What Does Auto Insurance Cover?

Auto insurance is divided into two categories: obligatory and optional coverages, which cover different types of expenses.

Required coverages include state-mandated coverages as well as any insurance required by a lender or lessor, such as liability insurance, which covers expenses such as personal harm to others when you are at fault or vehicle damage. Collision and comprehensive insurance are optional coverages that cover the repair of an automobile you completely own, among other charges.

Learn how auto insurance policies must meet certain requirements and can be adapted to your specific needs.

What Does Auto Insurance Cover?

An auto insurance coverage consists of numerous types of safeguards. State laws compel drivers to acquire minimum insurance coverage, and lenders and leasing businesses typically require additional coverage for financed and leased cars.

Liability coverage

A conventional car insurance policy covers bodily injury and property damage liability. When you are at fault in an accident, bodily injury liability insurance can help pay the medical bills of the other driver and passengers. Property damage responsibility can help cover the costs of repairing or replacing the other driver's vehicle, as well as the repair of any damaged structures such as a fence or building.

States require car owners to have a minimum of bodily injury and property damage coverage, although the amounts vary. Here are three instances:

If the costs of an accident surpass your limits, your state's minimum liability car insurance requirements may not be sufficient to protect you financially. A professional insurance agent can help you estimate how much liability coverage you require. Furthermore, in no-fault states, each driver's insurance company is responsible for its insured's injuries, regardless of who is at blame.

Collision and comprehensive coverage

Collision coverage pays to repair or replace your vehicle if it is damaged in a covered traffic collision. If your car is destroyed by fire, theft, or another non-collision catastrophe, comprehensive coverage will help you repair or replace it. Similarly, this form of coverage might help pay for repairs to a cracked windshield or the replacement of a stolen vehicle.

These coverages are not required under state law. However, if you have a car loan or are leasing a vehicle, you will normally be obliged to maintain collision and comprehensive coverage until the loan or lease is paid off. If you decline these coverages, your lender could acquire them for you and charge you for the insurance.

Personal Injury Protection and Medical Payment Coverage

Depending on your state, your optional or statutory personal injury protection (PIP) may pay these costs, regardless of who is at blame.

• Medical and hospital costs: Typically up to a percentage or a limit.
• Wage Loss: Income Replacement
• Loss of services: Paying non family people to do work, such as housework
• Funeral expenses: Paying a portion of your funeral costs

No-fault insurance laws may mandate you to carry a minimum PIP coverage amount, such as $50,000 in New York.

Medical payments coverage, often known as med pay, can help cover medical and/or funeral expenses for you and your passengers, as well as deductibles and copayments not covered by your health insurance plan.

Uninsured and underinsured motorist coverage

If your automobile is damaged by a hit-and-run driver or a driver who does not have auto insurance, your uninsured motorist coverage may pay for the damage. This insurance covers medical bills for you and your passengers, as well as the cost of repairing your vehicle. If the at-fault driver does not have enough insurance to cover your injuries or vehicle damage, your underinsured motorist policy might assist make up the difference. 

This insurance is typically packaged and referred to as UM/UIM (uninsured/underinsured motorist) coverage. Some states require drivers to have minimum uninsured motorist coverage. 

What Does Auto Insurance Not Cover?

A regular automobile insurance policy does not cover every form of loss. Even a comprehensive coverage policy may not always give you the necessary protection. Typically, ordinary personal auto insurance coverage do not cover the following:

• Any difference between an insurance settlement and the car loan amount still owed
• A rental car while your car is being repaired following a covered accident, although in some states, you’re entitled to a rental car for a limited period if your vehicle was declared a total loss
• Mechanical breakdowns, roadside assistance, towing costs, and general wear and tear
• All-terrain, commercial, motorcycle, off-road, and recreational vehicles
• Cars driven for ride-sharing services such as Uber or Lyft or other business purposes
• Intentional damage
• Accidents while driving in Mexico or racing your car

Additional Car Insurance Coverage Options

Including optional coverages in your policy can improve your protection. Some insurers provide a vast choice of optional coverages, while others only offer a handful. Common optional auto insurance coverages include:

• Guaranteed auto protection (GAP) insurance: If you total your car, the insurance company will offer you a compensation based on its real cash value. This value may be less than the amount still owed to the lender. For example, the insurance company may offer a $15,000 settlement if you still owe the lender $18,000. Gap insurance can pay the $3,000 difference.
• Classic car insurance: While new automobiles depreciate quickly, antique, classic, and exotic vehicles can gain value over time. Classic car insurance allows you to negotiate the value of an automobile with the insurer. Following a covered loss, this sort of insurance might assist with the high cost of specialized repairs or restoration.
• Rental car reimbursement: If your car is damaged in a covered accident, rental car reimbursement coverage can help you pay for a rental car while yours is being repaired. If the other driver is at fault, they may offer you rental car coverage.
• Custom parts and equipment: Standard auto insurance coverage typically excludes cosmetic changes or equipment, such as custom wheels or a navigation system. Custom parts and equipment coverage can assist cover the cost of recovering your customizations after a covered loss.
• Rideshare or delivery driver coverage: If you work for a transportation or delivery firm, this coverage can assist protect you and your vehicle while the company's insurance does not cover you, such as while you wait for your next passenger or shipment.
• Roadside assistance: When you break down, roadside assistance coverage can help pay for flat tire repairs, fuel delivery, locksmith services, and towing.

What Type of Auto Insurance Do You Need?

The type of car insurance you need is determined by state laws, lenders, and your specific wants and requirements. State laws and lenders require you to carry specific types and amounts of coverage.

Most states' mandatory minimum bodily and property liability coverage does not provide adequate financial protection if the costs of an accident exceed your insurance coverage. Increasing your limitations helps to protect your investments. 

Comprehensive and collision coverage will help you repair and replace your automobile if it is damaged or stolen, especially if you are at fault. When the market value of your car falls to a few thousand dollars, you should generally cancel collision and comprehensive coverage. However, after paying off your car loan, you may want to consider eliminating collision and comprehensive coverage. 

Car owners who drive for delivery or ridesharing services can either add an endorsement to their existing auto insurance policy or purchase a standalone policy. If you frequently use your car for work, find out if you're covered by your employer's non owner auto insurance coverage. If your employer does not provide non owner coverage, see your insurance agent to determine whether you need to obtain commercial car insurance.