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From distracted and inattentive drivers to perilous potholes, the road is riddled with risks to you and your vehicle. When one of those risks collides with your car, auto insurance can help cover the costs. Car insurance helps pay for injuries and damage to property or vehicles. The types of auto insurance you can get include liability insurance, collision and comprehensive insurance, uninsured/underinsured motorist insurance, and medical payments or personal injury protection insurance. There are also several kinds of specialized insurance you may want to consider. Here's what to know.
The 5 Basic Car Insurance Coverage Types
The basic types of car insurance in a standard policy typically include:
- Liability insurance: If you cause an accident that injures someone or damages their car or property, liability insurance covers the costs.
- Collision insurance: This pays for damage to your car if you collide with a vehicle, animal or object.
- Comprehensive insurance: This covers damage to your car not due to a collision, such as theft, fire or a tornado.
- Uninsured/underinsured motorist insurance: If a driver who's uninsured or underinsured causes an accident, this insurance covers your bodily injury and property damage.
- Medical coverage or personal injury protection: Medical coverage pays for accident-related medical care for you and your passengers. Some states offer personal injury protection (PIP) instead; this may go beyond medical costs to cover lost wages and other expenses resulting from an accident.
Most states require a minimum amount of insurance in order to drive. If your car is financed or leased, the lender or lessor technically owns it and will require you to get collision and comprehensive insurance to protect the vehicle. Aside from these requirements, the amount of coverage you buy is entirely up to you.
Additional Coverage Options You Might Not Know About
In addition to the types of car insurance commonly included in a standard policy, you can also get various kinds of specialty coverage to protect against specific risks.
- Gap insurance: At a certain point, a car that's leased or financed may not be worth the amount you still owe on it. If the car is totaled, insurance will pay out the car's value, but you'll have to pay the lender or lessor the difference. Guaranteed asset protection insurance covers the gap, paying this amount for you.
- Rental reimbursement: This coverage reimburses or pays for the cost of renting a car while yours is in the shop for covered repairs.
- Roadside assistance: When your car breaks down or runs out of gas, roadside assistance can come to the rescue and get you back on the road.
- Rideshare coverage: Do you use your car to drive for a rideshare service like Uber or Lyft? Neither your auto insurance nor the rideshare company's insurance covers the period where you're logged in to the rideshare app but haven't yet accepted a trip request. Specialized rideshare coverage offers protection for this time period.
- Glass or windshield insurance: Even if you have car insurance, repairing or replacing a windshield can be costly as deductibles add up. Glass or windshield insurance covers glass repair or replacement with low or no deductible.
- Mexico car insurance: U.S. car insurance won't cover you when you're driving in Mexico. If you frequently travel south of the border, look for insurers who sell specialized auto insurance through Mexican partner companies.
- Classic car insurance: Repairing or replacing a collector's car can be very expensive. Classic car insurance helps cover your prized antique for its full value and provide for specialized repairs.
- Equipment insurance: There are two kinds of equipment insurance you may want. Original equipment manufacturer (OEM) insurance covers the cost of using factory-original parts rather than generic parts in repairs or replacements. Customized equipment insurance pays for repairs or replacement of aftermarket customizations such as oversized wheels or performance modifications.
Specialty coverage adds to the total price tag of your policy, so be sure to weigh the potential costs of going without the insurance against the expense of buying it.
How to Choose an Auto Insurance Policy
What kind of auto insurance is best for you? Choosing the right policy requires striking a balance between your assets, your needs and your budget. Here are some factors to think about when looking for car insurance.
- How much coverage do you want? A lawsuit can put assets such as your home or investments at risk. In general, the more assets you have, the more coverage you'll need. Umbrella insurance can be added on to auto insurance to ensure coverage above the amount your auto policy provides.
- What can you afford? Consider both your deductible (the amount you'll pay before the insurance coverage kicks in) and your premiums. Increasing your deductible, which typically starts at $500, can lower your premiums; just be sure to limit your deductible to an amount you can easily cover if you have a claim.
- How old is your car? If you have a paid-off older car that's only worth a few thousand dollars, you may want to cancel collision and comprehensive insurance and put the money toward a new-car savings fund instead. However, if you'd have difficulty affording a replacement car, it may be worth paying for collision and comprehensive coverage to protect your ride.
- How reliable is the insurance company? When you have a claim, you'll appreciate an insurer that's helpful and responsive. Look for an insurance carrier that's financially stable and provides good customer service. Research online to see how the carrier is rated by companies such as A.M. Best or J.D. Power and read reviews from customers.
To get the best rates for car insurance, shop around. You can get car insurance quotes online or by contacting an independent insurance agent who sells policies from multiple insurance carriers. Get quotes from at least three companies before you decide. Be sure to compare the same amounts and types of coverage, as well as the same deductibles, so you're comparing apples to apples.
Getting the Right Type of Car Insurance
Deciding what types of car insurance you need takes some time and effort. It's worth the work, however, because having the right coverage can make a big difference when you're involved in an accident. To help get the coverage you need at the right price, check your credit score before you start shopping. Depending on your location, your credit score could be a factor in the cost of your premiums, because insurers have found higher credit scores may indicate lower insurance risk. If you have time to do so before you need insurance, improving your credit score could help you pocket some savings.