Car insurance helps pay for repairing your car after a covered loss, such as a car accident. It’s a type of property and casualty (P&C) insurance that provides financial protection if you’re in a car accident, if your vehicle is damaged in a non-collision event (such as a falling tree or hail), or if your car is stolen.
In exchange for a premium – the amount of money you pay for your policy – the insurer will pay for covered expenses up to applicable limits.
Auto insurance works on indemnity, ensuring the policyholder will be made whole or returned to their original financial position. If your car suffers damage or you are sued over an accident you caused, your insurance policy could help pay for repairs, replacements, medical bills, and any other expenses for which you are deemed liable.
Every policy is based on coverage limits, or the maximum amount your insurer will pay on a claim. Some types of coverage also carry deductibles, or the amount you must pay before the insurer covers the remaining costs.
Several types of car insurance are available, so you can customize a policy to get the insurance coverage you need.
Types of Car Insurance Coverage
Since car insurance coverages can function differently between tort states and no-fault states, it’s important to discuss specifics with a licensed insurance agent or an insurance company.
Liability insurance
Liability coverage pays for costs associated with an accident for which you’re found legally at fault. Liability insurance generally includes two types of coverage:
Bodily injury: This covers the expenses related to injuries or death for others (e.g., another driver, their passengers, or a pedestrian) when you are at fault.
Property damage: This covers the expenses for repair or replacement of others’ property (e.g., fencing, a home, etc.) you damage when operating your vehicle.
Most states require drivers to carry a minimum amount of liability coverage before they can register and operate a vehicle in that state. You can find out how much liability coverage you need by visiting your state’s Department of Motor Vehicles (DMV) or by visiting our Auto Insurance by State guide.
Learn more about how liability car insurance works.
Uninsured motorist coverage
Uninsured motorist (UM) coverage provides financial protection if you are hurt in an accident and the other driver doesn’t have car insurance. Depending on where you live, this coverage may extend to cover property damage. Uninsured motorist coverage also pays if you are the victim of a hit-and-run. Your state may require you to carry a minimum amount of uninsured motorist coverage.
You may also want to consider underinsured motorist (UIM) coverage, which typically pays the difference between your expenses and the policy limit of the at-fault driver when their limits are insufficient. However, in some states, underinsured motorist coverage is not applicable unless your underinsured motorist limits are greater than the liability limits of the other driver.
Learn more about uninsured motorist coverage.
Personal injury protection (PIP)
This no-fault insurance coverage pays the medical expenses for you or your passengers if you are injured in an accident, regardless of who is at fault. Personal injury protection (PIP) may also apply if you’re riding a bike or walking and are hit by a vehicle.
In some cases, PIP coverage may reimburse you for lost wages and expenses for tasks you can’t perform while recovering, such as house cleaning.
PIP is required in some states and is optional in some others. As always, check with your state’s DMV to determine if PIP is available in your state and if you are required to carry it.
Learn more about how PIP insurance works.
Medical payments coverage (MedPay)
Like personal injury protection, medical payments (MedPay) coverage pays the medical bills for you and your passengers for injuries sustained in a car accident, regardless of who is at fault. However, unlike PIP coverage, MedPay does not cover any additional or related expenses, like lost wages.
MedPay is required in some states and optional in others. It is not available in all states.
Collision coverage
Collision coverage pays for repairs if your car is damaged during a car accident or if it collides with another object like a building or tree, even if you’re at fault. It may also cover damage from potholes.
Learn more about how collision car insurance works.
Comprehensive coverage
Comprehensive coverage, or other than collision coverage, pays for damage to your car that occurs during an event that’s not a car accident or collision with another object. Examples of covered losses include fire damage, hail damage, damage from falling objects, a cracked or shattered windshield, vandalism, or damage from an animal. It also reimburses you if your car is stolen.
Learn more about how comprehensive car insurance works.
Insurance Extras
To ensure you have the coverage you need, many auto insurance companies offer optional insurance add-ons for purchase, including:
Roadside assistance: If you have a flat tire, need a tow, or are locked out of your car, this coverage reimburses you for services to get you moving again.
New car replacement: This type of coverage will pay to replace a totaled vehicle with a new one of the same make and model. Coverage is typically limited to vehicles that are relatively new – two years old, for example – but the cutoff varies by insurer.
Mechanical breakdown insurance: If your car breaks down and your manufacturer’s warranty doesn’t cover the repairs, this coverage will.
Rental reimbursement: This add-on will cover the cost of a rental vehicle while your car is undergoing repairs during a covered claim. It does not apply when your car is in the shop for routine maintenance.
Rideshare insurance: If you drive for a ridesharing company, this insurance provides coverage if you’re in an accident while working. Personal auto insurance policies typically exclude coverage for any business exposures.
Gap insurance: If your car is deemed “totaled” following an accident and you owe more on your car loan or lease than the insurance company will pay, gap insurance will pay the difference.
What Car Insurance Doesn’t Cover
There are some things car insurance won’t cover – even if you have a comprehensive policy.
Personal property inside the car. If you leave cash, jewelry, electronics or other valuables in your car and they’re stolen, don’t expect your car insurance provider to cover it (although your homeowners or renters insurance might).
Injury to a pet inside the car. Unfortunately, if you’re driving with Fido and they’re hurt or injured in an accident, your car insurance won’t be paying the vet bills.
Normal wear and tear. Car insurance doesn’t typically cover maintenance and replacement costs, such as oil changes or new spark plugs.
Modifications, accessories, and aftermarket add-ons. If you’ve added a spoiler, rims, or made other modifications, your insurance won’t pay to replace them (unless you’ve added a special rider to your policy).
Intentional damage. Don’t damage your car on purpose, hoping for an insurance payout – it won’t be covered, and you could even lose your policy.
Criminal use. Car insurance won’t cover an accident or other damage that occurs while using the car for criminal activity.
Racing use. You also shouldn’t expect your policy to cover damage incurred while drag racing. If you want to participate on the racetrack, look into motorsports policies.
Ridesharing. Drivers who use their car for Uber, Lyft, or food delivery may find their insurance won’t cover accidents that occur when they’re “on the clock.” However, some insurers offer this type of coverage as an add-on.
Unlicensed or excluded drivers. If a child, an unlicensed driver, or someone who’s been specifically excluded from your policy (like a disgruntled roommate) uses your car and crashes it, don’t expect your insurance company to pay for repairs.
How Do I File a Car Insurance Claim?
Filing a car insurance claim can be overwhelming, and each insurance company has their own process and tools in place. However, there are some things you can do to make the process easier.
Immediately call your car insurance agent. Explain what happened, and find out what your policy covers as well as any deadlines for filing a claim.
Gather required information. Depending on the nature of your claim, you may need to include a police report, photos of the damage, the names and information of anyone involved in the accident, and a repair estimate. Your insurer should be able to provide you with a list of information or documents you need to include.
File a claim. You can usually submit an official claim over the phone or via your insurance company’s website or mobile app.
Ask about a rental car. If your policy covers a rental car, find out the process for getting the car or reimbursement.
Does Car Insurance Cover Theft?
Car insurance can cover theft, but it has to be the right kind of insurance. To learn more, we spoke to Edward L. Blais, J.D., C.I.C., C.P.I.A., President of Blais Insurance in Lincoln, R.I. He helped us get a sense of what types of policies cover car theft. We also threw a series of scenarios at the car insurance expert.
“When it comes to an auto policy,” says Blais, “Theft is theft.” So the answer is yes, but it’s not quite a blanket “yes.”
In Rhode Island, theft is covered under something called “Other Than Collision.” “It used to be called comprehensive,” says Blais. Even before that, it was called Fire and Theft. In most other states, it is still called “Comprehensive.”
The only way theft would not be covered under this plan is if it could be proven that the policyholder was somehow involved in the theft of the vehicle. That’s straight-up fraud.
Typical things that comprehensive insurance covers include “Missiles, falling objects, theft, larceny, wind storm (sandblast), contact with bird or animal, mischief, fire, explosion, earthquake …” Blais says. These generally constitute your typical “Act of God” scenarios.
It’s important to note that this comprehensive level of coverage is above and beyond your basic liability insurance.
What happens when your car is broken into?
So you walk out to your car in the morning, and your car is still there, but the window is broken. Maybe you own a vehicle with a manual transmission and the thieves couldn’t drive stick, so they went after your belongings instead.
Once again, things get tricky. It depends what those things were, where they were located in the car, and how they were used by the owner.
If you had valuables in the car, such as cell phones, CDs, a purse, etc., these items are covered under the personal property section of your homeowners insurance, condo insurance, or renters insurance.
But say you have an advanced digital camera with multiple lenses (which can get quite expensive), and they are stolen from your trunk. If it turns out you use that equipment for work-related purposes, they would be covered under a commercial property policy or a special scheduled policy. Once again – special cases require a special insurance policy.
What if you have installed aftermarket parts and they are stolen?
One of the great things about car ownership is the ability to customize and personalize your ride. From specialty sound equipment to aftermarket wheels and engine upgrades, there are seemingly endless ways to modify your vehicle. But just because these parts are now on your car, it doesn’t mean they are covered together under the same policy.
“Your standard stereo is covered under the auto policy if it is stolen in the middle of the night,” says Blais. “And even many aftermarket units are covered.”
The rationale is that, in theory, most late-model cars have sophisticated stereo systems, and even the aftermarket units are on-par with the stock ones.
But if you are using an adapter connected to a portable music device, like an old iPod, that’s covered under homeowners insurance.
“If you were to take the stock wheels off the car and replace them with $5,000 wheels and tires,” explained Blais, “You won’t get comped, even under the most robust policy.”
The only way to recover the value of the wheels is if you contact the auto insurance company to write special coverage. Otherwise, you will only be compensated for the value of the stock wheels and tires.