Explaining Auto Insurance Coverage Types

A common misconception about auto insurance is that having a basic policy gives you all forms of coverage. There are many different auto insurance coverage types. It's important to be aware of the different types so you know what would work best for your situation and needs. This list of different auto insurance coverage types will walk you through the various types of insurance and what they all cover.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years

UPDATED: Nov 12, 2020

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A common misconception about auto insurance is that having a basic policy gives you all forms of coverage. This is far from the truth. As a result, when many turn to their car insurer for a claim, they get turned away because they aren’t covered in their particular situation. To be safe, make it a point to become familiar with the different types of auto coverage available, and then keep them in mind when choosing an auto insurance policy.

Liability Coverage

Liability coverage covers the expenses, or part of them, occurring from accidents that you are legally responsible for. However, it is not that simple, there are many different kinds of liability coverage.

Bodily Injury Liability – This type of coverage insures bodily damage, harm, or death that you were responsible for. This includes medical bills, lost income, and pain and suffering. Legal costs are also covered under this type of coverage. Don’t sell yourself short here, medical and legal bills can be the most costly part of an accident.

Property Damage Liability – Not only does this form of coverage covers damage to a car, but it also covers all other forms of property. From damage to houses, mailboxes, and everything in between. Once again, this also covers any related legal bills.

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Physical Damage Coverage

Physical Damage Coverage covers damages done to your vehicle. Not only does it cover damage caused in an accident, but also covers your car in cases of theft, vandalism, and other rare occurrences. Not all policies cover the same areas, so check with your particular company beforehand.

Comprehensive Coverage – Comprehensive coverage covers your vehicle, and sometimes other vehicles for damages caused by things other than collision. Each policy varies so check with your prospective insurance company before signing up. Common scenarios that this form of coverage covers are damages caused by theft, fire, water damage, animals, or vandalism. This form of coverage is typically recommended for high end or expensive vehicles, as well as financed or leased vehicles.

Collision Coverage – This is the most common type of auto insurance coverage, and is required by most state laws. This covers damages done to your vehicle in case of a collision. Choosing a large deductible (the amount you pay out of pocket before your insurance kicks in) can greatly reduce your premium costs.

Uninsured and Underinsured Coverage

Uninsured Motorist Coverage and Underinsured Motorist Coverage – This form of coverage protects you against scenarios in which the other party (if at fault) doesn’t have insurance or if they decided to hit and run. In other words, if they aren’t able to cover the damage, your auto insurance company will cover the costs for you (if you have this coverage).

The reason having Uninsured or Underinsured Motorist Coverage (UM/UIM) is so important in the United States is because of the sheer amount of uninsured drivers on the road. According to the Insurance Research Council, 13% of all motorists on the road, or about one in eight drivers, are uninsured. So, if you get into an expensive accident that you were not at-fault for, there is a high chance that insurance won’t even pay for it. This is why having UM/UIM is so important.

Other Important Coverage Types

Medical Payments Coverage

Medical payments coverage is an optional type of car insurance that can cover medical costs related to a covered accident, regardless of who is at-fault. It works in a similar way to an ordinary health insurance policy by covering all your medical expenses. Medical payments coverage can also cover things like funeral expenses, passenger injuries, dental care, and injuries sustained as a bicyclist or pedestrian after you’re hit by a vehicle.

Personal Injury Protection Coverage

Personal injury protection, or PIP coverage, is required in some states but not others. Personal injury protection is different from medical payments coverage in that it covers certain medical expenses and loss of income from a covered accident. Depending on your PIP coverage, your policy could cover up to 80% of medical expenses, lost wages, and other expenses resulting from a covered accident.

Personal injury protection is considered a “no-fault” type of coverage because it will pay for claims regardless of who is at fault.

Emergency Road Service Coverage

Emergency road service coverage is an optional car insurance policy that will cover common, reasonable expenses on your vehicle if it breaks down for non-accident-related reasons. If your vehicle’s battery dies in a parking lot, for example, then your emergency road service coverage might cover the costs of sending someone to your location to jump-start your vehicle. A typical emergency road service coverage plan covers mechanical labor at the breakdown site (up to one or two hours) as well as towing your vehicle to the nearest service location (if the vehicle is not driveable). Many emergency road service coverage policies also cover you if you need to change a tire, run out of gas, or get locked out of your vehicle.

Gap Insurance

Gap insurance is a unique type of car insurance that covers the “gap” between the amount you owe on your vehicle and the amount your car insurance will cover. If your car is worth $50,000, for example, and your car insurance covers up to $25,000 in collision damage, then you might buy gap coverage to lower the gap. This can be particularly important (or even legally required) if you’re leasing or financing a vehicle. Without gap coverage, you could lose money when your vehicle is totaled. If you just drove your $50,000 truck off the lot, for example, then it’s no longer valued at $50,000. If you get into an accident on the way home, then your insurance company will only send you a check for, say $45,000 – even though you still owe $50,000 on your vehicle.

Rental Reimbursement Coverage

If your vehicle is damaged in a collision, then you might not be able to drive your vehicle for a few weeks while it gets repaired. In this situation, you might use your car insurance policy’s rental reimbursement coverage. Rental reimbursement coverage will pay for a rental vehicle if your primary vehicle cannot be driven after a covered accident. Typically, you can get $20 to $50 per day in rental car coverage, allowing you to rent a basic vehicle to get you from Point A to Point B.

Modified Car Insurance Coverage

If you’ve added non-stock items to your vehicle, then you may need to purchase modified car insurance. Items that add speed, style, and flair to your vehicle can increase its cost, making it more expensive to insure. If you don’t tell your insurance company about these additions, then they won’t be covered in an accident under your ordinary car insurance policy. That’s why you may need modified car insurance.

Umbrella Insurance

Umbrella insurance is extra liability insurance designed to protect you from major claims and lawsuits. Like an umbrella, umbrella insurance provides comprehensive protection above and beyond the limits of your ordinary car insurance or homeowner’s insurance policies. These policies can protect you against injuries, damage to property, certain lawsuits, and personal liability situations. If you want maximum peace of mind and maximum protection, then you might wish to purchase an umbrella insurance policy to supplement your car insurance.

SR-22 Insurance

SR-22 insurance is required for high-risk drivers. It’s called SR-22 insurance because you need to file an SR-22 certificate of insurance, also known as a Certificate of Financial Responsibility (CFR) to prove you have insurance. An SR-22 is not technically car insurance itself; instead, it indicates you’re meeting your state’s minimum car insurance requirements for driving. You might require an SR-22 form if you were convicted of a DUI, a DWI, reckless driving, an at-fault accident (or several at-fault accidents), driving without insurance coverage, or driving with a suspended license.

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How Much Coverage Is Needed?

Now that we have explained the different types of coverage available in the United States, the next step is to determine how much of this coverage is needed. Different states have different minimum legal requirements, but buying the legal limit is hardly ever enough. For the best protection, it is recommended that you get as much coverage you can possibly afford. Of course, buying too much coverage is also problematic because you might never actually get to use it. The trick is to find the sweet spot between maximum coverage and affordability. To learn how much auto insurance coverage you should equip yourself with, please read this article. For more information on the coverage types recommended and legally required in your locale, please call your insurance provider.

Additional Information Regarding The Types Of Car Insurance Coverage

  • Allstate – Typical components of an auto insurance policy
  • Nationwide – What are the different types of auto insurance?
  • DMV.org – An in-depth guide on the different types of auto insurance coverage.

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