What Car Insurance Does - and Doesn’t - Cover

INSURANCE - CAR INSURANCE
Understanding the different types of car insurance coverage can help you avoid being under-protected. It can also protect you from overpaying. Here’s what you need to know about what car insurance covers.
Updated Nov. 9, 2023
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Shopping for the best car insurance can be confusing because several different types of coverage are available. Take one look at an auto policy and you’ll know exactly what I mean. Personal injury protection, bodily injury liability, uninsured motorist coverage, the list goes on. This information can be overwhelming if you’re trying to determine which coverage to get.

Although it may feel like there’s a lot going on, the entire process of purchasing a new policy will be much easier once you have an understanding of what car insurance covers.

Here’s what’s typically covered under each type of insurance.

In this article

What does car insurance cover?

When you purchase a car insurance policy, you’ll find that you can customize several components of your coverage. You can adjust coverage limits to find the right balance between what you can afford and what’s required by your state. In some instances, certain coverages may not be needed at all. For example, you may decide to exclude towing coverage because you’re currently a AAA member. Because your AAA membership includes roadside assistance, there’s no need to pay for the same coverage twice.

Car insurance is required in most states, but coverage requirements may vary by state. Even if car insurance isn’t required in your state, optional coverage is still a good investment.

Here are the most common coverage options you’ll find on an auto insurance policy and how each protects you.


Collision

If your vehicle is damaged in an accident, collision coverage will cover the cost of repairs minus the amount of your deductible. You’re covered no matter who was at fault in the car accident.

Comprehensive

If your vehicle is damaged by something other than a collision, comprehensive insurance will cover the cost of repairs minus the amount of your deductible. Damage from the following is typically covered:

  • Theft
  • Vandalism
  • Fire
  • Natural disasters
  • Falling objects
  • Damage from animals
  • A civil disturbance

Uninsured motorist

If you’re involved in an accident with an at-fault driver who doesn’t have liability insurance, uninsured motorist coverage will cover the cost of your injuries. Uninsured motorist coverage will also cover injuries as a result of an accident caused by a hit-and-run driver. Coverage may include payment for the following:

  • Medical expenses
  • Lost wages
  • Disability
  • Pain and suffering

Underinsured motorist

If you’re involved in an accident with an at-fault driver whose bodily liability insurance isn’t enough to cover all your injuries, underinsured motorist coverage pays for those injuries. Coverage may include payment for the following:

  • Medical expenses
  • Lost wages
  • Disability
  • Pain and suffering

Bodily injury liability

If you’re involved in an at-fault accident that injures another person, bodily injury liability coverage will help pay for the other person’s medical expenses and related costs. Bodily injury liability coverage can help pay for the following costs:

  • Medical expenses
  • Legal fees and counsel if you’re sued as a result of the accident
  • Loss of income
  • Pain and suffering
  • Funeral costs

Property damage liability

If you cause damage to another person’s property with your vehicle, property damage liability will help cover the cost of those damages. This can include, but is not limited to, the following repair costs:

  • Damage to another vehicle
  • Damage to a fence
  • Damage to a storefront

Personal injury protection (PIP)

If you’re involved in an accident, personal injury protection will pay you and any other person in your vehicle for injuries, regardless of fault. Coverage may include:

  • Medical expenses
  • Lost wages
  • Rehabilitation expenses

Medical payments

If you’re involved in an accident, medical payments coverage will help pay your or your passenger’s medical bills, regardless of fault. Medical payments coverage may include the following expenses:

  • Health insurance deductibles and copays
  • Doctor or hospital visit
  • Surgery
  • Ambulance
  • Funeral expenses

Roadside assistance

If your vehicle breaks down, roadside assistance coverage will pay for the labor costs at the disablement site and the costs of towing your vehicle.

Car rental

If your vehicle is disabled due to a covered loss, car rental reimbursement coverage will pay the costs of a rental car up to your coverage limits.

What isn’t covered by car insurance?

Car insurance protects you in many different scenarios in which you’d otherwise be liable to pay for repair costs or medical expenses. Your coverages will be thoroughly explained in your policy, and your policy will tell you what types of accidents and damage are covered.

However, several things aren’t covered by your car insurance. The following situations are not typically covered:

  • Theft of personal items: Although comprehensive coverage protects you if your car is stolen and may cover damage to your car if someone breaks into it, a car insurance policy typically doesn’t pay to replace personal property stolen from your car. Personal property is, however, typically protected by renters' and homeowners' insurance.
  • Regular repairs: Car insurance won’t cover repair costs that result from normal wear and tear or as a result of neglect. So although your car insurance policy will cover damages to your car as a result of a covered accident, you’ll have to pay out of pocket for things like worn-out tires or excessive wear on your brakes.
  • Using your vehicle for business purposes: A personal car insurance policy will cover you if you’re involved in an accident on your way to and from work, but your policy may not cover you if, at the time of the accident, you were using your own car for business purposes without having additional coverage. This additional coverage is known as commercial auto insurance.
  • Rideshare driving: This can vary from policy to policy, but regular car insurance may exclude claims for damage caused while driving for fares as a rideshare driver such as Lyft or Uber. Depending on your policy issuer, rideshare insurance can replace your personal auto policy altogether or be offered as an add-on.
  • Other people who drive your car: Although laws vary from state to state, your car insurance policy might cover only the people named in your policy — the insured. This even goes for family members living in your home, which is why it’s important to understand your policy limits and know who is covered before you lend your car to someone else.
  • Damage that exceeds your liability limits: When you purchase car insurance, you get to choose your coverage limits for several different components of your policy. Your car insurance provider is not obligated to pay out more than the limits set for each type of coverage, so it’s important to purchase the maximum amount of coverage you can afford.
  • Driving across the U.S. border: Even though you buy car insurance based on the laws in your state, your policy will cover you anywhere you drive in the U.S. But if you decide to take a road trip to Mexico, most car insurance companies won't cover you once you've crossed the border. Instead, you’ll usually need to get a supplemental policy for the duration of your trip. However, many insurers will cover you while you're driving in Canada, but check with your provider.
  • Exotic and performance cars: Many U.S. auto insurers have exclusions for exotic and performance cars. You'll typically need to find a specialty insurer for these vehicles. Car insurance providers will inform you if your car isn't eligible for coverage during the quoting process.

How to find the right coverage

Whether you’re looking to save money on car insurance costs or purchase a new commercial truck insurance policy for your business, having the right auto insurance coverage is essential. Before you shop for a new policy, determine which coverages you need and how much you can afford. Once you’ve done this, you can begin to map out how to get car insurance coverage.

There are numerous car insurance companies to choose from, which means you have a variety of options. Many lenders offer a way to obtain a free online quote. Alternatively, you can call and speak with a representative directly.

If you’re shopping around for the best rates, it can be overwhelming to have to compare so many different car insurance quotes. You have to fill out the same information over and over again, which is redundant and time-consuming. Fortunately, this isn’t always the case.

Insurance marketplaces allow you to compare insurance providers in one location, which saves you both time and money. Provide Insurance is an online insurance marketplace that takes your information and the details of the policy you’re looking for and returns the most relevant options. It’s fast, free, and you’re not obligated to move forward with a new policy if you don’t want to. In short, it cuts down on having to fill out multiple insurance quotes and allows you to compare car insurance rates in one place.

With your quotes in hand, it’s time to purchase your new auto policy. Connect with a licensed insurance agent and hash out the exact details of your policy. When your new policy is issued, make sure to review it thoroughly to ensure your information and coverages are accurate.

The last word on what car insurance covers

If you're looking to lower your car insurance, you might be tempted to only purchase the state minimum coverages. But before you do, make sure you understand the situations in which you'd be financially responsible. There are other ways to save money on car insurance besides dropping comprehensive and collision insurance. Understand your needs and budget, and compare quotes from multiple companies before choosing the right car insurance policy.

  • You could save up to $500 with some companies
  • Compare dozens of providers in under 5 minutes
  • Fast, free and easy way to shop for insurance
  • Quickly find the perfect rate for you

Author Details

Matt Miczulski Matt Miczulski is a personal finance writer specializing in financial news, budget travel, banking, and debt. His interest in personal finance took off after eliminating $30,000 in debt in just over a year, and his goal is to help others learn how to get ahead with better money management strategies. A lover of history, Matt hopes to use his passion for storytelling to shine a new light on how people think about money. His work has also been featured on MoneyDoneRight and Recruiter.com.
Lindsay Frankel Lindsay Frankel is a Denver-based freelance writer who specializes in credit cards, travel, budgeting/saving, and shopping. She has been featured in several finance publications, including LendingTree. When she's not writing, you can find her enjoying the great outdoors, playing music, or cuddling with her rescue pup.

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