Car insurance is a type of property and casualty policy that covers damage to vehicles and injuries to people involved in an accident. It can pay for medical bills, lost wages for injured parties, legal costs, vehicle repairs or replacements, theft and damage caused by natural disasters or animals. However, it doesn't cover wear and tear, maintenance or mechanical breakdowns.
Car Insurance Coverage
Updated: April 15, 2025
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Key Takeaways
There are six main types of car insurance coverage including liability, comprehensive, collision, Medpay, PIP, and uninsured/underinsured coverage.
In addition to standard coverage options, you can purchase add-on benefits such as roadside assistance, gap insurance and more to supplement your plan.
How much car insurance coverage you need depends on state regulations, your financial situation, driving habits and your vehicle.
What Does Car Insurance Cover?
Types of Car Insurance Coverage
Standard car insurance comes in six main types: liability, comprehensive, collision, uninsured/underinsured motorist, medical payments and personal injury protection coverage. Below is a summary of what each covers:
- Bodily injury liability: Covers medical and legal costs for injuries you cause to others. In no-fault states, it may cover your own injuries. The first two numbers in the limit split represent the per-person (first number) and per-accident (second number) limits.
- Property damage liability: Pays for damage to another person’s property when you're at fault. This applies regardless of fault laws, with the at-fault driver always covering property damage. The last number in the limit split represents the per-accident limit.
Liability coverage
Liability insurance protects you if you're at fault in an accident, covering damage to other drivers. Coverage limits are often shown as a split, such as 100/300/100, representing thousands of dollars. It includes two types:
Collision insurance
This coverage reimburses you for repairing or replacing your vehicle after you pay a deductible. Repairs are fully covered up to their cost, while replacements provide the vehicle's actual cash value minus the deductible.
Comprehensive insurance
Comprehensive insurance covers damage to your vehicle in case of theft, vandalism, weather-related damage, and other nature-related causes like animals or trees. It works like collision coverage and pays for car repairs and replacements from these causes if you pay a deductible.
Uninsured/Underinsured motorist coverage
Underinsured/Uninsured (UM/UIM) works like liability insurance but only applies when the at-fault driver is uninsured or underinsured. It covers your bodily injuries and property damage if the other driver can't fully pay for the damage they caused. Also, if you are a victim of a hit and run and the perpetrator cannot be found in time for a claim, this coverage applies.
Medical payments coverage (MedPay)
MedPay pays for any medical damage to you and those in your vehicle, regardless of who's at fault, up to a certain limit without deductibles. This type of coverage is required only in Maine and New Hampshire and is optional everywhere else. However, coverage availability and limitations differ by state.
Personal injury protection (PIP)
PIP is similar to MedPay but offers broader coverage, including medical expenses for you and those in your insured car and lost wages from injuries up to a set limit without deductibles. This applies regardless of who is at fault in an accident. PIP is available in only 19 states; 15 require some form of coverage, and four as an optional add-on.
Types of Car Insurance Coverage Add-ons
In addition to main coverage options, insurance providers also offer various add-on coverages:
Add-on Coverage Option | Details |
|---|---|
Roadside assistance | Provides towing coverage, locksmith services, gas transport and other services you may need if your car breaks down and you need assistance |
GAP insurance | Covers your loan if your car is financed in case your car is totaled up to a certain limit |
Rental car reimbursement | Covers you for rental car expenses up to a certain limit per day if your vehicle breaks down while on the road |
Accident forgiveness | Depending on the severity of an accident, your first accident may be forgiven, meaning your rates won’t increase. |
Original equipment manufacturer (OEM) | Also known as original parts replacement coverage, this ensures repairs or replacements for a covered incident include automaker parts. |
Vanishing deductible | With this add-on, your deductible for comprehensive and collision coverage decreases over time as long as you remain claim-free. |
New/Better car replacement | Allows you to replace your totaled car with a new or upgraded vehicle after a covered incident |
Protects you during covered incidents while using your personal vehicle for rideshare services | |
Trip interruption | Covers transportation, lodging and food costs up to a daily limit if your car breaks down or is out of commission |
Custom equipment coverage | Covers custom equipment or modifications to your car, providing reimbursement up to a set limit for each item if damaged |
Pet coverage | Covers vet bills up to a set limit if your pet is injured in your car |
Windshield/Glass coverage | Covers windshield replacement if it gets damaged and needs repair or needs to be replaced up to a certain amount |
Nonstandard Types of Car Insurance Coverage
Separate from other standard car insurance coverage, insurers offer these optional policies:
Nonstandard Coverage Option | Details |
|---|---|
Covers your vehicle (must be at least 20 years old) up to an agreed value and offers comprehensive protection | |
Commercial auto insurance | Offers the same protection as a traditional policy but applies only when the vehicle is used for commercial purposes |
Mechanical breakdown insurance | Similar to a car warranty, this coverage protects against unexpected part breakdowns on your vehicle. However, it typically offers less coverage than warranties from automakers or third-party providers. |
Combines a base rate, determined by your personal and vehicle details, with a premium based on your annual mileage. It works like a traditional policy but usually costs less for drivers logging fewer than 7,000 miles a year. | |
Provides liability coverage for drivers who don't own a car but drive often | |
Provides the same standard coverages as a traditional policy but applies specifically to rental vehicles. For most drivers, it supplements their standard car insurance coverage. |
How Does Car Insurance Work?
When buying car insurance, you can select coverage levels, types of coverage, deductibles and which drivers and vehicles to include. Coverage for people is limited by set dollar amounts, while vehicle damage is covered in full after you pay a deductible.
Policies typically last six months, with renewal options available, though some insurers offer one-year terms. After purchasing, you can create an online profile or use the insurer’s app to manage payments, adjust coverage or file claims.
CONSIDER REMOVING COMPREHENSIVE COVERAGE
When you choose full coverage, collision and comprehensive are often bundled and can't be separated initially. However, you can remove them later after purchasing a policy. Depending on your risk factors, dropping comprehensive coverage can save you hundreds of dollars annually.
How Do Car Insurance Claims Work?
Here’s a summary of the claims process with clear steps to help you navigate auto claims smoothly:
- 1
Document and report the incident
If your car is damaged or you're in an accident, document the scene with photos or videos and notify the police if possible. This helps establish proof, continuity and the cause of the incident. Filing a police report, either in person or online, is crucial, as insurers typically require it when submitting a claim.
- 2
File a claim
Call your insurer first at the number on your car's insurance card as soon as possible. Also, manage your claim through your insurer's mobile app or website to make the process simpler.
- 3
Understand claim terms
After filing a claim, understand the required documentation, submission deadlines and expected reimbursement timeline. This knowledge helps you plan, meet deadlines and manage your finances effectively.
How Do Car Insurance Payments Work?
Car insurance payments can be made in full or through monthly installments. Paying in full for the entire policy period is recommended when possible, as it typically saves money.
How Switching Car Insurance Coverage Works
To change coverage with your current insurer, use its app. If you increase coverage, you’ll pay higher premiums for the current billing period.
Switching car insurance involves purchasing a new policy while your current one is still active. Once the new policy begins, cancel the old one to avoid a coverage lapse. You may receive a refund for any unused portion of the old policy.
How Much Car Insurance Coverage Do I Need?
Minimum car insurance requirements are typically set by your state. However, if you lease or finance a vehicle, full coverage is usually required. For car owners, choosing the right coverage can be more complex. To help, we’ve created a tool to determine how much car insurance is right for you.
Determine How Much Car Insurance You Need
Take our four-step quiz to learn the required and optimal level of car insurance for you.
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Vehicle Insurance Coverage: Bottom Line
Car insurance protects you from unexpected accidents on the road or at home, offering various options for peace of mind. To make the best choice, decide on your coverage level, research costs and providers and compare multiple quotes.
Auto Insurance Coverage: FAQ
Here are expert answers to frequently asked questions from the MoneyGeek team:
Does car insurance cover my rental car?
Most traditional car insurance policies cover most rental cars and your injuries in them as long as you have full coverage.
Does car insurance cover stolen cars?
Damage caused by your vehicle or to your vehicle when it's stolen are covered only when you have comprehensive insurance. This is even the case if you have left your keys in the car negligently.
Does car insurance cover your windshield and windows?
You're covered for all cases of damage to your windshield or windows if you have both collision and comprehensive insurance on your auto insurance policy.
Does car insurance cover weather?
Comprehensive insurance covers weather-related damage to your car, including hail, fire, wind, water and other natural disasters.
Does car insurance cover you for a hit-and-run on your parked car?
If your parked car is hit in a hit-and-run, collision insurance or the property damage liability portion of an uninsured/underinsured motorist policy can cover the damage.
Does car insurance cover you if your car is damaged by animals?
Comprehensive insurance covers your vehicle if it's damaged by a deer, rodent or other animals.
Does your car insurance cover car part repairs and replacements?
Collision or comprehensive insurance covers car parts like the engine, catalytic converter or tires if they're damaged or totaled in an accident. However, a car warranty is needed to cover breakdowns during normal use.
Does car insurance cover mechanical failures?
Unless a failure is related to an accident, car insurance doesn't cover mechanical failures.
Does car insurance cover lost keys?
Car insurance doesn’t cover lost keys. Coverage is available only if you purchase a key protection plan from your dealership.
Does car insurance cover vandalism?
Vandalism is covered under comprehensive insurance, which pays for non-collision damage to your vehicle.
Does car insurance cover medical bills?
Your medical bills are covered in an accident if your policy includes liability, PIP or MedPay coverages.
Does car insurance cover damage to private property?
Under collision car and/or property damage liability insurance, all damage you cause to private property is covered.
Does car insurance cover damage due to wear and tear?
Car insurance doesn't cover wear and tear, such as dents, scratches or peeling paint. These are typically covered under a dealership add-on warranty.
About Mark Fitzpatrick
Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.
Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!
Passionate about economics and insurance, he aims to promote transparency in financial topics and empower others to make confident money decisions.
sources
- Insurance Information Institute. "Background on: Compulsory Auto/Uninsured Motorists." Accessed February 18, 2025.