Types of Car Insurance Coverage Explained

Car insurance is not one product.

Here’s how types of car insurance coverage work, and how to choose yours.

Most people talk about car insurance like it is one thing you buy, then forget about until renewal time. In reality, your policy is a bundle of different coverages, each designed to handle a specific kind of problem.

This guide breaks down 10 of the most common types of car insurance coverage, how they work, and what they cover, so you can make smarter choices with your budget. Requirements and options vary by state, and we will use Florida examples where that matters.

10 Common Types of Car Insurance Coverage

Most coverages fall into one of three categories:

1. Coverage for injuries (yours and other people’s)
2. Coverage for damage you cause to other people’s property
3. Coverage for your vehicle and your inconvenience

However there are much more than three different types of car insurance coverage.

1. Personal Injury Protection (PIP)

Personal Injury Protection, usually called PIP, helps pay for injuries after an accident, regardless of who caused it. In Florida, drivers are required by law to carry at least $10,000 in PIP coverage.

PIP is designed to cover 80% of all medical bills for you and any passengers, as well as 60% of your lost wages following an accident, up to that $10,000 limit.

• What it helps with: Medical bills and lost wages after an accident, up to the PIP limit.
• Reality Check: PIP does not pay 100% of medical bills, and the $10,000 limit can disappear fast.

2. Collision Insurance

Collision coverage helps pay for damage to your vehicle caused by a collision with another vehicle or an object, such as a mailbox. Though collision is not required by law, your lender may require you to carry it until you have paid off your vehicle.

This coverage is designed to cover your vehicle when you are at fault, however it can also help you when a third party is at fault.

Your policy would pay you, and then your insurance company would recover their expenses and return your deductible back to you through a process called subrogation.

• What it helps with: Repairs to your car after a crash with a vehicle or object.
• Reality Check: Collision is not the same as “any damage to your car,” it is specifically collision-related damage.

3. Comprehensive

Comprehensive coverage helps pay for damage to your vehicle caused by covered perils that were not caused by a collision—things like fire, theft, vandalism, or hail.

There is one exception to the non-collision rule, however. Collisions involving animals, if you hit a deer on a country road for example, would fall under your comprehensive coverage.

Comprehensive generally protects your vehicle from specific non-collision problems, but it doesn’t cover “everything that is not a crash,” and it is not “everything you could ever need.” (That’s a common insurance myth.) Neither does it replace liability coverage (damage/injuries you cause to others), and it does not replace injury coverages like PIP, MedPay, or Uninsured Motorist.

Similar to collision coverage, your lender may require that you carry a certain amount of comprehensive coverage until you have paid for your vehicle in full.

• What it helps with: Covered non-collision damage to your car (fire, theft, vandalism, hail), plus animal collisions.
• Reality Check: Comprehensive doesn’t cover everything, only specific non-collision perils.

4. Liability Coverage

Liability coverage is designed to protect you against claims from injury and/or damage that you cause, such as when you’re at fault for a car collision.

There are two types of car insurance related to liability: Bodily Injury Liability and Property Damage Liability.

In the event that you are at fault for causing a car accident, your Bodily Injury coverage would help pay for the other party’s medical bills (as well as loss of life or limb), while your Property Damage Liability would cover damage to their property.

• What it helps with: Paying for the other party’s injuries and property damage when you’re at fault.
• Reality Check: Liability generally isn’t there to repair your own vehicle.

5. Medical Payments

Medical Payments coverage, often called MedPay, is an optional coverage that helps pay medical bills for you and your passengers after an accident.

In Florida, if you are in compliance with the law, you already have at least $10,000 in PIP. But $10,000 doesn’t stretch nearly as far as people expect, especially because PIP is designed to cover 80% of medical bills (not 100%), plus it has that overall limit.

That’s where MedPay comes in. MedPay is designed to pay the medical bills for you and your passengers after your PIP has been exhausted.

• What it helps with: Extra help with medical bills after PIP runs out.
• Reality check: MedPay is not redundant, it can matter when PIP runs out or leaves you with that remaining 20%.

6.Uninsured Motorist Coverage

Uninsured Motorist coverage is designed to step in if another driver doesn’t have the coverage to pay for the injuries they caused.

Now, here’s why that matters in Florida. Even though Florida drivers are required to carry a certain amount of Property Damage Liability, there is no requirement that they carry Bodily Injury Liability. Therefore, a lot of people go without this coverage to save a few bucks.

So even if you carry PIP and MedPay, you may still find yourself paying for car accident injuries out-of-pocket. (Ambulance rides and x-rays are expensive!)

• What it helps with: Injury costs when the other driver can’t (or won’t) cover what they caused.
• Reality check: Up to 20% of Florida drivers don’t have any insurance coverage. This situation is more common than you think.

7. Towing & Labor

Towing and Labor coverage helps pay for tow trucks and labor to get your vehicle up and running after a breakdown or accident. It’s usually available as an add-on to comprehensive coverage.

If you get into an accident or your car breaks down, it isn’t just the cost of repairs you need to worry about. Getting the car moved and handled can be its own headache, and that’s where this coverage can help.

• What it helps with: Towing and certain roadside labor costs.
• Reality check: It’s automatically included, it’s often an add-on.

8. Rental Reimbursement

Rental Reimbursement coverage can reimburse you for the cost of a rental car so you can get to work, the grocery store, or anywhere else while your car is in the shop.

If you’ve ever been in a serious accident, you understand the frustrations of going without a car for a couple of days. Rental reimbursement is designed to take some of that pressure off.

• What it helps with: Paying for a rental car while your vehicle is being repaired for a covered loss.
• Reality check: Rental reimbursement is not the same as towing and labor.

9. Gap Insurance

Gap insurance can cover the difference between what your car is worth and what you still owe on your loan if your car is totaled.

When you take out a loan on a new car, you’re paying whatever you (and the salesman) decided was a fair deal. But the second you drove that car off the lot, it was no longer worth what you paid for it.

If your car is totaled, comprehensive and/or collision coverage will pay for the current actual cash value of the car (i.e. what Kelly Blue Book says it’s worth). If you still owe more than that amount, gap insurance can cover the difference.

• What it helps with: The gap between what you owe on the loan and what the car is worth if it’s totaled.
• Reality check: Gap is about the loan balance, not upgrading you to a nicer car.

10. New Car Replacement Coverage

New Car Replacement coverage can pay for you to purchase a car the same make and model of your old one if your car is totaled, so you don’t have to worry as much about depreciation.

Remember, comprehensive and/or collision coverage will only pay you what your car was worth at the time of the accident (i.e. the depreciated value). If you wanted to purchase a replacement vehicle, you would likely have to cough up a few extra bucks.

In some cases, you probably won’t be able to purchase both New Car Replacement and Gap Insurance. In fact, not all insurance carriers even offer New Car Replacement.

If you have questions, your independent insurance agent can help you decide which one is best and whether it’s worth the increased premiums.

• What it helps with: Replacing a totaled newer car without being stuck with only the depreciated value.
• Reality check: New Car Replacement isn’t usually available and not always compatible with gap coverage.

Which Types of Car Insurance Do I Need?

This is only a portion of the most common types of car insurance available in the marketplace and yes, it can be very overwhelming to choose between them.

But you should keep two important things in mind.

The first is that you can always speak to an independent insurance agent to guide you toward a decision. Independent agents are experts in insurance and, because they aren’t tied to a particular carrier, can offer a wide selection of options for your budget.

Which brings us to our next important point: You should always buy as much insurance as you can afford.

One practical way to think about “bang for your buck” is to start with the biggest financial risks:

• If a serious injury claim would be financially devastating, look closely at your injury-related coverages and liability limits.
  
• If you rely on your vehicle every day, consider the coverages that protect your car and reduce downtime (collision, comprehensive, rental reimbursement, towing and labor).
  
• If your vehicle is financed, your lender may require certain coverages like collision and comprehensive until the loan is paid off.

While there is no such policy labeled “full coverage car insurance,” there is such a thing as being adequately protected. None of us can confidently say what will happen on the road of life. But having the right level of insurance coverage can protect you from all the bumps and scrapes along the way.

Shop Smarter

Most coverage mistakes happen when you assume one part of the policy will do a job it was never built to do. Collision and comprehensive are great for protecting your vehicle, but they don’t replace liability, and they don’t automatically solve every injury expense. PIP is helpful in Florida, but $10,000 and 80% medical coverage can disappear fast, which is why optional coverages like MedPay and Uninsured Motorist are worth a real look.

Life is too risky for subpar insurance. Call Harry Levine Insurance today or fill out our online form for a free quote.