What does car insurance cover? It depends on the coverage you buy. Almost all states have minimum insurance requirements, though they vary by state. No matter the coverages you choose, it will always include minimum liability. Some other coverages you can choose are PIP, gap insurance, comprehensive and uninsured motorist. Understanding the coverages can help you decide what to buy to meet your needs.
How does car insurance work?
When you buy an auto insurance policy, you select different coverage options to protect yourself and your car. Based on the coverage you select, your insurance company will then pay up to a certain limit per coverage type. Coverage protects you if you are injured, the other person if they are injured or if you cause property damage to your own car or someone else’s.
Some coverage types have a deductible, which is the amount you are responsible to pay, before the insurance company pays its portion. You can increase or decrease your deductible amount depending on your needs and financial situation. The more coverage types you buy and the higher your coverage limits, the less likely you will have to pay for damages out of pocket after an accident, except for the deductible. But, with higher limits and more coverage comes a higher price tag for insurance.
Minimum liability coverage
Minimum liability coverage is the least amount of coverage you can buy as required by your state. Each state has its own minimum requirements, but almost all of them require a certain amount of liability insurance. Depending on the state, you can decline certain coverages, even when offered. For example, in Maryland, insurance agents are required to offer PIP coverage, but you can decline it.
Bodily injury liability
Bodily injury liability pays for the other driver and their passengers’ injuries if you cause an accident. This coverage pays for their medical bills, lost wages and pain and suffering because of the accident. Most states require a minimum amount of bodily injury liability. There is no deductible to use this coverage.
Property damage liability
If you cause an accident and damage someone’s property, property damage liability pays for it. Property damage is most often caused to someone’s vehicle, but could also be a fence, mailbox, utility pole, guard rail or building. Just like bodily injury liability, this coverage is usually required and does not have a deductible.
Uninsured/underinsured motorist coverage
Though not required in all states, uninsured and underinsured motorist coverage protects you if someone hits you and does not have any insurance or enough coverage to pay for your injuries and property damage. Most often, this coverage is used when you are a victim of a hit-and-run, which is when another driver is at fault and leaves the scene without providing insurance information. If you want protection against uninsured drivers, consider this coverage, even when it is not required.
PIP, short for personal injury protection, is a coverage required by some states, though some allow you to waive coverage. PIP insurance pays if you or your passengers are injured in an accident, no matter who is at fault. It also covers you as a passenger in someone else’s vehicle. It you include PIP coverage on your car insurance, it covers (up to the maximum limit selected):
- Medical costs
- Lost wages
- Funeral expenses
- Household services
Childcare and household services are only covered if needed while you are recovering from your injuries. The amount you can buy varies by state and there is no deductible to use this coverage.
Medical payments coverage pays for medical expenses you incur if you are injured in an accident, regardless of fault. If you select this coverage, it follows you when you are walking, riding a bike, on public transportation, driving your own car or someone else’s or if you are a passenger. Like PIP, there is no deductible to pay for coverage.
Full coverage car insurance
With minimum liability coverage, you miss out on physical damage coverage for your own car. If you want the insurance company to pay for repairs to your car in a covered claim, consider full coverage car insurance. The national average cost of full coverage car insurance is $1,674 per year. However, your rate may be different based on your driving history, location and coverages and deductible selected.
Collision insurance pays for the damage to your car caused by hitting another vehicle, object or piece of property, regardless of fault. A deductible will apply to this coverage, and is based on the deductible you select for the policy.
Comprehensive insurance, also called other-than-collision coverage, pays for the damage to your car not covered by collision. This includes:
- Broken windows or windshields
- Hitting an animal
- Theft of the car
- Weather events
Like collision, the deductible you choose for comprehensive coverage applies when you file a comprehensive claim.
Other types of coverage
Most insurance companies offer add-on coverages you can get besides full coverage. While options vary by state, other types of coverage could include:
- Gap insurance: This coverage is for drivers who finance or lease their cars. If your car is totaled in an accident, gap insurance will pay the difference if your totaled car is worth less than what you owe.
- New car replacement: If your car is only a few years old and you have full coverage, you may qualify for this coverage. With new car replacement, if your car is totaled, you get the value to replace your car with the same year, make and model, instead of the depreciated value.
- Roadside assistance: This coverage pays for service to assist you if your car breaks down. Coverage varies, but usually includes towing, key lockout, bringing fuel, battery jump start and tire changes.
Who is covered by my auto insurance policy?
The people listed as insured drivers on your auto insurance policy are covered to drive your car. If you give someone not listed or in your household permission to drive your car, they are also covered. Keep in mind, if they get into an accident, it falls under your insurance policy.
What does car insurance not cover?
Your auto insurance policy will detail what is and is not covered in your policy. There are a few things that are not covered by car insurance:
- Damage beyond coverage limits: When you purchase car insurance, you choose the limits you will pay for. The policy declarations page will outline your limits, which is the maximum amount your auto insurance company is required to pay. You handle the rest, which is why most insurance experts recommend buying as much coverage as you can afford.
- Specialty vehicles: Cars that are high value, exotic, performance or vintage may not be eligible for coverage under a standard auto insurance policy. Some companies offer specialty insurance policies, which are tailored to meet the needs of these types of vehicles.
- Maintenance and repairs: Car insurance does not cover regular maintenance and normal wear and tear. You are responsible to pay to keep your car running, including regular maintenance as recommended by the manufacturer. Some insurance companies may offer mechanical breakdown insurance, which could provide some coverage.
- Rideshare: If you rideshare, there is a gap in coverage where you are not covered. You should check to see what coverage the rideshare company provides and if you should get specific rideshare insurance.
Frequently asked questions
What is the best car insurance company?
The best car insurance company is one that meets your needs and coverage requirements. You may have to shop around to find the right insurance company for you.
How do I know how much car insurance I need?
How much car insurance you need is up to you after you meet the state’s requirements. Consider whether you need minimum or full coverage and what limits and deductibles are best. Once you determine how much coverage you need, get quotes from multiple companies to get the best price.