types of auto coveragePurchasing auto insurance can be confusing, as there are many different types of auto coverage as well as different insurance requirements across states. At first glance, it can be hard to know exactly what you need, especially without some familiarity with the auto insurance market. That’s why we decided to dig into the details you’ll want to know when purchasing auto insurance for the first time. Keep reading to learn about the different types of auto coverage.

How auto insurance works

Many likely understand that auto insurance covers them in the instance they get into an accident, but before that happens, you’ll need to select a coverage plan. Coverage refers to the type of insurance you’ll be receiving. With auto insurance policies, there are coverage plans geared toward certain types of injuries and damages (e.g., bodily injury coverage vs. property damage coverage). You’ll have to also decide on what is called a coverage limit, or the total amount of money the policy will pay out if you wind up in an accident. You’ll want to pay close attention to not just the price you’re quoted, but also what type of coverage you have and how high the limits are. Most states have mandatory minimum liability limits for specific types of coverage, so make sure you’re aware of the auto insurance requirements mandated by your state (or any other states you’ll be driving in).

The most common types of auto coverage

There are many different types of auto coverage, but several stand out as the most beneficial, including:

Liability Coverage: This is a category of insurance that refers to several coverage types which help you cover expenses whenever you’re at fault in an accident. Most states demand that drivers at least have a designated minimum limit that their liability coverage is able to pay out. Liability coverage is often broken into Bodily Injury Liability insurance and Property Damage Liability insurance, both of which are explained below.

Bodily Injury Liability (BIL): This is a type of liability coverage that specifically covers medical expenses incurred by the victim of an at-fault accident, where you’re responsible for damages. Additionally, it provides you with funding for legal defense if you’re sued as a result of the accident.

Property Damage Liability (PDL): This type of liability coverage specifically covers damages to other people’s property in the instance you’re in an accident where you’re deemed to be at-fault. Property can be anything from the victim’s car to storefronts and homes damaged in the accident.

Personal Injury Protection (PIP): This type of insurance is for your own benefit. Unlike liability coverage plans, PIP and a few other policies are designed to compensate you whenever you’re in any kind of accident. PIP specifically helps pay medical expenses for you and your passengers. Some policies might also compensate you for wages lost due to injury.

Uninsured/Underinsured Motorist Coverage (UMMC): If you get into an accident with someone who lacks auto insurance (or has insufficient coverage), UMMC covers damages that this person might have done to you or your property. This insurance is sometimes also used in hit-and-run accidents where the at-fault party can’t be identified.

Comprehensive Coverage: This type of coverage generally applies to damages outside of accidents, like weather, theft and random, miscellaneous events known as “acts of God.” What is covered in a comprehensive coverage plan differs from provider to provider, so you’ll have to ask each company specifically what is covered in its policy.

Collision Coverage: This coverage guarantees that damages to your vehicle in any accident are covered. In some cases, this can transfer to rented vehicles or those you don’t own.

What type of auto coverage should I choose?

While everyone would technically benefit from having as many different types of auto coverage as possible, there is such a thing as being over-insured, which means you’re paying for coverage that you won’t be able to utilize. For example, if you’re driving an older car that you plan to replace soon, getting the highest limits for Collision Coverage (or even getting Collision Coverage at all) might not make sense because your car holds little value, which means you won’t be able to get the maximum coverage in an accident. You might not need maxed out limits for every type of coverage, but they’re all distinct enough that they each provide value. That said, it’s important to keep in mind that your own needs will also play a role in what you should get.

Keep in mind that both Bodily Injury Liability and Property Damage Liability are mandatory in nearly every state, meaning that you have to at least purchase the minimum limits for these types of coverage — the auto insurance provider you select should know these limits and require you to meet them. Still, you’d likely be better off purchasing more than the minimum Liability Coverage and investing in the other types of coverage, if possible.

For more information on how to choose and manage your auto insurance policy, keep reading our auto insurance blog.