Cheap Car Insurance 101 (7 Types of Coverage Explained)

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Brad Larsen
Licensed Insurance Agent for 6 Years

UPDATED: Mar 13, 2020

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In a nutshell...
  • Almost all drivers have limited knowledge of auto insurance and are only forced to learn in the event of a claim
  • Some states report over 30 percent of drivers that are uninsured
  • Liability insurance is the most common type of auto insurance and is required by most states

Car insurance can sound like an easy purchase but besides comparing car insurance rates do you know enough about auto insurance coverage to make an educated decision?

Many drivers purchase insurance based merely on premiums. However, the real value of any policy is both in the company providing protection and the details of coverage.

How about trying to list the five most popular car insurance discounts or the largest auto insurance companies by market share?

The more information you have, the better an insurance comparison search you can do. Use our FREE quote tool to compare car insurance quotes now!

What are the types of car insurance?

Whether you live in California or Florida terms like PIP, collision coverage and bodily injury liability all mean the same.

The difference comes down to your policy limits and any exclusions about your different policy.

The main types of car insurance are:

Liability Insurance

This form of coverage provides for liability protection against damages/injuries caused in accidents to others where you are at fault.

For accidents happening in states with no-fault insurance laws the issue of who was at-fault is less relevant as liability insurance will pay for your damages regardless who was at fault.

Liability insurance, however, is not a “cover everything” policy nor bulletproof protection from litigation since any damages exceeding policy limits can very well trigger a lawsuit and personal liability.

Bodily Injury Liability

Most State car insurance laws also require drivers to have bodily injury liability.

This type of insurance provides coverage for medical expenses of injuries to the passengers and drivers of other vehicles for injuries sustained in a car accident.

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Property Damage

Property damage coverage is merely a version of liability insurance used solely for damage caused to property owned by others such as hitting a fence or slamming your car into a light pole.

Almost all state laws require property damage insurance.

— Collision Insurance

Coverage for “road-related” damage such as a head-on collision. Any loss,e caused when your car strikes another car as you are operating the vehicle.

Think of the definition of the word collision – when two cars collide most likely the collision coverage part of your policy will apply to some of the damages.

Comprehensive Insurance

Probably the most critical type of auto insurance although comprehensive car insurance is never required by state law.

States must enact laws for public safety, so liability insurance is a logical part of this however since comprehensive auto insurance is a form of coverage to protect your personal property.

With that said, it’s a very critical piece of the auto insurance puzzle and regardless if laws require it or not all drivers should consider some comprehensive insurance since this is the part of your policy which covers almost all the damage to your vehicle.

Personal Injury Protection

PIP is most often only required in states with no-fault insurance laws however its an optional form of insurance every driver should consider.

PIP, also known as Personal Injury Protection, provides coverage for medical expenses from car accident injuries for the policyholder.

Underinsured and Uninsured Motorist Coverage

Some states report over 30 percent of drivers that are uninsured, so your odds of getting hit by a driver with either no insurance or not enough protection can be pretty high depending on where you live.

A lot of states have car insurance laws requiring drivers to have underinsured/uninsured motorist coverage, and any responsible driver has no reason not to obtain UIM coverage.

While these seven types of coverage make up the critical components of auto insurance, many optional forms of coverage exist including rental car reimbursement, medical payments, and GAP insurance.

Before purchasing any vehicle or insurance policy its critical to understand the laws of your state – especially any minimum car insurance requirements.

Although most drivers opt for limits much higher than state laws, require its essential to understand what you need to be in full compliance with the law.

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