Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Sep 8, 2020

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Key takeaways...

  • There are many types of car insurance that you can choose from; first, figure out what you need
  • Liability insurance is a state minimum requirement, but it is usually much less than you need
  • Collision, comprehensive, GAP, and underinsured/uninsured motorist coverage are all supplemental options

Car insurance policies are not umbrella coverage for all damages resulting from a car accident, but rather a mix of coverage options a driver chooses.

Many different types of car insurance coverage exist; so before securing a car insurance policy, it’s important to know what type of coverage you need.

Most consumers search for the best car insurance rates. However, when it comes to looking for a car insurance policy, you need to understand the types of car insurance coverage. Otherwise, it will be hard to find the best policy for you and your family.

Want to find better and more affordable car insurance? Enter your ZIP code above and compare at least three to four policies today!

Table of Contents

Bodily Injury / Liability Insurance

All states (excluding New Hampshire) have minimum state requirements for liability insurance coverage. In fact, liability insurance is the only type of car insurance coverage required by all states.

Liability insurance is defined as insurance for the liability caused to other persons/property when you are at fault in a car accident.

How much liability insurance do you need? How much you need will depend on where you live as states have defined minimum car insurance requirements for liability insurance and anyone registering or operating a vehicle must carry liability insurance.

However, state minimum requirements are usually much lower than you really need, and most drivers opt for additional coverage.

To learn more about the need to going above state minimum requirements and obtaining additional car insurance, click here.

It’s important to note that liability insurance DOES NOT cover damage or injuries sustained by you or to your vehicle, only damage to others!

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Collision Coverage

Collision coverage is basically the physical damage coverage part of a car insurance policy. Collision coverage provides insurance for damages to your vehicle (the insured) if it is damaged in an accident or by an object under covered events.,

Almost all drivers with newer model cars opt for collision coverage. However, if you have an older vehicle which is not worth a whole lot, it may be wise to analyze whether or not the cost of carrying collision coverage is right for you.

If your vehicle is financed by an auto loan company, you will be required to carry collision coverage until the loan is paid in full.

Comprehensive Car Insurance

https://www.youtube.com/watch?v=ntPe3mURmzo&t=6s

Comprehensive car insurance is another part of auto insurance coverage which protects against physical damage. Your vehicle can incur damage in many ways outside of a typical car accident including damage by:

  • Fire
  • Theft
  • Storms
  • Road debris, etc.

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Should any damage occur to the vehicle outside of a “collision,” the comprehensive portion of your car insurance policy will kick in and cover repair costs up to your policy limits.

Think of a windshield crack or asphalt falling from a roof – this type of damage is covered under your comprehensive car insurance coverage.

GAP Car Insurance

GAP car insurance is coverage against the gap in the vehicle’s book value and any car loan financing you have against it. For example, if you purchase a brand new car for $30,000, the car’s book value may drop down to $22 or $23,000 the moment you drive it off the lot.

What would happen if you got in an accident the next week and the car was determined a total loss?

GAP insurance would pick up the cost of the GAP between your car loan balance and the book value leaving you with no liability (outside of your deductible).

Without GAP insurance, it’s quite likely you would owe the car loan company a sizeable chunk of change subject to immediate payment.

Once a car becomes two or three years old, GAP insurance is less important as your financial obligation starts to be on par with the book/replacement value of the vehicle.

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Uninsured Motorist / Underinsured Motorist Coverage

These two types of coverage usually always go together and are commonly referred to by their acronyms in many insurance documents – UM and UIM.

Uninsured Motorist (UM) and Underinsured Motorist (UIM) car insurance coverage provides protection against injuries to the driver and passengers in the event of a car accident with a driver who is either uninsured or underinsured.

It also kicks in during the event of a hit-and-run since technically the party that “ran” is categorized as an uninsured driver. UM and UIM car insurance coverage can also pay for medical expense, lost wages, and more.

The number of uninsured motorists on the road is actually at a staggering level, and all drivers should consider adding Uninsured Motorist and Underinsured Motorist Coverage to their car insurance policy.

If you want to ensure that you are fully covered, start comparison shopping today for better car insurance by entering your ZIP code below!

References:

  1. https://www.thebalance.com/understanding-minimum-car-insurance-requirements-2645473
  2. https://wallethub.com/edu/types-of-car-insurance/9636/
  3. https://wallethub.com/edu/collision-insurance/7292/
  4. https://www.thebalance.com/comprehensive-vs-collision-coverage-527402
  5. https://www.iii.org/article/what-gap-insurance
  6. https://wallethub.com/edu/uninsured-motorist-coverage/9647/