What does car insurance cover?

Car insurance protects you from the financial risks you could incur by hurting someone or damaging their property with your car. It also protects you from having to replace the car or items in it when the car is vandalized.

Car insurance covers many different types of situations in which you’d be liable to pay repair bills or medical expenses. Depending on the circumstance, it may cover you, the passengers in your car, or a third party who suffered some kind of damages because of your car. Each car insurance policy is divided up into different components, and you can select the amount of coverage you receive under each component when you purchase the policy, after accounting for the minimum amount of coverage required by your state.

The main components of car insurance are liability coverage, both for bodily injury and property damage; personal injury protection, which helps you and you the people in your car; collision coverage, for damage to your car in an accident; comprehensive coverage, for the theft or vandalism of your car when it’s not being driven; and various other types of car insurance that help you make up the difference when your base coverage is not enough.

Read on to learn more about what car insurance covers:

• When you cause damage or hurt someone with your car – liability coverage
• When you hurt yourself or a passenger in your car – personal injury protection
• When your car gets damaged, stolen, or vandalized – collision and comprehensive insurance
• When your car is worth less than you owed on it when it was stolen – gap insurance
• When the other party doesn’t have car insurance – uninsured/underinsured coverage
• What car insurance doesn’t cover

When you hurt someone with your car – liability coverage

Almost every state in the U.S. requires you to have auto insurance, and even those that don’t require you to have coverage still compel drivers who are liable in an accident to pay for the other party’s expenses. Every state that requires you to have car insurance mandates that you have bodily injury liability (BIL) and property damage liability coverage.

Medical bills can be expensive, but the minimum amount of coverage most states require is between $25,000 and $50,000. You can’t predict how bad a person’s injuries will be or what kind of health insurance they have to finance some of the costs, so if you don’t think you could afford a high medical bill, you’ll want to spend more in the liability component. You also may not realize how much damage your car can do to someone’s property until you get the repair bill, so plan ahead for property damage liability as well.

To use liability coverage, the injured party will file a claim with your car insurance carrier, who will work with that person to make sure damages are paid.

When you hurt yourself or a passenger in your car – personal injury protection

Personal injury protection (PIP) helps cover some of the costs when you injure yourself or any of the passengers in your car. A form of no-fault coverage, PIP may pay costs associated not only with medical expenses but also lost wages due to being put out of work and any resulting funeral expenses, as long as the accident is covered by your policy.

Medical expenses may include surgeries and X-rays, as well as bills from hospitals, dental offices, and nursing services. Medications may also be covered, as well as prosthetic devices and hearing aids.

When your car gets damaged, stolen, or vandalized – collision and comprehensive insurance

Collision insurance is not always required in every state, but it’s worthwhile to have. But you may be required to get collision insurance if you lease or loan your car. This component of car insurance pays for both direct and accidental damage or loss to your insured vehicle. That means damage to your car that happens during an accident with another car, such as a crash; or damage involving only your car, such as hitting a tree.

Collision insurance differs from the property damage liability component in that the latter is intended to pay for damage you cause to other peoples’ cars. Your collision insurance will not cover damage or injury inflicted upon other drivers. Nor will it cover theft or vandalism, which is covered by comprehensive insurance.

The major difference between comprehensive insurance and collision insurance is that most collision insurance claims result from damage incurred while the car is being driven, with the exception of certain hit-and-run claims. Comprehensive insurance, which is often lumped in together with collision insurance, covers damage to or the loss of the car when it’s not in use. That means events out of your control, such as elemental and weather conditions or natural disasters.

Comprehensive insurance, also called simply comp insurance, protects not only against vandalism caused by the lone hooligan but also large-scale disruptions like riots. You’ll be protected against everything from glass breakage to missiles blowing up your car. It also protects against theft of your vehicle (but not theft of the items within, which is covered by your homeowners or renters insurance). As with collision insurance, it may be optional in your state but required if you lease or rent your car.

When your car is worth less than you owed on it when it was stolen – gap insurance

Although comprehensive insurance will pay you for the cost of your car when it’s stolen, your car insurance carrier may deduct the amount by which the car has depreciated from its value before determining how much to pay you. This is called paying you the actual cash value of the car.

If you loan or lease the car, you may owe more money on the car than it’s worth. In that case, the actual cash value of the car may not be enough to keep making the payments you owe. Gap insurance pays out the difference between the car’s actual cash value and the amount you still owe on the lease or loan.

Gap insurance is an endorsement that usually costs extra to add to your base car insurance policy. You may be required to have it if you lease or loan, and it may already be factored into the cost.

When the other party doesn’t have car insurance – uninsured/underinsured coverage

You can also purchase coverage that will protect you from the financial risk that the other party doesn’t have enough coverage. Because many states require you to only purchase a minimum amount of coverage, the driver who caused the accident may not have enough or even any at all. Uninsured and underinsured motorist coverage (they may be separate purchases, depending on your carrier) helps pay out some of the difference between what’s owed to you and what the other party can or can’t cover.

Like liability insurance, uninsured and underinsured motorist coverage may pay out for both property damage and bodily injury. You also don’t need to be in the car at the time to be eligible for coverage under this component. It could even cover damages or loss you’re owed caused by the driver of a car that isn’t their own, such as a car borrowed from the policyholder or stolen by a thief.

What car insurance doesn’t cover

Your car insurance will be thoroughly spelled out and explained in your policy. The policy will tell you both what kinds of accidents and damage are covered as well as what isn’t. The following situations are not covered by auto insurance:

• Regular repairs. Repairs that result from regular wear and tear are not covered by car insurance. Other damage inflicted with malicious intent or during an accident is covered.
• Other people who drive the car. Only the people named in the car insurance policy – the insured — are covered. If you live in a state where car insurance is mandated by law, you could face high fines and criminal charges for letting someone drive your car without insurance.
• Ridesharing. Some policies may differ, but your car insurance policy may exclude claims for damage caused while driving for fares. For that, you’ll need rideshare insurance.
• Damage that exceeds your limits of liability. When you purchase car insurance, you’ll be allowed to choose how much coverage you get in each component. On the policy declarations page, a sheet that’s attached to the policy, your coverage in each component will be its limits of liability, meaning that the car insurance company is under no obligation to pay more than that amount.
• Exotic and performance cars. Exotic, performance, and vintage cars that are highly expensive to replace or repair are generally not covered under auto insurance policies. Check with your insurer to see whether you can get coverage for your Lamborghini, but you may find you have to shop at specialty insurers and get a separate policy entirely.