Car insurance coverage can be confusing — nearly as confusing as trying to navigate a twisting, turning mountain road. But when you break it down, car insurance can be as simple as leisurely driving down a neighborhood street.
We’ll explain the eight types of car insurance coverage that every driver should know. “Insurance is regulated at the state level, and the minimum coverage requirements differ by state. Your insurance company or agent is an excellent go-to source to explain your options,” says Lynne McChristian, a spokeswoman for the nonprofit Insurance Information Institute.
“Keep in mind that minimum state requirements may be insufficient,” she adds. “Insurance is about protecting your finances, so talk with your insurer about the difference between what’s required and what you need. You want to be confident you have sufficient protection when you take to the road.”
Also, remember that if you have an auto loan or lease, you technically don’t own your vehicle. The lender or lessor normally insist that you have certain types of coverage.
Types of Car Insurance Coverage You Must Have
Motorists in every state except two, New Hampshire and Virginia, must carry liability coverage. In the liability category, there are two kinds of coverage: bodily injury liability and property damage liability.
Bodily injury liability covers injuries, including fatal injuries, you cause to someone else when you’re driving.
Property damage liability covers damage you cause to someone else’s property when you’re behind the wheel, such as other cars, fences, buildings, and lamp posts.
2. Medical payments coverage/personal injury protection (PIP)
This covers the treatment of your injuries or your passengers’ injuries that result from a crash. It also covers lost wages. Plus, you can get reimbursement for basic services you normally do, such as housework. Many states, but not all, require medical payments coverage/personal injury protection (PIP).
Types of Car Insurance Coverage That Are Optional
Next, let’s move on to the six types of optional car insurance coverage:
3. Collision coverage
The collision portion of your car insurance coverage protects you from an accident with another vehicle or with an object like a tree, or even damage caused things like potholes. This typically comes with a deductible; the higher the deductible, the lower your insurance premium will be.
Collision coverage does not, however, pay for mechanical failures, such as engine failure. Nor does it cover normal wear and tear, such as worn tires.
“The price you pay for collision is based on the type of car you drive. In general, the more expensive your car is — in terms of what it cost when it was brand new — the more you pay for collision,” says David Miller, an independent insurance agent with The Plexus Groupe LLC in Deer Park, Illinois.
4. Comprehensive coverage
Your comprehensive coverage pays for damage caused by fires, falling objects, missiles, explosions, earthquakes, windstorms, hailstorms, floods, vandalism, and contact with animals such as deer and birds.
Coverage is also based on the cost of your car when it was new, Miller says, “but it’s less expensive than collision. This is because collision claims happen more frequently than comprehensive claims do.”
Miller notes that most car owners believe that the cost of collision and comprehensive should go down as your car ages.
“This is untrue. Yes, your car is worth a little less each year it gets older. But the cost to repair the car does not,” Miller says. “You might drive a car built in 1998, but you’d have to pay 2018 prices for the parts and for the body shop to install them.”
5. Uninsured/underinsured motorist coverage
McChristian recommends that every motorist consider uninsured/underinsured motorist coverage.
“This protects you if you’re in a car crash with an at-fault driver who doesn’t have any or enough car insurance,” she says. “It also provides coverage if you are the victim of a hit-and-run accident.”
In the U.S. in 2015, an estimated 13% of drivers were uninsured.
6. Rental car reimbursement
You can add rental car reimbursement to your car insurance policy. It pays for a rental car that you may need to drive while covered damages to your vehicle are repaired.
SEE ALSO: Do You Need Commercial Auto Insurance?
7. Glass coverage
It’s common for a rock to fly into your windshield and break it when you’re on the road. Some car insurance policies have no-deductible glass coverage. This covers you for the front windshield, side windows, rear windows, and glass sunroofs. You also can buy glass coverage as an add-on to your policy.
8. Gap coverage
If you’ve got a car lease or loan, you’re probably already covered by collision and comprehensive because the lender or car dealer requires it. However, collision and comprehensive cover only the market value of your car, not the amount you paid for it.
So, if your car is stolen or it’s totaled after a crash, you may owe more for the car than your policy covers. If you don’t want to have to make up the difference between the two out of your own pocket, you need gap coverage.
Typically, if you lease a car, you’ve already got gap coverage. Check to see if it’s already included in your monthly lease payment.