Car Insurance Coverage

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Updated: June 24, 2025

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Key Takeaways

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There are six main types of car insurance coverage, including liability, comprehensive, collision, Medpay, PIP, and uninsured/underinsured coverage.

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In addition to standard coverage options, you can purchase add-on benefits such as roadside assistance, gap insurance and more to supplement your plan.

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How much car insurance coverage you need depends on state regulations, your financial situation, driving habits and your vehicle.

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Ensure you're getting the best rate for your auto insurance. Compare quotes from the top insurance companies.

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What Does Car Insurance Cover?

Car insurance, or auto insurance, is a type of property and casualty policy that covers damage to vehicles and injuries to people involved in an accident. It transfers financial risk from you to an insurance company; in exchange for regular premium payments, your insurer pays for covered losses up to your policy limits. Your car insurance contract includes coverage limits (the maximum amount paid), deductibles (what you pay first) and specific terms defining when coverage applies. Car insurance coverage typically pays for medical bills, lost wages, legal costs, vehicle repairs or replacements and damage from natural disasters or animals.

However, auto insurance coverage doesn't cover wear and tear, maintenance or mechanical breakdowns. Standard policies also exclude intentional damage, illegal activities and business use without proper coverage.

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:

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    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:

    • 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.

    When you need it: Required in most states. Included in auto insurance policies by default.

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    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. Collision works with comprehensive coverage, called "full coverage" when added to liability insurance.

    When you need it: Required if you finance or lease your vehicle. Consider dropping collision on older cars worth less than 10 times your deductible, since you'll pay more in premiums than you'd receive in a claim.

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    Comprehensive insurance

    Comprehensive insurance covers damage to your vehicle in case of theft, vandalism, weather-related damage and other natural 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.

    When you need it: Required for financed and leased vehicles. Valuable for newer cars or if you live in areas with severe weather, high crime rates or lots of wildlife.

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    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.

    When you need it: Required in many states and highly recommended everywhere else.

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    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.

    When you need it: Useful if you don't have health insurance or have high deductibles. Also covers passengers who might not have their own health coverage.

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    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 offer it as an optional add-on.

    When you need it: Required in no-fault states where PIP replaces the right to sue for minor injuries. In optional states, consider PIP if you want broader injury protection than MedPay provides, especially for lost wages coverage.

Types of Car Insurance Coverage Add-ons

In addition to the 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

Nonstandard Types of Car Insurance Coverage

Separate from other standard car insurance coverage, insurers offer these optional policies:

Nonstandard Coverage Option
Details

Classic car insurance

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.

Pay-per-mile car insurance

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.

Non-owner car insurance

Provides liability coverage for drivers who don't own a car but drive often

Rental car insurance

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.

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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. 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.

    Detailed documentation steps:

    • Take photos of all vehicles involved from multiple angles
    • Capture damage to property, street signs or barriers
    • Document the accident scene, including traffic signals and road conditions
    • Get contact information from all drivers, passengers and witnesses
    • Note the time, date, weather conditions and exact location
    • Don't admit fault or discuss details beyond basic facts
  2. 2

    Prepare documentation

    Gather all necessary documents and information before filing your claim. Having everything organized speeds up the process and helps ensure you don't miss important details that could affect your settlement.

    Required documentation checklist:

    • Police report number and copy when available
    • Photos and videos of the scene and damage
    • Insurance information from all parties involved
    • Driver's license numbers from all drivers
    • Medical records if injuries occurred
    • Repair estimates from licensed shops
    • Receipts for towing, rental cars and other expenses
    • Witness contact information and statements
  3. 3

    File a claim

    Call your insurer first at the number on your car's insurance card as soon as possible. Most insurers have 24/7 claim reporting hotlines. Also, manage your claim through your insurer's mobile app or website to make the process simpler.

    Filing process:

    • Call within 24 hours of the incident (sooner is better)
    • Provide your policy number and basic incident details
    • Answer questions about what happened without speculating
    • Get your claim number and adjuster's contact information
    • Schedule a vehicle inspection if needed
    • Keep detailed records of all conversations and correspondence
  4. 4

    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.

    Typical timeline expectations:

    • Initial contact: Adjuster assigned within 1 to 2 business days
    • Vehicle inspection: Scheduled within 3 to 5 business days
    • Damage assessment: Completed within 5 to 7 business days after inspection
    • Settlement offer: Provided within 10 to 15 business days for straightforward claims
    • Payment processing: 3 to 5 business days after settlement agreement
    • Complex claims: May take 30 to 60 days or longer depending on investigation needs
  5. 5

    Know your dispute resolution options

    If you disagree with your insurer's decision or settlement offer, you have several options:

    • Internal dispute process: Request a claim review from your adjuster's supervisor. Ask for a second opinion or independent appraisal. Escalate to the insurance company's customer service department. File a formal complaint through the insurer's internal process.
    • External dispute resolution: Contact your state insurance department to file a complaint. Consider hiring a public adjuster to represent your interests. Pursue mediation through your state's insurance dispute program. Consult with an attorney for potential legal action if the claim value justifies it.
    • Timeline for disputes: Most internal reviews take 15-30 days, while state insurance department investigations can take 30-90 days. Keep detailed records of all communications and continue documenting your damage throughout the dispute process.

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 Car Insurance Coverage Works: Real World Scenarios

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    Scenario 1: Rear-End Collision You Cause

    Sarah rear-ends another car while texting, causing $8,000 in damage to the other vehicle and $3,500 to her own car. The other driver has $2,000 in medical bills.

    Coverage response: Her liability insurance covers the $8,000 property damage and $2,000 medical bills for the other driver. Her collision coverage pays $2,500 for her car repairs ($3,500 minus her $1,000 deductible). Total out-of-pocket: $1,000 deductible

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    Scenario 2: Hit by an Uninsured Driver

    Mike's car sustains $12,000 in damage when an uninsured driver runs a red light. Mike has $5,000 in medical expenses.

    Coverage response: His uninsured motorist property damage covers the $12,000 vehicle damage. His uninsured motorist bodily injury pays his $5,000 medical bills. Total out-of-pocket: $0 (assuming no deductible on UM coverage)

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.

Compare Auto Insurance Rates

Ensure you're getting the best rate for your auto insurance. Compare quotes from the top insurance companies.

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Auto Insurance Coverage: FAQ

Here are expert answers to frequently asked questions from the MoneyGeek team:

Does car insurance cover my rental car?

Does car insurance cover stolen cars?

Does car insurance cover your windshield and windows?

Does car insurance cover weather?

Does car insurance cover you for a hit-and-run on your parked car?

Does car insurance cover you if your car is damaged by animals?

Does your car insurance cover car part repairs and replacements?

Does car insurance cover mechanical failures?

Does car insurance cover lost keys?

Does car insurance cover vandalism?

Does car insurance cover medical bills?

Does car insurance cover damage to private property?

Does car insurance cover damage due to wear and tear?

Auto Insurance Coverage: Related Articles

About Mark Fitzpatrick

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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.

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