Different Types of Car Insurance Coverage: Everything You Need to Know

Car insurance protects you financially if you’re in an accident or your car is damaged or stolen. There are several different types of car insurance coverage out there, each of which serves a different purpose. Understanding the ins and outs of these car insurance types is essential to making smart decisions that will effectively protect you, your passengers, and your car.

The Big Three: Standard Car Insurance

There are three main types of auto insurance: liability coverage, collision coverage, and comprehensive coverage. When you’re looking to get auto insurance. It’s important to understand all three. Here’s a closer look at each one.

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Liability Coverage

Liability coverage helps cover the cost of damages to other people involved in an accident when you are at fault. So, for example, if you were to miss a stop sign and hit an oncoming vehicle, you would generally be considered at fault. Your liability coverage would cover the cost of repairs to the other driver’s car, their medical bills and lost wages, and other related expenses.

Most states require that you have liability coverage, though minimum car insurance coverage requirements will vary. California, for example, requires:

•   $30,000 for injury/death to one person

•   $60,000 for injury/death to more than one person

•   $15,000 for damage to property

New York, on the other hand, has a very different set of requirements:

•   $10,000 for property damage for a single accident

•   $25,000 for bodily injury and $50,000 for death for a person involved in an accident

•   $50,000 for bodily injury and $100,000 for death for two or more people in an accident

You may choose to carry coverage beyond the minimum requirement to protect yourself against costly accidents. If you’re covered for $10,000 in property damage in New York and you cause $20,000 of damage, for instance, your insurance will only pay for $10,000. You’ll have to come up with the rest yourself.

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Collision Coverage

As you look at what car insurance covers, collision coverage is key. This type of vehicle insurance helps pay for the cost of repairs for damage to your vehicle if you’re at fault in an accident. It will also help pay for damage if you hit an inanimate object, such as a building, tree, guardrail, or retaining wall.

Collision coverage typically has a deductible that you must pay out of pocket first. Then the insurance kicks in and pays the rest, up to a predetermined limit. For example, if you have a $500 deductible and your car sustains $2,500 in damages, you’ll pay $500 and your insurance will cover the other $2,000.

No state requires collision coverage. But if you have an auto loan or lease, your lender or lessor will likely require you to have it.

There are situations in which you might consider doing without collision coverage. For example, if you own your car outright and it’s not worth much, it may be cheaper to pay out of pocket to repair or replace the car than it would be to pay a monthly premium.

However, if your vehicle is more valuable or you don’t have the money on hand to pay to replace it, you may want to add collision coverage to your policy.

Comprehensive Coverage

Comprehensive coverage helps pay for auto damage that doesn’t result from a collision. That damage could be caused by random incidents such as vandalism, hitting an animal, hailstorms, or a fallen tree branch. Again, if you have an auto loan or lease, those contracts will likely require you to carry comprehensive coverage. Generally, you’ll have to pay a deductible before the policy kicks in.

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Medical and Driver Protections

There are additional types of vehicle insurance for cars that you may want to consider. Some are optional add-ons. Others may be mandatory in your state, so it’s a good idea to check with your Department of Motor Vehicles (DMV) to see what you need.

Uninsured and Underinsured Motorist Coverage

Unfortunately, not everyone on the road carries insurance. Even if they do, they may not carry enough to cover the cost of the damage caused by an accident.

That’s where uninsured and underinsured motorist coverage comes in. Many states mandate uninsured motorist coverage, and several states require both types of insurance. These policies pay when the at-fault party doesn’t carry enough –– or any — insurance to pay for the accident’s costs.

What’s more, if you’re in a hit-and-run accident, you may be able to file a claim on your uninsured coverage. Make sure up front by checking the fine print on any policy you may be considering.

Without uninsured motorist coverage, if you get into an accident with an uninsured or underinsured driver that results in vehicle damage or bodily injury, you might have to pay for car repairs and medical care out of your own pocket.

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Personal Injury Protection (PIP)

PIP, also known as no-fault insurance, can help pay the costs associated with personal injury for you and your passengers, including medical expenses, lost wages, disability, rehab costs, death benefits, and related household services, such as child care or cleaning services. PIP covers you no matter who was at fault in the accident. This coverage is mandatory in some states and optional or unavailable in others.

Medical Payments (MedPay) Coverage

Medical payments insurance, also called MedPay, is an optional form of insurance that helps protect you and your passengers by paying for your medical expenses in the event of an accident, no matter who is responsible. In many cases, it may cover you when you’re hit by a car while walking or riding a bike, though policies can vary. Typically, a policy will pay for doctor’s bills, but not other costs such as lost wages, which may be covered by liability insurance if the other party is at fault. Bear in mind, too, that medical payments insurance typically has a limit of $1,000 to $10,000.

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Common Optional Add-Ons

Finally, there are a number of insurance options you can choose to add to your required policies. Whether these make sense for you will depend largely on your individual situation and your level of comfort with risk.

Guaranteed Asset Protection (GAP) Insurance

If you have collision or comprehensive coverage and your car is totaled or stolen, that coverage will typically pay you up to the car’s depreciated value.

But what if you have an auto loan or you lease, and you owe more on the loan than the depreciated value of your car? In that case, gap insurance can kick in and help you pay off your loan.

Rental Car Reimbursement Coverage

Rental reimbursement is optional coverage that may help cover the cost of a rental car after an accident that leaves your own vehicle damaged and inoperable. To add this coverage to your policy, you’ll generally need to carry collision and comprehensive insurance as well.

Without this coverage, you might have to pay out of pocket for a rental car after an accident.

Roadside Assistance Coverage

Many insurance companies offer roadside assistance add-ons, though you may also be able to get roadside assistance from an auto club (such as AAA) or your car manufacturer. Typically, roadside assistance provides help when your car is stranded, offering services like jump-starts, flat tire fixes, aid if you’re locked out, and fuel delivery if you run out of gas, among others. Prices for this insurance add-on typically range from $10 to $60 per year.

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The Takeaway

Choosing the right car insurance is about protecting yourself financially and ensuring peace of mind while you’re on the road. By understanding the different types of coverage that are available, you can determine how much auto insurance you want and pick a policy to suit your needs and your budget. Revisit your policy regularly to make sure it still provides the type and amount of protection you need, so you can be prepared no matter what happens out on the road.

Having the right auto insurance means knowing you're truly protected — not just checking a legal box. SoFi lets you shop and compare quotes from top carriers in minutes, so you can find coverage that gives you real peace of mind on the road. Explore your coverage options.

SoFi brings you real rates, with no bait and switch.

FAQ

What is “full coverage” car insurance?

“Full coverage” car insurance typically refers to a policy that includes liability, collision, and comprehensive coverage.

Should I get gap car insurance?

If you’ve leased or financed a vehicle, you may want to consider gap insurance. In fact, many lease agreements require it. If you have an auto loan, you might consider gap insurance if you made a small down payment, your loan term is 60 months or longer, or you purchased a car that depreciates quickly.

Do I need both comprehensive and collision coverage?

While you may not be required to have both car insurance coverage types — comprehensive and collision — you may want to consider it anyway. Having both may be especially worth considering if you have a newer car or if you might not be able to pay out of pocket to repair or replace your vehicle.

Is PIP required in my state?

To find out if your state requires PIP, check the website for your state’s Department of Motor Vehicles (DMV).

What happens if I don’t have enough car insurance?

Not having enough car insurance — or the right car insurance coverage types — can put you at financial risk. If you are the at-fault party in an accident and you don’t have enough insurance, you could be on the hook for the remainder of the cost for the damage you caused.

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photo credit: iStock/asbe

This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.

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