Are you shopping for car insurance and wondering what will be covered and what will not be covered? If yes, then this guide has all the answers.
A standard car insurance policy provides liability coverage, collision coverage, comprehensive coverage, uninsured and underinsured motorist coverage, personal injury protection and medical payments coverage. Also, there are several optional coverages such as gap coverage, rental reimbursement coverage, rideshare coverage, new car replacement coverage and auto glass coverage, among others.
In this guide, we will explore car insurance coverages, why you need car insurance, what is covered under a car insurance policy, the standard coverages, as well as the optional coverages. We will also answer some frequently asked questions on car insurance coverage.
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What is the Purpose of Car Insurance?
Car insurance helps to protect you against costs that you could incur if you damage another party’s property or cause bodily injuries with your car.
In addition, car insurance can also help to cover your vehicle’s repair or replacement costs, arising from damage caused by auto collision or from other perils such as falling objects, theft, animals, fire and natural disasters.
Without car insurance, you would have to cover all these costs from your own pocket. And if you don’t have the money to pay for these costs, you may be forced to sell some of your assets.
Furthermore, car insurance is a legal requirement in almost all states. If you are arrested while driving without car insurance, you may incur serious penalties such as:
- Suspended driver’s license
- Fines of up to $5,000
- Mandatory community service
- Suspended vehicle registration
- Vehicle impoundment
- Jail time
Simply put, car insurance will give you peace of mind knowing that if you are involved in a car accident, you will not have to cover the resulting expenses from your own pocket. Furthermore, purchasing car insurance means you don’t have to worry about legal issues every time you are on the road.
What Does Car Insurance Cover?
A typical car insurance policy features different components. And as the policyholder, you have the freedom to choose the amount of coverage that you want to receive, on top of the minimum amount of coverage mandated by your state.
So, what does car insurance cover? Here are some of the most common types of car insurance coverages that come with a standard car insurance policy.
Bodily Injury Liability Coverage
Also known as bodily injury liability insurance, this coverage will help to pay the other party’s medical costs and other expenses if you cause a car accident that leads to injuries. If you are the at-fault driver during a car accident, your bodily injury liability coverage will pay for:
This component of your bodily injury liability coverage will help to cover the other party’s medical expenses if you cause a car accident. The medical expenses may include things like:
- Medications and treatments
- Doctor’s visits
- Recovery wheelchairs
There is always a chance that the other party may file a lawsuit against you after you’ve caused a car accident. Your bodily injury liability insurance will also help to take care of the legal fees.
Pain and Suffering
After a car accident, the other party may sometimes decide to seek payment for pain, emotional suffering and distress, due to the injuries suffering. Bodily injury liability coverage will also help to compensate the individual for their pain and suffering.
If the other party suffers serious injuries that prevent them from engaging in productive work, this coverage will help to cover their lost income.
In the unfortunate situation where you cause a car accident that leads to death, your bodily injury liability coverage will help to cover the other party’s funeral costs, up to your policy limit.
How Much Bodily Injury Liability Coverage Should You Purchase?
Bodily injury liability coverage comes with a per-person limit and a per-accident limit. Each state has minimum requirements for each limit.
Therefore, when you are purchasing this coverage, you have the option of sticking with your state’s base requirements or increasing your limits based on your needs.
Property Damage Liability Coverage
This coverage will help to cover the repair or replacement costs if you cause a car accident that destroys another person’s property. It will cover the repair or replacement costs for damaged:
Just like bodily injury liability coverage, each state has base requirements on property damage liability coverage.
For instance, if you live in Texas, the base requirement for property damage liability insurance is $25,000 while in California the minimum coverage you should have is $5,000.
Collision coverage is a type of car insurance coverage, which helps to cover your vehicle’s repair or replacement costs if it’s damaged in a car accident. Collision coverage will help to repair or replace your car if it’s damaged by:
- A collision with another vehicle
- A collision with a stationary object like a tree or fence
- A single-car accident such as falling over or rolling
Collision coverage comes with a deductible. A deductible is the amount of money you are required to pay out of pocket before your collision coverage kicks in. You can choose a $500, $1,000 or $1,500 deductible, depending on your preference.
Collision coverage doesn’t cover car damage caused by theft, vandalism, fire, falling objects or natural disasters like tornadoes and hurricanes.
And this is where comprehensive car insurance coverage comes in. Your comprehensive car insurance will pay for damage caused by:
- Natural disasters
- Civil disturbances like riots
- Falling objects
- Hitting a wild animal
Similar to collision insurance, comprehensive car insurance also comes with a deductible, which you will have to pay first before your insurance coverage kicks in.
Uninsured and Underinsured Motorist Coverage
If you are involved in a car accident and the at-fault driver doesn't have adequate car insurance or doesn’t have any car insurance at all, then this coverage will help to cover your costs. It will pay for:
- Repairs to your car
- Medical bills
- Pain and suffering
- Lost wages
This coverage will also help to cover your expenses if you are involved in a hit-and-run car accident or the other party is driving a stolen vehicle.
Fourteen jurisdictions require underinsured motorist coverage while 22 states mandate uninsured motorist coverage.
Personal Injury Protection
Also known as no-fault insurance or PIP coverage, personal injury protection coverage will cover your medical expenses and associated costs, regardless of whether you are at fault or not. It covers:
- Medical bills
- Lost wages
- Health insurance deductibles
- Essential services like cleaning, child care and grocery shopping
- Funeral expenses
What separates PIP coverage from other car insurance coverages is who is at fault for the accident.
For instance, liability coverage will only pay for your expenses, if the other driver is at fault for the accident. Personal injury protection, on the other hand, will cover your expenses regardless of whether you are the at-fault drive or not.
Medical Expenses Coverage
Also called medical payments coverage, this car insurance coverage will help to cover your medical expenses, if you suffer injuries during a car accident, regardless of who is at fault.
Medical payments coverage or MedPay will help to pay for various medical-related expenses arising from injuries sustained during a car accident such as:
- Hospital or doctor visits
- Health insurance deductibles
- X-rays, surgeries and prostheses
- Dental care
- EMT and ambulance fees
- Professional nursing and home care services
Medical payments coverage will cover everyone in your car, at the time of the accident. It will also pay for your medical expenses if you are injured while traveling as a passenger in another person’s car or you are hit by a vehicle while walking as a pedestrian.
Unlike PIP coverage, medical payments coverage will not cover lost wages, in a situation where you are forced to miss work due to injuries sustained during a car accident.
Additional Coverage Options
Apart from the standard coverage options, most car insurance companies also offer several optional coverages, which you can use to extend your car insurance policy. Some of the optional coverages that you can purchase include:
Gap insurance is a type of car insurance coverage, designed to help you pay off your car loan, if your car is stolen or totaled, and you owe more than its depreciated value.
Also known as lease gap coverage or loan gap coverage, this insurance will cover the gap between what you still owe on your vehicle and its depreciated value.
If you are financing or leasing a new car, then it’s highly likely that your lender will require you to purchase this coverage, on top of your comprehensive coverage and collision coverage.
Rental Car Insurance Coverage
This coverage will cover the costs of a rental car, as your shop is being repaired for a covered car insurance claim. Rental car coverage will also reimburse your expenses if you opt to use a taxi or public transportation means.
Rental car insurance coverage also comes with coverage limits, which is the maximum amount your insurer will pay for a covered claim.
For instance, your rental car reimbursement coverage may provide up to $50 per day, for 30 days. If you exceed this limit, then you will have to cover the difference out of pocket.
Auto Glass Insurance
Auto glass insurance coverage will help to pay the cost of replacing or repairing a damaged windshield or glass.
This coverage comes in handy if you are stranded on the road, due to a flat tire, or you’ve run out of gas. Roadside assistance covers:
- Changing a flat tire
- Towing up to your limits
- Fuel delivery
- Battery jump-starting
- Fuel delivery services
With this coverage, you will be paying a monthly or yearly fee, based on your plan. You will then be receiving roadside assistance services, without incurring additional costs or at discounted rates.
If you drive for rideshare companies like Uber or Lyft, then your personal car insurance coverage will not cover you if you are involved in an accident when your app is active.
On the other hand, your rideshare company’s insurance will not cover you, if your app is on but you are yet to pick a customer.
And this is where rideshare insurance comes in. It helps to fill the coverage gap between your personal car insurance coverage and your rideshare company’s auto insurance coverage.
New Car Replacement Insurance
If your new car is totaled in an accident or stolen, then your collision insurance and comprehensive insurance will replace it, up to its actual cash value.
But considering that new cars lose value quite fast, the money you receive from your insurer may not be enough to replace your new car.
Fortunately, new car replacement insurance can help to ease the financial strain. It will pay to replace your totaled or stolen car, with a new car of a similar make and model.
Car Insurance FAQs
Does Car Insurance Cover Theft?
Yes, car insurance also covers theft. However, you need to have comprehensive coverage on your car insurance policy, for you to be reimbursed for a stolen car. The reimbursement you will receive will depend on the actual cash value of your car or it’s fair market value, at the time it’s stolen.
Does Car Insurance Cover Stolen Items?
No, car insurance doesn’t cover personal stolen items. So, if someone breaks into your car and steals your phone, laptop, tablet, jewelry, purse, wallet or any other personal item, then your insurer will not reimburse you, even if you have comprehensive car insurance.
Does Car Insurance Cover Repairs?
Yes, your car insurance policy will help to cover repairs. Repairs are usually covered under the collision and comprehensive coverages. For example, if you collide with another car, the repairs will be covered under collision coverage. And if your car is damaged by a hailstorm, then the repairs will be covered under comprehensive car insurance. However, car insurance will not pay for repairs occasioned by normal wear and tear.
Does Car Insurance Cover Rental Cars?
Yes, if you have purchased rental car insurance coverage, which is usually offered as an optional coverage. However, you will only be reimbursed up to your coverage limits. For example, if your rental car coverage comes with $50 per day limit for up to 30 days, then you will only be reimbursed for those limits. If you exceed the coverage limits, you will be forced to pay for the difference out of pocket.
Does Car Insurance Go Down At 25?
Yes. At 25, most auto insurers will lower your car insurance premiums. However, this is done on a case-by-case basis. If you have a clean driving record by the time you attain the age of 25, there is a high chance your insurer will review your premiums downward. On the other hand, if your driving record shows a history of accidents or serious moving violations, then your premiums will remain high, even when you attain the age of 25.
Does Car Insurance Cover the Car or the Driver?
Your car insurance policy will follow your car. However, coverages like PIP and MedPay will follow both the driver and the car. For example, if your car is rear-ended by another vehicle when a member of your family was driving it, then your collision coverage will pay for the repairs. On the other hand, if you were hit when walking as a pedestrian, then the PIP coverage on your car insurance policy will cover your medical fees and other expenses such as lost wages due to injuries sustained.
Does Car Insurance Cover Vandalism?
Yes, car insurance also covers vandalism, which falls under comprehensive car insurance coverage. You may have parked your car outside your place of work and someone breaks in and damages the upholstery or steals some parts. Your insurer will cover the costs of repairing that damage, if you have purchased comprehensive car insurance.
Does Car Insurance Cover Windshield Replacement?
Yes, the comprehensive coverage under your car insurance policy will help to replace or repair your windshield, if it’s damaged under a covered loss. A windshield specialist will assess the extent of the damage and recommend whether it’s to be repaired or replaced. Whether you will pay the deductible or not will depend on the state where you live and your policy.
Is car insurance mandatory?
Yes, car insurance is mandatory in almost all states, apart from Virginia and New Hampshire. Most states will require you to have liability coverage, uninsured and underinsured motorist coverage, personal injury protection coverage and medical payments coverage. Collision coverage and comprehensive coverage are optional coverages, which you may decide to add to your car insurance policy.
About THE AUTHOR
I've spent many years selling cars, working with auto detailers, mechanics, dealership service teams, quoting and researching car insurance, modding my own cars, and much more.Read More About Charles Redding