What Are the Different Types of Car Insurance Coverage?

Most U.S. states (except New Hampshire) have minimum requirements for auto insurance coverage.

Full coverage

When you have “full coverage,” it often means that you have liability, collision, and comprehensive coverages (further detailed below).

Liability-only

Liability insurance coverage is meant to pay other parties for damage caused by your vehicle.

In nearly all states, this is the bare minimum level of auto insurance required.

Bodily injury liability

This coverage will pay for medical expenses, legal fees, loss of wages and other costs associated with injuries and death in accidents where your vehicle was in motion -- whether or not you were driving it.

Property damage liability

This coverage will pay others for damage to another vehicle and property caused while your vehicle was in motion -- whether or not you were driving it.

Depending on your state laws, additional coverage may be required. Your auto loan provider may as require these coverages:

Medical payments or personal injury protection (PIP)

Medical payments coverage pays for medical expenses for you and your passengers (even if you’re driving someone else’s vehicle) after an accident, regardless of who is at fault.

PIP covers medical expenses, lost wages, funeral costs and other expenses for you and your passengers after an accident.

Uninsured motorist coverage

This coverage will pay for bodily injury and, in some states, property damage to you and other passengers in your vehicle from an accident where the at-fault party does not have (or does not have sufficient) 

Optional Insurance Coverage

For the most part, the state-required minimum auto insurance coverages is focused on compensating other parties in accidents that result from your vehicle.

However, accidents and other types of incidents can also cause extensive damage to your car, which is where collision and comprehensive coverage can be useful.

Both types of additional coverages are not required by any U.S. state, but lenders may require them as long as you still have an outstanding loan for your vehicle. (You can remove them from your policy after paying off the loan.)

Collision

Collision coverage insures you against damage to your vehicle caused by a collision with another vehicle or object (e.g., parked vehicles, trees, and fences) when you’re the at-fault party.

This coverage applies only to damages sustained to your car while it is in motion.

Comprehensive

Comprehensive coverage covers hazards while your vehicle is parked and not in motion.

Common examples of such damages include those caused by falling trees, vandalism, storms, fire, and more.

The best part is that your car insurance premiums won’t increase as a result of a claim because you’re typically not at fault for these incidents.

What Factors Affect Your Car Insurance Rates?

Car insurance companies use a ton of data to determine your risk of accidents and the likelihood of claims.

These are often the factors considered as part of their underwriting process:

Coverage

If you want more coverage, you’re going to pay more for it. So, for example, full coverage is going to cost significantly more than just liability-only coverage.

Remember that you may have to pay for additional coverage depending on state requirements.

Gender and age

Gender and age are used to generalize the driver and to judge their risk of getting into more accidents.

Not surprisingly, young male drivers are often considered very risky and tend to pay higher car insurance premiums.

See car insurance rates for younger drivers:

Marital status

Married couples have been found to be in fewer accidents and file fewer claims.

Additionally, married drivers are often eligible for lower premiums through multi-vehicle discounts and bundling auto insurance with other types of insurance.

Driving experience and history

Those who have been driving longer and those who have few or minor violations and accidents are seen as less-risky drivers.

Credit score

The research found that people with lower credit scores are more likely to file claims and insurers may use this information to calculate premiums.

So, a higher credit score could play in your favor when it comes to calculating premiums.

That said, some states forbid insurers from using consumer credit histories when underwriting auto insurance policies:

  • California
  • Hawaii
  • Massachusetts
  • Michigan

Location

Location not only helps to identify the required coverages for the state, but insurance companies also use your location to look at historical data to estimate the likelihood of natural disasters, crime, frequency of accidents, and other risks associated with your area.

Insurance history

Auto insurers find that drivers who’ve had uninterrupted coverage are less likely to get into accidents. So, if you’ve maintained an auto insurance policy continually (without lapsing), you’re more likely to get lower rates.

Claims history

Simply, a history of many claims -- whether with the current insurer or previous insurers -- will likely result in higher rates or denied coverage. To no surprise, this is especially the case for larger claims where you’re the at-fault party.

Vehicle

The insured vehicle will be considered for its purchase price, safety features, safety tests, repairs costs, and more. 

Data may reveal that your vehicle model is known to be involved in accidents more often or more likely to be targeted for theft and crime.

Purpose of vehicle

You will usually be asked what you use the car for, such as commuting to work or school. Or, you’re just driving it occasionally for recreation.

Additionally, if you plan to use the car for commercial purposes (such as ridesharing) or as part of running a business, you’d have to ensure that your vehicle is covered properly because insurers are picky with coverage depending on use case.

Mileage

Your annual mileage provides the car insurance company with information on how often you drive. The more you drive, the more likely to be part of accidents -- so you can expect to pay higher rates. (There are programs for lower rates if you drive very little.)

Auto insurance companies may not verify this information upon application but note that mileage information is often collected by servicers when your vehicle goes in for service, oil change, inspection, etc.

Average Car Insurance Rates by State

State Full coverage Minimum coverage
Alabama $1,713 $498
Alaska $1,560 $412
Arizona $1,783 $578
Arkansas $1,763 $449
California $2,125 $606
Colorado $1,948 $553
Connecticut $2,036 $891
DC $2,188 $839
Delaware $1,921 $843
Florida $2,162 $828
Georgia $1,865 $684
Hawaii $1,589 $485
Idaho $1,285 $377
Illinois $1,538 $493
Indiana $1,266 $430
Iowa $1,352 $326
Kansas $1,689 $464
Kentucky $2,368 $669
Louisiana $2,601 $771
Maine $1,080 $355
Maryland $1,816 $853
Massachusetts $1,466 $520
Michigan $3,141 $1,855
Minnesota $1,619 $614
Mississippi $1,684 $413
Missouri $1,798 $546
Montana $1,963 $447
Nebraska $1,500 $393
Nevada $2,402 $717
New Hampshire $1,086 $424
New Jersey $1,993 $846
New Mexico $1,604 $479
New York $2,062 $867
North Carolina $1,425 $438
North Dakota $1,577 $423
Ohio $1,191 $406
Oklahoma $1,815 $418
Oregon $1,496 $674
Pennsylvania $1,700 $502
Rhode Island $2,040 $738
South Carolina $1,653 $617
South Dakota $1,643 $323
Tennessee $1,493 $462
Texas $1,823 $538
Utah $1,492 $565
Vermont $1,410 $398
Virginia $1,196 $380
Washington $1,620 $537
West Virginia $1,654 $541
Wisconsin $1,335 $401
Wyoming $1,782 $328

The Most Expensive Car Insurance Rates by State

State Average rate for full coverage Averages rate for minimum coverage
Michigan $3,141 $1,855
Louisiana $2,601 $771
Nevada $2,402 $717
Kentucky $2,368 $669
DC $2,188 $839
Florida $2,162 $828
California $2,125 $606
New York $2,062 $867
Rhode Island $2,040 $738
Connecticut $2,036 $891

The Cheapest Car Insurance Rates by State

State Average rate for full coverage Average rate for minimum coverage
Maine $1,080 $355
New Hampshire $1,086 $424
Ohio $1,191 $406
Virginia $1,196 $380
Indiana $1,266 $430
Idaho $1,285 $377
Wisconsin $1,335 $401
Iowa $1,352 $326
Vermont $1,410 $398
North Carolina $1,425 $438

Factors to Consider When Choosing an Auto Insurer

When it comes to finding the right car insurance company, you want to make sure you’re not overpaying, but you also don’t want to pay so little that you get bad service. Low premiums might be nice if you are trying to save money, but you don’t want to have a bad experience when it’s time to file a claim.

Here are some other insurance features to check out to ensure you are getting the best insurance coverage for your needs.

Premiums

The premium is the price you pay for your auto insurance policy. You can pay premiums annually, quarterly, or monthly. Typically, when you pay more upfront, your insurer will give you more of a discount.

Discounts

Auto insurers will offer many discounts to help keep your premiums low.

Here are some examples of discounts you may be eligible for depending on the insurer and your state of residency:

  • Safety equipment like ant-theft, anti-lock brakes, etc.
  • Multi-policy discount
  • Good driver discount
  • Paperless billing
  • Good student billing
  • Defensive driving discount

Deductibles

The deductible is the amount you are responsible for in case of a claim. In some cases, you may have different deductibles for different types of damages, even if it occurs in the same incident.

Most often, the lower your deductible, the higher your monthly premium. However, if you choose to pay a higher premium, you may opt for a lower monthly premium.

If your card is damaged in a covered incident, the insurance company will give a check to you to cover the damage. For instance, if your total claim amount is $3,000 and your deductible is $500, the auto insurance company will give you a check for $2,500.

Financial health and credit risk

When choosing an auto insurer, you want to make sure their financial rating is good. Otherwise, they may not be financially healthy enough to pay your claims. There are a few company’s that rate the financial stability of auto insurance companies:

  • Moody’s
  • Fitch
  • Standard & Poor's

Insurance companies rated as financially stable are more likely to provide you with excellent customer service, a good insurance product and will pay your claims on time and as agreed.

Customer service

Another important feature of an auto-insurer is their customer service. Often, a great insurance policy at a competitive price can be spoiled by bad or nonresponsive customer service.

Ideally, you want a company with 24-hour phone customer service and a robust digital interface, either via web or smartphone app, to access your account.

Filing claims with your smartphone and managing the claims process online can be a huge help.

If it’s not easy to access and manage your account online, this is a sign that you may run into problems with your insurer down the road.

Additional perks and benefits

Finally, you should look for the “icing on the cake” when researching your insurance options.

Nowadays, insurance companies are offering extra perks and benefits for their customers. Here are some to watch out for:

  • Pet insurance
  • Accident forgiveness
  • Vanishing deductibles
  • Zero deductible windshield replacement (available in select states)
  • Roadside assistance

Key terms

Appraisal

The appraisal process determines your vehicle’s fair value and the cost of its repairs after a car accident. If the repairs cost more than what the car is worth, your payout will be based on the appraisal’s value.

Deductible

This is the amount you are responsible for paying when a claim is filed. Your deductible will be “deducted” from the total claim amount when you receive an insurance payout.

CLUE report

CLUE stands for Comprehensive Loss Underwriting Exchange.

It is a database that insurance companies consult when you apply for coverage or request a quote. The report generally contains up to seven years of personal-auto and personal-property claims history.

Gap insurance

If your car is considered a total loss and your remaining auto loan exceeds the amount, gap insurance will pay off off an auto loan.

No-fault insurance

No-fault means that all parties involved in any incident must submit claims through their own insurance policy instead of recovering from the at-fault party's insurer.

No-fault insurance is the basis for auto insurance laws in 12 U.S. states.

Non-renewal

This is a notice you may get from your car insurance company when they choose not to renew your policy at the end of its term.

SR-22

With this type of insurance, your auto insurer assures your state's motor vehicle or insurance department that you'll maintain coverage for a certain period of time. If you don't, the insurer will alert your state, and your driver's license could be suspended or revoked. Your insurance company will charge you more for this service, which makes SR-22 insurance more expensive.

Total loss

When the cost to fix your car exceeds the car’s appraised value, your insurance company will total out your car and consider it a total loss.

That is:

They will not pay to fix it but instead pay the actual cash value (ACV) of the car. If your settlement is less than what you owe, you're responsible for the balance of your loan.

Read the car insurance guide based on your state

Industry Ratings of the Top U.S. Car Insurance Companies

Company A.M. Best Financial Strength Rating A.M. Best Issuer Credit Rating
AAA (The Auto Club Group) A a
CSAA Insurance Group A a+
USAA A++ aaa
Auto Club of Southern California A a
Erie Insurance A+ aa-
State Farm A++ aa+
GEICO A++ aaa
Progressive A+ aa
Allstate A+ aa
Farmers A a
Travelers A++ aa+
American Family Insurance A a+
Nationwide A+ aa-
Auto Club Exchange A a
Chubb A++ aa+
Kemper A- a-
Mercury Insurance A a+
Amica A+ aa-
COUNTRY Financial A+ aa-
The Hanover Insurance Company A a+