Insurance, and How Does It Work? NerdWallet, 2021.