10 Types of Car Insurance Policies & How They Work

WRITTEN BY: Julia Matseikovich


Whether you just purchased a new car or are looking at options to renew your insurance, purchasing car insurance is essential before taking out your vehicle for a drive.

There are many different types of car insurance to choose from. Picking out the best one is critical to getting the most value for your money.

What are the Different Types of Car Insurance Policies?

There are many different forms of auto insurance policies that must be taken into account before deciding on which car insurance is right for you.

Liability Coverage

In most US states, liability coverage is mandated and must be a part of your auto insurance plan. Liability coverage is responsible for covering damages for injuries and property damage to others when you are at fault for a covered accident.

Collision Coverage

Collision coverage helps to pay or fully cover the cost of damages to your car after being involved in a covered accident with another vehicle. This may be applied to any car within your policy.

Comprehensive Coverage

Although not mandatory in most states, comprehensive coverage may be a good option to keep in mind when creating your policy, depending on where you live or your lifestyle. Comprehensive coverage covers the cost of repairing your vehicle after vandalism, certain weather events, or accidents with animals.

Uninsured Motorist Insurance

Uninsured motorist insurance protects you and your vehicle from damages from an uninsured driver or a hit-and-run accident. 

Underinsured Motorist Insurance

Underinsured motorist insurance is similar to uninsured motorist insurance and is often paired. This insurance offers coverage for the costs that arise from damage another vehicle causes if the other driver’s insurance is limited and does not cover all of the costs.

Medical Payments Coverage

If you or someone on your policy is injured during an accident, the medical payments coverage portion covers these medical payments. This coverage applies whether or not you are at fault.

Personal Injury Protection Insurance

Personal Injury Protection covers certain medical expenses and loss of income resulting from a covered accident. Many times states require this form of insurance or medical payments coverage. 

Gap Insurance

If you’re paying off a loan for your vehicle and get into a total loss accident or become a victim of car theft during this time, gap insurance helps cover the remaining amount owed on the car.

Towing and Labor Insurance

If you have comprehensive car insurance, this service is already included. If you choose not to include comprehensive car insurance, you can still get reimbursed for towing and labor costs to repair your vehicle.

Rental Reimbursement Insurance

After an accident that damages your vehicle, you most likely will have to get a car rental to get around while your car is being repaired. Rental reimbursement insurance helps to cover costs related to your rental car during this process.

Who Is Covered Under Car Insurance?

Car insurance provides coverage for the vehicle’s driver and any family member who is a part of the policy. Depending on your coverage, this may extend out to anyone driving your vehicle with your consent if you’re present.

However, this only applies to personal use. If you’re driving your car for commercial purposes, this coverage does not apply. If you’re using your car for a ride-sharing service such as Uber or Lyft, you must obtain a supplement to your car insurance at an extra cost.

What is Required in Car Insurance Coverage?

Since the states mandate car insurance, every state is entitled to require different aspects of coverage. It is essential to check your state’s requirements for auto insurance before obtaining coverage to make sure your plan applies. However, nearly every state requires the following forms of coverage:

  • Bodily Injury Liability
  • Property Damage Liability
  • Medical Payments or Personal Injury Protection
  • Uninsured Motorist Coverage

Auto Insurance That Works Best For You

Now that you know the basics of auto insurance and the available different types of coverage, it is your turn to do additional research and see which coverage options best apply to your needs and lifestyle.

Make sure to consider pricing and coverage depth and compare different plans. Once your insurance is picked out, always drive safe and enjoy your new vehicle!