When buying car insurance, most people want to balance affordability and quality coverage. Learning about the different types of insurance can help you choose the right policy and coverage limits for your vehicle.
Also, skimping on car insurance could leave you underinsured when it’s time to file a claim. But, buying more insurance than you need could result in wasted money on premiums.
Here’s how to determine how much car insurance you need to buy to ensure you’re covered and within your budget.
How to Buy Car Insurance
You can buy car insurance in several ways – online, in-person, or by phone. If you choose to purchase online, you can request quotes from several providers until you find one that suits you. Our rating of the best car insurance companies might be a good place to start your research. Most of the time, you can check out and print your insurance documents without speaking with an agent.
If you’d rather have in-person support, you can work with an agent for a specific company like Geico, Progressive, or Allstate, or partner with an independent broker who can pull quotes from several companies and find the best offer. You can also contact a broker or captive agent by phone.
Throughout this process, you’ll need to provide personal information, including your driver’s license, social security number, details about your vehicle, home address, where you intend to park your vehicle, and estimated usage. All this information is factored into your rate.
Once you find a rate that fits your budget, you can pay for your policy upfront or split your premium into monthly installments.
How to Estimate Car Insurance Costs
There are a lot of factors that impact the premium you pay for car insurance, such as your age, location, driving history, car type, coverage limits, and deductibles. How these factors specifically impact your costs can vary between insurers.
Every insurance company has its own rating plan, or method for analyzing risk levels and calculating coverage costs. Insurers use statistics to identify factors that may lead to a loss, then use that information to determine how much to charge.
The best way to get an accurate auto insurance estimate is to contact multiple insurers – a minimum of three, according to the Insurance Information Institute (III). Be sure and ask for multiple quotes for the same coverage levels to provide yourself with an accurate comparison.
Learn how to compare rates with our guide to free auto insurance quotes.
Types of Car Insurance Coverage
Car insurance can function as a multiline, or package, policy to provide a combination of property coverage, liability coverage, and medical coverage. Some coverages are legally required, depending on your state’s insurance laws and any applicable financing or leasing contracts, while others are optional.
Standard Car Insurance Coverage
Standard car insurance policies typically offer the following coverage:
Liability coverage. If you are at fault in a car accident, liability insurance compensates the third parties involved for bodily injury and property damage, which is why it is required in almost every state. This can include the other driver, their passengers, and their vehicle, as well as injured pedestrians and property owners who sustain damage to their building, mailbox, fence, etc. However, your liability coverage does not compensate you or your passengers.
Collision coverage. This coverage is not required by law, but it’s usually required by a lienholder or lessor on a financed or leased vehicle. Collision coverage helps pay for the repairs or replacement of your own car if it’s damaged in an accident.
Comprehensive coverage. This coverage is not required by law but is usually required by a lienholder or lessor on a financed or leased vehicle. Comprehensive coverage helps pay to repair damage to your vehicle caused by events other than a collision, such as vandalism, theft, flood, hail, fire, and animal damage.
Uninsured and underinsured motorist coverage. Required in many states, uninsured or underinsured coverage pays for your and your passengers’ medical bills and property damage if the at-fault driver doesn’t have insurance or doesn’t have enough coverage. It can also cover hit-and-run accidents.
Personal injury protection (PIP). This coverage is required in states with a no-fault insurance system and covers medical bills and lost wages if you or your passengers are injured in a crash, regardless of who is at fault. PIP insurance can also pay for replacement services for daily tasks that you are unable to perform due to a covered injury, such as cleaning your house, going grocery shopping, or providing care for your children.
Medical payments (MedPay) coverage. Optional in most states, MedPay covers your medical bills, no matter who is at fault in a crash. However, it does not cover lost wages, child care, or other related expenses the way PIP coverage can.
Optional Car Insurance Coverage
Many auto insurance providers offer the following additional coverage options:
Gap coverage. Typically required for a leased or financed car, “gap” stands for “guaranteed asset protection.” If your financed car is totaled in a crash, gap insurance covers the difference between the car’s actual cash value and the balance on your loan. This coverage is especially valuable when the car is new since it will typically depreciate much faster than you’ll pay down the loan balance.
Rideshare insurance. This is supplemental coverage for drivers of ride-hailing services like Uber and Lyft. A rideshare policy is typically inexpensive, though it provides valuable coverage for situations not covered by a driver’s car insurance policy or the rideshare company’s insurance policy. If you are a rideshare driver, discuss your options with your insurer.
Accident forgiveness coverage. This protects you from rising car insurance rates if you’re at fault in an accident, basically “forgiving” the incident and wiping your record clean (in the eyes of the insurance company). Generally, you can only use this coverage once.
Glass coverage. This applies a smaller or zero-dollar deductible if your windshield needs to be repaired or replaced. Availability depends on the state.
Custom equipment coverage. This reimburses you for the expense of custom or aftermarket parts damaged in a collision, typically excluded from coverage. Examples include an upgraded stereo, a custom paint job, or off-road equipment.
Pay-per-mile insurance. Pay-per-mile insurance is a policy that calculates insurance costs based on miles driven. It generally includes collision and comprehensive coverage and can include additional coverages, as well. Mileage is reported to the insurance company via a device that plugs into your car and tracks your driving.
Usage-based insurance (UBI). A type of insurance that calculates insurance costs based on your driving habits. It may consider factors like how often you drive and what time of day you drive, as well as behaviors like speeding, hard braking, and using your phone. This is reported to your insurer via a device that plugs into your car or via a mobile app. UBI is also called telematics insurance or black box car insurance.
Roadside assistance. This provides towing coverage, regardless of the breakdown’s cause. It may also cover services like flat tire changes, jump starts, fuel delivery, and lock-out assistance.
Umbrella insurance. This supplemental policy provides additional liability coverage after you’ve exhausted other liability coverage limits, particularly if you’re involved in a lawsuit as a result of a collision. Learn more in our guide to umbrella insurance.
Rental reimbursement coverage. This pays for a rental car or other form of transportation when your car is inoperable because of an accident or other covered claim.
Original equipment manufacturer (OEM) coverage. If your car needs repairs as the result of a collision, OEM coverage guarantees that it will be repaired with parts from the vehicle’s manufacturer, instead of cheaper aftermarket parts. There may be restrictions on this type of coverage based on your vehicle’s age.