With auto insurance coverage, you choose which incidents you want to protect yourself against. You pay an insurance premium, either monthly or annually, to your insurance company. In return, the insurer agrees to pay for covered losses up to your policy limits. When a covered incident occurs, you pay the insurance deductible, and your insurance company handles the remaining repair costs, medical bills, or reimbursements according to your insurance policy.
- Coverage Types Explained
- Add-On Optional Coverages
- What Car Insurance Doesn't Cover
- Coverage Types at a Glance
- "Full Coverage" Explained
- How Much Coverage Do You Need?
- How to Check What You're Actually Covered For
- When to Update Your Coverage
- Common Coverage Mistakes People Make
- FAQ
Quick Answer: What Does Car Insurance Cover?
Car insurance covers the financial costs you may face due to incidents involving your vehicle. Policies vary by state and insurer, and not all types of coverage are required. Common coverage options include:
- Liability: Damage/injuries you cause to others; required in most states
- Collision: Damage to your car caused by a collision
- Comprehensive: Damage to your car caused by anything other than a crash (theft, weather, vandalism, animals)
- Personal Injury Protection: Your medical expenses related to a motor vehicle incident
- Uninsured Motorist: When the at-fault party has no insurance
- GAP Insurance: Covers the difference between your car's value and loan balance if totaled
- Roadside Assistance: Towing, flat tire changes, jump starts
- Rental: Coverage for when you're borrowing a vehicle from a rental company
Coverage Types Explained
Liability Coverage
Liability insurance protects others when you're at fault in a car accident, covering property damage and bodily injury to other drivers and passengers. It doesn't cover your own vehicle, your medical bills, or lost wages.
Bodily Injury Liability Coverage pays for medical expenses, lost wages, and pain and suffering/death benefits for other parties involved in an accident you caused. This includes:
- Medical expenses like emergency room visits, hospital stays, medical treatment and therapy, prescription medication, medical equipment, and ongoing care
- Lost wages for income they miss due to injuries or future lost income if they're permanently disabled
- Financial payouts for physical pain, emotional distress, or loss of quality of life
- Funeral expenses and loss of income to the surviving family in the event someone dies from injuries you caused
- Legal fees for your attorney, court costs, settlements, and judgments (up to your limits) if you're sued
Property Damage Liability covers repair or replacement for damaged vehicles, buildings, and personal property. This includes:
- Repair costs or total loss value if the other person's vehicle is totaled
- Rental vehicles while the other person's vehicle(s) are being repaired
- Repair or replacement of buildings and structures
- Repair or replacement for personal property like laptops, phones, and other belongings that were damaged in the other vehicle
Understanding the numbers:
Liability limits are typically detailed by three key numbers, such as 25/50/25. The first number represents the maximum amount insurance pays per person for bodily injury, in this case $25,000. The second number represents the maximum coverage per accident for all bodily injuries combined, in this case $50,000. The final number details the maximum amount per accident that insurance pays for property damage, in this case $25,000.
The second number is typically higher because it limits the amount paid out for all parties combined; however, if a single person's bills exceed the individual's limit, the driver is responsible for the rest out of pocket. If numerous people file an insurance claim, the second number limits the total payout combined.
That's why most experts recommend having coverage above and beyond the minimum liability limits for your state to ensure you have enough insurance to protect your home, assets, and wages.
| What Liability Covers | What Liability Does Not Cover |
|---|---|
| Repair and/or replacement for other vehicles involved | Repair or replacement for your vehicle |
| Medical bills for other drivers and passengers involved | Your medical bills |
| Lost wages Your legal defense if you're sued after an accident |
Anything beyond your policy limits |
What happens without it:
- You are personally liable for all damages
- The state may suspend your license for driving without required insurance
- Other parties may file lawsuits, which could lead to garnished wages to collect on damages
Collision Coverage
Collision coverage protects your car from damage, regardless of fault. This includes accidents with other vehicles, if you're involved in a single-car accident, such as hitting a tree or guardrail, backing over objects, or rolling your car in a ditch. In some cases, collision may even cover damage caused by hitting a pothole.
If you are involved in an accident and file a collision claim, you're responsible for paying your deductible, and your auto insurance company will cover the rest, up to your coverage limits. Collision coverage claims can sometimes impact your insurance rates.
Comprehensive Coverage
Comprehensive coverage handles non-collision damage such as weather-related damage, theft, vandalism, animal collisions, and other incidents such as windshield chips or cracks.
Comprehensive doesn't cover mechanical breakdown, normal wear and tear on your vehicle, intentional damage, or personal items stolen from your vehicle.
If you file a comprehensive claim, you are responsible for your deductible, and insurance covers the remaining balance for damage or replacement, up to your policy limits. Comprehensive claims typically don't result in an increase in your insurance premiums, unless you file several comprehensive claims in a short time period.
Personal Injury Protection (PIP)
Personal injury protection is a type of auto insurance coverage that pays for your medical expenses and, in many cases, lost wages and funeral expenses, regardless of who is at fault. It often coordinates with your health insurance and is required in some states. Medical payments coverage differs slightly, covering only medical bills but not lost wages or funeral expenses.
Medical Payments vs. PIP
| Feature | Medical Payments | PIP |
|---|---|---|
| Medical bills | Covered | Covered |
| Lost wages | Not covered | Covered |
| Funeral costs | Not covered | Covered |
| Required? | In some states | In some states |
| Fault matters? | No | No |
Uninsured/Underinsured Motorist Coverage
Uninsured or underinsured motorist coverage protects you if another driver is at fault but lacks sufficient auto insurance coverage. Without it, you're responsible for out-of-pocket medical bills or repair costs. Even if most states mandate liability coverage, many drivers remain uninsured or underinsured, making this coverage critical.
Add-On Optional Coverages
There are some add-on options that you can add to your insurance policy to cover you in certain circumstances:
- Rental Reimbursement Coverage pays for a rental car while yours is repaired
- Roadside assistance pays for towing, changing a flat tire, jump-starting a dead battery, and lockouts
- Gap Insurance protects against the difference between your car's actual cash value and your loan balance if your car is totaled. This is critical if you had a small down payment or longer loan terms
- Custom Equipment Coverage covers special equipment like aftermarket parts, custom rims, or sound systems, since standard policies only cover factory equipment
- Rideshare Endorsements ensure drivers for Uber or Lyft and are a critical add-on for gig-economy drivers
What Car Insurance Doesn't Cover
While "comprehensive" insurance seems to give the nod that it will cover everything, that's not the case. Some things are covered under other types of coverage, such as homeowners' insurance, whereas other things are never covered under insurance.
What is covered under other insurance:
- Personal belongings stolen from your vehicle: covered under homeowner's or renter's insurance
- Using your car for business: Commercial auto insurance or rideshare coverage is required when using a personal vehicle for income
What is not covered:
- Mechanical failures
- Normal vehicle wear and tear
- Maintenance issues
- Intentional damage
- Driving internationally
Coverage Types at a Glance
| Coverage Type | What It Covers | Required? | Covers Your Car? |
|---|---|---|---|
| Bodily Injury Liability | Injuries you cause to others | Yes (most states) | No |
| Property Damage Liability | Property damage you cause | Yes (most states) | No |
| Collision | Your car damages from crashes | No* | Yes |
| Comprehensive | Theft, weather, vandalism, animals | No* | Yes |
| Personal Injury Protection | Your/passengers medical bills | Varies by state | No |
| Uninsured Motorist | When the at-fault driver has no insurance | Varies by state | Depends |
| Rental Reimbursement | Rental car while yours is repaired | No | N/A |
| Roadside Assistance | Towing, flat tire, battery jump | No | N/A |
| Gap Insurance | Covers the difference between the car value and the remaining loan if totaled | No | N/A |
*Required if you have a loan or lease
"Full Coverage" Explained
Many drivers mistakenly believe that having "full coverage" covers all incidents. However, full coverage isn't an official insurance term, and it typically refers to having liability, collision, and comprehensive insurance. These coverages still have exclusions and limits, and drivers are still responsible for their deductibles in the event of an accident. Additionally, "full coverage" does not cover mechanical breakdowns, personal items, intentional damage, or any claims exceeding the car insurance policy's limits.
Others assume comprehensive coverage protects against collisions; however, only collision coverage handles crash damage.
How Much Coverage Do You Need?
Your personal coverage needs depend on the car you drive, your state's requirements, whether your vehicle is on loan or lease, and your financial situation. Many drivers opt to pay more in insurance coverage if they don't have a large emergency fund and can't cover damages or replacements out of pocket. Other drivers opt for more coverage because they drive newer cars that would be expensive to replace.
Liability coverage recommendations:
- At least your state minimum liability coverage
- Most experts recommend 100/300/100, or that your liability coverage should equal your net worth
Collision/Comprehensive decision:
- Keep it if: You can't afford to replace your car out of pocket
- Drop it if: Your car is worth under $3,000, or your premium exceeds 10% of car value
Medical coverage:
- Consider your health insurance deductible and coverage
- If you have a higher health insurance deductible, there's a greater need for PIP
- If you don't have health insurance, then PIP is critical
Uninsured motorist:
- Uninsured/underinsured motorist coverage is always recommended
Always review your policy exclusions so you don't encounter any unexpected denied claims.
How to Check What You're Actually Covered For
Read your declarations page carefully and note all your coverage types, limits and deductibles.
Make note or ask your insurance agent:
- If you have collision and comprehensive (and the corresponding deductible)
- If you have liability coverage, what are the limits?
- If you have uninsured motorist coverage
- If you have rental reimbursement coverage
- If you have gap insurance
Specifically ask:
- What is not covered by my current insurance policies?
When to Update Your Coverage
You may need to update your coverage if you've recently bought or financed a new car, moved to a new state, got married, started driving for Uber/Lyft, added a teen driver to your household or paid off a car loan.
Annual Review:
It's best practice to review your policy annually to:
- Check if coverage still matches needs
- Shop for better rates
- Adjust deductibles if needed
- Add or remove coverages
Common Coverage Mistakes People Make
Mistake #1: Assuming "Full Coverage" Means Everything
Full coverage typically means liability, collision, and comprehensive coverage. These coverages do not cover non-accidental damage, normal wear and tear, or mechanical breakdowns. Understanding your individual policies and their limits is crucial to ensuring you're fully covered for what you need coverage for.
Mistake #2: Carrying State Minimum Liability
Most states require low amounts of liability coverage, and you can personally be held responsible for the difference through garnished wages or liens on personal assets. Most experts recommend coverage that equals your net worth or at least 100/300/100.
Mistake #3: Not Having Uninsured Motorist Coverage
Many drivers are uninsured, and others only insure for the state-mandated minimum amounts. Uninsured driver coverage is inexpensive and covers you if you're hit by an uninsured or underinsured driver.
Mistake #4: Thinking Comprehensive Covers Collisions
Comprehensive coverage only covers non-collision events. Collision coverage is required for all crashes, including single-car crashes. Comprehensive covers most accidents that collision insurance does not.
Mistake #5: No Gap Insurance on Upside-Down Loans
With the price of cars increasing and the length of loans extending, gap insurance is critical to ensuring you're not left responsible for the remainder of a loan for a car you can no longer drive. If the actual value of your car when it is totaled is $5,000 and your loan balance is $15,000, gap insurance covers the $10,000 difference that you otherwise would be responsible for paying your lender out of pocket.
Mistake #6: Not Reading Exclusions
Read your policy declarations to ensure you're fully covered for all your use cases.
FAQ
Does car insurance cover mechanical breakdowns?
No, standard auto insurance coverage does not cover mechanical breakdowns or normal wear and tear. Some insurers offer mechanical breakdown insurance or extended warranties to cover failures after the manufacturer's warranty expires. Otherwise, those maintenance and repair costs are your personal responsibility.
Does comprehensive coverage mean everything is covered?
No, comprehensive only covers accidental, non-collision damage, like theft or vandalism. It does not cover crashes with other vehicles or objects, mechanical breakdowns, normal wear and tear, or personal items stolen from your vehicle.
What does car insurance cover when you're not at fault?
When you're not at fault, the at-fault driver's liability insurance should cover your damages and expenses. Your insurance company will typically handle filing a claim with the at-fault driver's insurance and recover the costs for you. Your insurance rates are not at risk of increasing when you are not at fault.
Does car insurance cover a rental car?
Your auto insurance policy will typically cover damage to a rental car that you're using for personal use on a short-term basis. If you require a rental car while your car is being repaired after an accident, you likely need rental reimbursement coverage.
Does car insurance cover personal items stolen from my car?
No. Auto insurance does not cover personal belongings stolen from your vehicle. Homeowner's or renter's insurance typically covers personal belongings up to a certain limit, such as laptops, phones, clothes, and other personal items.
If someone borrows my car and crashes, whose insurance pays?
Typically, the insurance follows the car, not the driver. In the event of an accident, your insurance is primary and would cover the accident. You would be responsible for the deductible, and your rates may be subject to change, even if you were not driving. The borrower's insurance may provide secondary coverage should your limits be exhausted.
Does car insurance cover hitting an animal?
It depends. Hitting an animal is covered by comprehensive coverage, not collision coverage. If you do not have comprehensive insurance and only have liability or collision coverage, your policy will not help, and you'll be responsible for damages out of pocket.
Does liability insurance cover my own car?
No, liability coverage only covers damage and injuries you cause to other people and their property. It does not cover damage to your vehicle or your injuries. Collision or comprehensive coverage would cover your car in the event of an accident or theft.
What happens if my claim exceeds my coverage limits?
If your claim exceeds your policy limits, you are personally responsible for the rest. If you cause an accident with $75,000 in damages but only have $50,000 in coverage, you're responsible for the remaining $25,000. Those impacts may file a lawsuit, garnish your wages or place liens on your personal assets to cover the rest, which is why carrying adequate liability coverage is crucial.
Does car insurance cover weather damage?
It depends. If you have comprehensive coverage, your insurance typically covers damage from hail, flooding, tornadoes, hurricanes, falling trees, and other natural disasters. Comprehensive coverage is important if you live in areas prone to severe weather. Liability-only and collision policies do not provide weather protection for your vehicle.
