10 Types of Car Insurance Explained

What exactly are you paying for?

There are many types of car insurance coverage. Find out what each of them do.

People refer to “car insurance” as if it was a single item they could purchase and be on their merry way. But in fact, there are dozens of types of car insurance coverage that make up your car insurance policy.

In this article, we’ll go over 10 of the most common types of car insurance, how they work, and what they cover to help you better understand your options.

1. Personal Injury Protection (PIP)

Under Florida’s no fault insurance system, drivers are required to first turn to their own insurance after they are injured in an accident. For this reason, all 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).

2. Collision Insurance

Collision helps pay for damage to your vehicle caused by a collision with another vehicle or 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 as long as your insurance company believes it’s the other person’s 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.

3. Comprehensive

It’s a myth that Comprehensive will cover anything that happens to your car.

In reality, Comprehensive covers damage to your vehicle that was caused by (covered) perils that were not caused by a collision—things like fire, theft, vandalism, or hail. There is one exception to this, however. Collisions involving animals (if you hit a deer on a country road, for example), would fall under your Comprehensive coverage.

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.

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.

5. Medical Payments

If you are in compliance with the law, you already have at least $10,000 in PIP to cover any injuries you sustain during an accident. But what if you need more than that?

That’s where Med Pay comes in.

Med Pay is an optional coverage that pays the medical bills for you and your passengers after your PIP has been exhausted.

6. Uninsured Motorist Coverage

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 (you guessed it!), a lot of people go without this coverage to “save a few bucks.”

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

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

7. Towing & Labor

If you get into an accident—or your car breaks down—it isn’t just the cost of repairs you need to worry about. That’s where Towing and Labor coverage can help.

Towing and Labor covers the costs of (you guessed it) tow trucks and labor to repair your vehicle. It’s usually available as an add-on to comprehensive coverage.

8. Rental Reimbursement

If you’ve ever been in a serious accident, you understand the frustrations of going without a car for a couple of days. But with Rental Reimbursement, you can be reimbursed for the cost of a rental car so you can get to work, the grocery store, or anywhere else.

9. Gap Insurance

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.

10. New Car Replacement Coverage

Have you ever thought about how you would afford a new car if yours is totaled in an accident?

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.

But with New Car Replacement coverage, you don’t have to worry about depreciation! This coverage will pay for you to purchase a car the same make and model of your old one.

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.

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.

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.

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