The Different Types of Car Insurance

1. Liability Coverage

At the end of the day, most states require some form of liability car insurance. This type of insurance ensures that in the event of an accident, you can cover an injured person's medical bills and/or vehicle repairs.

Liability coverage can be broken down more into two forms: bodily injury coverage and property damage coverage. These two coverage types do exactly what they sound like and cover bills related to either bodily injures or property damage. Most insurance carriers actually package these into a singular product for your convenience and list the maximum coverage for each type of coverage.

For example, you may see three numbers that state the limits for each: 25/50/10 would mean a $25,000 bodily injury limit, a $50,000 per accident limit, and a $10,000 property damage limit for your coverage plan.

These limits will, of course, depend on the packages your insurer offers so be sure to pick the best limits that work for you at a price you can afford.

2. Collision Coverage

This is where things might get a little confusing.

Liability coverage will pay for someone else's car, but it won't cover damages to your own car. For this, you need an optional add-on called "collision coverage" that can be added to your policy. In some cases, you may be required to get collision coverage, such as if you're leasing your car.

Collision coverage does exactly what it states: it covers damages to YOUR car when you get into an accident, whether at-fault or not, so you can repair and get back on the road ASAP.

Please note that the damage must be caused by a COLLISION and not something else like inclement weather, fire, or theft. For those, you'll need the next type of coverage.

3. Comprehensive Coverage

Ever had your car stolen? How about having it tossed around by a tornado? Well, if you have comprehensive insurance on your policy, your carrier should have you covered.

Comprehensive car insurance protects against incidents you might not see coming, like a tree falling onto your car. It's normally an optional form of coverage, but it may be required in certain cases (much like collision insurance), such as if you're leasing your car.

Note that the name "comprehensive" might be misleading. It does not cover everything, especially not damage to another person's vehicle, bodily injury, medical bills, or any damage to your own car that result from an accident.

4. Uninsured or Underinsured Motorist Coverage (UM/UIM)

This one is a bit tricky, but let's break it down. There's two types of coverage here: uninsured and underinsured.

Uninsured

Some people don't want to get insurnace even though it's required by law. Hopefully, you'll never get into an accident with someone who does not have insurance, but in the event you do, hopefully you have uninsured motorist coverage. This type of coverage protects you by paying for medical expenses in the event you're struck by someone without any liability coverage.

Underinsured

UIM coverage comes into play when the at-fault driver does not have enough coverage to pay for the medical bills for the aggrieved party (in this example: you). Some states may also have it pay for the repairs of the person injured in the collision.

Additionally, UM/UIM can be broken down further, much like liability insurance, into two separate categories for bodily injury and property damage. Bodily injury will protect your and your passengers for medical bills, lost wages, and paind and suffering--assuming that you are not at fault.

Property damage will protect your car in the event the at-fault driver cannot fully cover all the expenses (for example: a 5 car collision may exhaust his or her policy limit if they are fully at fault).

Finally, there's a neat little trick that could help if you have more than one car on your policy: stacking. Stacking allows you to combine the UM/UIM limits of each car on your policy into a new, bigger, better limit.

For example, if you have two cars on your policy with UMBI limits of $25,000/$50,000 (remember that's the injury limit and per accident limit) then stacking both cars will allow you to get $50,000/$100,000 in UMBI coverage. States have varying rules on how stacking can work so it's best to ask your carrier or insurance agent about stacking.

20 states currently require some form of UM/UIM:

1. Connecticut
2. Washington D.C. (okay, it's not a state, we know)
3. Illinois
4. Kansas
5. Maine
6. Maryland
7. Massachusetts
8. Minnesota
9. Missouri
10. Nebraska
11. New Hampshire
12. New York
13. North Carolina
14. North Dakota
15. Oregon
16. South Carolina
17. Vermont
18. Virginia
19. West Virginia
20. Wisconsin

5. Personal Injury Protection & Medical Payments (PIP/MedPay)

MedPay is coverage solely dedicated to covering the medical bills resulting from an accident in the insured vehicle. If you, your family, or your passengers are in an accident, MedPay should cover the expenses for health insurance deductibles, doctor visits, ambluance rides, or even surgery. MedPay is normally an optional add-on to your policy.

PIP is generally the same thing as MedPay with a few exceptions:

1. It's usually only available in "no-fault" states
2. Some states may require PIP
3. PIP could cover a little more than just medical bills, such as lost wages or child care.

Like most other coverage types, MedPay/PIP has a limit. Be sure you know how much yours will cover so you are best prepared in the event of an accident. Hopefully, you'll never need to use it.

6. Full Coverage (?)

"Full coverage" usually just means multiple types of coverages bundled onto the same policy. There is no dedicated type of car insurance called "full coverage" that carriers offer, only combinations of the types that we listed above. For example, "full coverage" might include liability, uninsured motorist, personal injury protection, collision coverage, and comprehensive coverage all bundled into one package.

When comparing quotes, be sure you're comparing the same coverage types on your policies so that you don't get the wrong prices.