If you’re new to car insurance, you may be under the impression that car insurance is a uniform product with only minor differences from brand to brand. However, the reality is a bit more complicated. When you buy car insurance, you’re actually purchasing a combination of multiple different types of insurance that make up your policy.
This means that not only do you need to decide on which insurance company you want to work with, but you also need to know what types of auto insurance you want and how to set your limits. Clearly, purchasing car insurance can be tricky.
Luckily, we’ve got you covered. In this article, we will discuss standard coverages and extras that you can add on to your policy. Then, we will break down a few of our findings from our review of the best auto insurance companies in the industry. So, buckle up and let’s get rolling.
In this article:
- What Are The Standard Types Of Car Insurance?
- Other Types Of Auto Insurance
- Minimum Coverage Vs Full Coverage Insurance
- How Much Auto Insurance Do You Need?
- Our Recommended Car Insurance Providers
What Are The Standard Types Of Car Insurance?
There are six coverages that make up a standard auto insurance policy. When you purchase a policy from any insurance company, you’ll be mixing and matching these coverages along with any additional, non-standard options you want to add. Let’s take a closer look at each of the standard types of auto insurance:
Liability insurance covers you against damages to other people and their property. It is made up of bodily injury liability and property damage liability. If you get into an accident, send the other driver to the hospital, and total their car, liability insurance will cover the damages, cost of medical treatment, and legal fees if the other party leverages a lawsuit. Liability insurance will not cover any damages or injuries to you or your vehicle.
Collision insurance covers the cost of damages to your car in the case that you get into a collision with another car or an object such as a telephone pole or guard rail. Generally, collision coverage also protects against rollovers and other similar accidents.
Comprehensive coverage picks up the slack where collision insurance leaves off, covering you against any other damages to your vehicle that aren’t due to a collision. Comprehensive insurance covers damages due to theft, vandalism, natural disasters, civil disturbances, and more.
MedPay is self-explanatory: It covers the costs of vehicle-related medical treatments for both yourself and your passengers, regardless of whether you or another driver is at fault in an accident. Unfortunately, this type of insurance is not available in all states.
PIP is similar to MedPay, but there are a few differences between the two. While MedPay only covers the cost of medical treatment, PIP covers the cost of medical treatment and other injury-related losses such as lost wages from days you were unable to work.
While almost every state legally requires drivers to have auto insurance before they get on the road, that doesn’t stop some motorists from breaking the law. Un/underinsured motorist insurance protects you in the case that you get into an accident with a motorist who doesn’t have sufficient insurance and consequently can’t cover your expenses.
Other Types Of Auto Insurance
While the six standard types of car insurance above are the backbone of every auto policy, they aren’t the only options available. Most car insurance companies have other coverage options, including:
- Rental car reimbursement: This covers the cost of a rental car in the case that an accident renders your car undrivable for an extended period of time.
- Gap insurance: Gap covers the difference between what you owe on a financed vehicle and what the car is actually worth in the case of a serious accident.
- Mechanical breakdown insurance: Similar to an extended auto warranty, mechanical breakdown insurance covers the costs of repairs that are not related to an accident.
- Rideshare insurance: This covers drivers who are using their vehicle to drive for Uber, Lyft, and other ridesharing companies.
Minimum Coverage Vs Full Coverage Insurance
To make things a bit simpler, auto insurance policies are often divided into two camps: full coverage and minimum coverage policies. Each includes different types of car insurance.
Minimum coverage insurance policies cover the bare minimum insurance requirements that drivers need to have in place before legally hitting the road in their state. In Arizona, for example, all motorists need to have at least:
- $15,000 per person in bodily injury liability insurance
- $30,000 per accident in bodily injury liability insurance
- $10,000 per accident in property damage liability insurance
However, in Maine, drivers need to have a minimum of:
- $50,000 per person in bodily injury liability insurance
- $100,000 per accident in bodily injury liability insurance
- $25,000 per accident in property damage liability insurance
- $50,000 per person in un/underinsured motorist insurance
- $100,000 per accident in un/underinsured motorist insurance
- $2,000 in medical payments coverage
Because of these variations, the cost of auto insurance can be significantly higher in one state versus another. Maine requires drivers to purchase more types of auto insurance in greater limits than Arizona, so the average cost of insurance in the state is naturally higher.
Although purchasing an insurance policy that meets your state’s requirements may allow you to drive without breaking the law, in most cases the coverage isn’t sufficient protection from a financial perspective. Many states only require drivers to have liability insurance, for example. However, this means that in the case of an accident, drivers can incur tens of thousands of dollars of damage that they can’t cover on their own, sometimes even leading to financial ruin.
For this reason, many drivers prefer to take out so-called “full coverage” car insurance policies, which meet their state’s minimums and then some. While there is no universally agreed-upon definition of full coverage, the term usually refers to policies that offer a combination of the following types of auto insurance:
By purchasing a full coverage policy, drivers won’t need to worry that a single accident will send them plummeting toward bankruptcy.
How Much Auto Insurance Do You Need?
When deciding which types of car insurance and how much coverage you need, you’ll need to consider:
- Your state’s minimum requirements
- How much you can afford to pay for insurance
- Your own personal risk tolerance
At the very least, you need minimum coverage – that part’s a given. Without having a minimum coverage policy, you could end up spending a few months in jail.
There are some circumstances that require you to take out more coverage, even if not on a legal level. If you drive for Uber or Lyft, for example, you need rideshare insurance. Similarly, if you’re financing or leasing your vehicle, your lender may require you to have gap insurance.
Beyond that, you’ll have to consider how much you can reasonably afford to spend on insurance and what your own risk tolerance is. In general, it’s recommended to take out a full coverage policy for some extra financial protection. However, if you simply can’t afford more than the minimum insurance, then your decision is made for you.
Our Recommended Car Insurance Providers
In our research, we ranked USAA and Geico as two of the top auto insurance providers in the United States. While researching any insurance company, make sure to review all of the types of auto insurance available, along with details like cost, customer reviews, company reputation, and your discount eligibility.
USAA received our highest ratings across the board, ranking highly in customer service, level of coverage, and price. The provider has an A++ financial strength rating from AM Best, and it placed first in J.D. Power’s 2019 Auto Claims Satisfaction Study. What’s more, USAA tends to have the cheapest full coverage insurance policies out of every provider that we reviewed, proving that top-notch coverage need not come at a premium.
Unfortunately, USAA auto insurance is only available for military members and their families, so most motorists won’t be able to take advantage of USAA insurance coverage. However, if you are eligible for USAA, we highly recommend you take a look at what the company has to offer.
Best for Military Families
Our best overall pick: Offers great customer service to military members and their families.
Geico received our second highest ratings after USAA, and because it is available to non-military members, the provider is our first choice for customers overall.
We ranked Geico highly for its great customer service, financial strength, reasonable rates, and convenience. Geico received an A++ financial strength rating from AM Best, which indicates that it has the financial wherewithal to fulfill claims, and it received a favorable ranking in J.D. Power’s Auto Claims Study. Along with standard types of car insurance coverage, Geico has extras like rental reimbursement and mechanical breakdown insurance.
Geico puts an emphasis on technology, making it easy to file claims and receive quotes online and through an app in addition to traditional phone and in-person filing procedures. When we conducted our research, Geico’s app had the highest rating on the Google App store of any insurance provider we looked into, clocking in at 4.8 out of 5 stars.
While average premiums from Geico are generally higher than USAA, they are still quite reasonable and much cheaper than those of most insurance companies we reviewed.
Best Company Overall
Our 2nd favorite and best for those ineligible for USAA: Offers competitive pricing and great coverage.
What are the different types of car insurance?
There are six standard types of coverage. Liability insurance, which is made up of bodily injury liability and property damage liability, is required in most states. Collision insurance, comprehensive insurance, medical payments, personal injury protection, and uninsured/underinsured motorist insurance are offered standard with most auto insurance policies, unless you opt for minimum coverage.
What is recommended for car insurance coverage?
It is generally recommended to take out a full coverage auto insurance policy, if possible. This includes liability, collision, and comprehensive insurance. While a minimum coverage policy will allow you to drive legally, it doesn’t offer the same level of financial protection that a full coverage policy does, and it can leave you open to serious financial injury if the unexpected occurs.
What is included in basic auto insurance?
Minimum auto insurance requirements vary widely from state to state. However, most states require at least some form of liability insurance. Additionally, many states require drivers to have uninsured/underinsured motorist coverage before hitting the road. Collision, comprehensive, and medical payments insurance, as well as personal injury protection, are types of auto insurance that are not required by most states.