What Does Car Insurance Cover?

Auto insurance is an important investment for every driver, protecting you and your vehicle in the event of a car accident. However, it’s important to understand exactly what your car insurance coverage helps pay for, as different coverage types offer different protections.

In this article, we will break down what auto insurance covers and what it doesn’t, so that you can make an informed decision about your needs.

What Does Car Insurance Cover? Types of Auto Insurance Coverage

Car insurance companies offer different types of coverage. These help cover expenses, including injuries and vehicle damage. Here's a look at what they pay for:

Liability Coverage

Liability insurance is mandatory in nearly all states and protects you if you cause an accident. Property damage liability covers the damage to the other party's property, while bodily injury liability covers the medical bills for their injuries. Liability doesn’t cover your own injuries or property damage.

All states have liability coverage minimums set by state law that all drivers must meet. For example, Montana's state minimum limits are $25,000 per person for bodily injury liability coverage, $50,000 per accident for bodily injury, and $20,000 for property damage.

Collision Coverage

Collision insurance pays for repairs to your car if you're in an accident with another vehicle or object, regardless of who is at fault. Collision is an optional coverage, but it is helpful if you drive an expensive car or frequently commute. Also, if you lease or finance your vehicle, lenders may require this type of auto coverage. For many drivers, this is also where the cost adds up, helping explain why car insurance is so expensive when full coverage is required.

Comprehensive Coverage

Comprehensive coverage protects against non-collision-related damages, including vandalism, fire, animal collisions, windshield repair, theft, and natural disasters. This coverage is also optional.

Lenders and lessors in many states require you to have this coverage if you lease or finance your vehicle. Most experts advise dropping comprehensive and collision coverage as a way of lowering car insurance if you have an older model.

Personal Injury Protection (PIP)

PIP covers medical expenses for you and your passengers in case of an accident, regardless of who is at fault. PIP may also cover lost wages and other associated costs, such as childcare, if you cannot work after an accident. It also covers funeral expenses.

PIP is mandatory in no-fault states such as Florida, Hawaii, Kansas, and Minnesota. These are states with laws that require drivers to file car accident injury claims with their own insurance.

However, it's important to note that some at-fault states, such as Oregon, require PIP, which is why you should check with your local DMV whether you need it.

Medical Payments Coverage (MedPay)

Medpay helps cover medical expenses for you and your passengers after an accident, regardless of who caused the crash. This is similar to PIP, since it covers medical and funeral expenses. However, Medpay is limited to only these payments. It is optional in most states and often less expensive than PIP.

Underinsured Motorist Coverage (UIM)

This coverage protects you if you're in an accident with someone who doesn’t have enough insurance to cover the damages. While it is not mandatory in most states, UIM is useful for accidents where the at-fault driver has minimal insurance.

Uninsured Motorist Coverage (UM)

Uninsured motorist coverage helps pay for damages and medical bills if you’re in an accident with someone who doesn't carry car insurance. This can help prevent major financial losses if the at-fault driver is uninsured.

UM coverage is ideal for drivers in states such as Mississippi, New Mexico, Florida, and Michigan, which have the highest numbers of uninsured drivers, according to the Insurance Information Institute.

Note that some states, such as Connecticut, Illinois, Maryland, Minnesota, and New Jersey, require UM and/or UIM coverage.

Gap Insurance

Gap insurance covers the difference between what you owe on your car loan or lease and what your car is worth if it’s totaled. This is especially important if you owe more than the current value of your vehicle. Gap insurance is optional, but some lenders and lessors may require it.

Rental Car Reimbursement

If your car is in the shop after an accident, this coverage will help cover the cost of a rental vehicle while yours is being repaired. It is an optional add-on that can help you if you're a frequent commuter who cannot go without a car. However, it's important to note that insurance companies offer this with a daily set limit.

Roadside Assistance

While your car insurance may protect you in accidents or non-collision situations, it doesn’t provide coverage if your vehicle breaks down on the side of the road. Roadside assistance is an optional add-on that provides services such as towing and flat tire changes if needed. These services vary by insurance company, so you can also get battery jump-starts, lockout assistance, and fuel delivery.

What Car Insurance Doesn’t Cover

While auto insurance policies provide a lot of protection, there are some things they don’t cover. Understanding these limitations can help determine how much car insurance you need. They include:

• Above the Coverage Limits: If your damages exceed your policy limits, you’ll be responsible for the remaining costs. For example, if you're in an accident and the damage to the other driver's property exceeds your liability coverage limit, then you would have to pay for the rest out of pocket.
• Personal Items: Personal property in your car, such as electronics or clothing, isn’t covered unless you have specific personal property coverage, which some policies offer. Also, most insurance companies that offer homeowners or renters insurance may cover these items if they’re stolen or damaged while in your vehicle.
• General Maintenance: Routine repairs and wear-and-tear from normal use, like tire replacements or brake pads, aren’t covered by auto insurance.
• Damage from Previous Owners: If you buy a used car with existing damage, your insurance won’t cover the repairs unless specified. Insurance claims cover damages that happen after the vehicle is insured under your policy. If the damage was not disclosed at the time of purchase, you should resolve it with the seller or dealer, not your insurance agent.
• Intentional Damage: If you cause damage intentionally, be it to your or someone else’s car, your policy will not cover it.

Does Auto Insurance Cover the Driver or the Car?

Most car insurance policies cover the car, but they may extend coverage to drivers who have permission to use the vehicle, such as family members.

The rule to go by on liability, collision, and comprehensive coverage is: An auto policy follows the car. This means the car's policy is the primary coverage in an accident, regardless of who is driving.

But in other cases, it depends on the type of coverage and your policy’s terms. For example, PIP and MedPay follow the pedestrian, passenger in a car, or the driver in a non-owned vehicle. Also, UIM/UM follows the driver and passengers.

Will Car Insurance Cover Theft and Other Crimes?

Yes. Auto insurance can offer protection against some types of criminal activity. However, it's important to note that you must have the specific coverage to enjoy these benefits, including car theft insurance through comprehensive coverage. Liability coverage pays only for the basic property and bodily injury costs. Crimes usually require you to have Comprehensive and UIM/UM. Here’s what the following coverages pay for:

• Vandalism: If your car is damaged due to vandalism, such as broken windows or keyed paint, comprehensive coverage may cover the repairs.
• Hit-and-Run: If you're involved in a hit-and-run accident, uninsured motorist coverage can help pay for your damages.
• Theft: If your car is stolen, comprehensive coverage will generally pay for its replacement or the repair costs.
• Animal Attacks: Damage from animals, such as a deer hitting your car, can be covered under comprehensive insurance.

If you live in areas with high vehicle-related crime rates, make sure you have adequate coverage to pay for potential issues.

Save on Auto Insurance with Think Save Retire

Finding auto insurance that provides the right coverage for you is important. However, without the correct information, you could buy an expensive insurance policy when you don't need to.

Avoid paying more by using Think Save Retire, which offers a comparison tool to help you find the best rates tailored to your needs.

We make it easy to compare car insurance quotes from multiple providers, helping you save time and money. So, if you're looking for the cheapest car insurance in California or other states, our comparison tools can help you find affordable options.

Let Think Save Retire help you get enough liability insurance and optional coverages at a price you can be happy with.

FAQs

What is Covered in Car Insurance?

Liability only covers damage to the other vehicle(s) involved in an accident, and medical expenses for injuries to others in an at-fault accident. It may also cover legal fees. If you add collision coverage, PIP, MedPay, UI/UIM, and comprehensive coverage, the policy will help pay your medical bills and property damage, providing better financial protection. Also, add-ons such as roadside assistance offer support in case of a breakdown.

What Does a Fully Comprehensive Car Insurance Cover?

Fully comprehensive car insurance covers situations such as accidents, theft, vandalism, natural disasters, and animal-related incidents. It’s the most extensive coverage, protecting you from almost every risk.

What Is Covered by Full-Coverage Car Insurance?

Full-coverage car insurance includes liability, collision, and comprehensive coverage. This provides liability protection in the event of an accident, and covers damage to your car from collision and non-collision incidents.

Conclusion

Auto insurance can protect you and others against accidents, theft, natural disasters, vandalism, and more. Understanding what your policy covers and what it doesn’t helps you buy the right coverage for your needs.

By exploring different coverage options and working with Think Save Retire, you can save money and find a policy that fits your lifestyle and budget. Remember, while basic coverage may seem like the easiest option, it’s important to consider additional coverage types, such as collision and comprehensive, for better protection.