Car insurance covers medical bills and property damage after a car accident or other damage-causing event. Liability car insurance covers damage to others caused by the policyholder, while other types of auto insurance cover the policyholder’s own expenses, including medical bills and vehicle damage. Typically, car insurance policies do not cover expenses related to mechanical problems, wear-and-tear, or maintenance.
|Coverage Type||What It Covers|
|Bodily Injury Liability||Injuries to other people caused by the policyholder|
|Property Damage Liability||Damage to other people’s property caused by the policyholder|
|Uninsured Motorist||The policyholder’s injuries or damage to their property if a driver without insurance was at-fault|
|Underinsured Motorist||The policyholder’s injuries or damage to their property caused by a driver without enough insurance to pay for all the expenses|
|Personal Injury Protection (PIP)||Injuries to the policyholder after an accident regardless of who was at-fault, plus indirect expenses like lost wages|
|Medical Payments (MedPay)||Injuries to the policyholder after an accident regardless of who was at-fault|
|Collision||Damage to the policyholder’s car after an accident|
|Comprehensive||Damage to the policyholder’s car after something besides an accident, like vandalism or theft|
|Gap||The difference between a driver’s insurance settlement and the balance on their loan or lease after their car is totaled|
|New Car Replacement||Replacing a totaled car with a comparable new vehicle|
|Mechanical Breakdown||Failure of the major systems of the policyholder’s car|
|Roadside Assistance||Assistance for stranded drivers, such as battery replacement and fuel delivery|
|Rental Reimbursement||Costs for a rental car while the driver’s vehicle is being repaired after an accident|
|Rideshare||Supplemental coverage for rideshare drivers|
Bodily injury liability insurance pays for other people’s medical bills and lost wages after the policyholder causes an accident. It can also cover the victims’ pain and suffering, funeral costs, and the policyholder’s legal fees if they’re sued because of the accident. But liability insurance never covers the policyholder’s expenses.
Bodily injury liability insurance is required in most states as part of a liability insurance policy.
Learn more about bodily injury liability coverage.
Property damage liability insurance pays for other people’s property after a crash. Coverage includes damage to vehicles or stationary objects like houses and fences. Property damage liability coverage does not pay for damage to the policyholder’s property, though.
Liability insurance, which is required in most states, includes property damage liability coverage.
Learn more about property damage liability coverage.
Uninsured motorist coverage (UM) protects the policyholder from damage caused by a driver who does not have any auto insurance of their own. It is designed to replace the liability insurance another driver should have been equipped with. It is generally split into two types: bodily injury (for medical expenses) and property damage (for vehicle repairs).
Uninsured motorist coverage is required in 20 states and the District of Columbia, and it’s available in many others.
Learn more about uninsured motorist coverage.
Underinsured motorist coverage (UIM) applies if the other driver’s liability limits are not high enough to cover the cost of all the damage they caused. If your expenses exceed the at-fault driver’s policy limits, underinsured motorist coverage can handle the remaining bills to a certain extent.
Like uninsured motorist coverage, underinsured motorist insurance is required in some states and is usually at least an available option in most states.
Learn more about underinsured motorist coverage.
Personal injury protection (PIP) is a type of coverage that pays for the policyholder’s accident-related expenses like medical bills, legal fees, lost wages, and more, regardless of fault. PIP insurance is sometimes referred to as “no-fault insurance” since it is mostly required in no-fault states.
While PIP will cover indirect costs stemming from injuries, such as childcare expenses due to the accident, it does not cover vehicle damage or property damage. Learn more about what personal injury protection covers.
MedPay – or medical payments coverage – is insurance that covers the policyholder’s injuries after a car accident, regardless of who was responsible. It also covers injuries sustained by their passengers, as well as PIP or health insurance deductibles and copays. MedPay can even cover a policyholder if they are injured by another driver while cycling or walking.
MedPay never has a deductible, so for those with expensive health insurance copays or no health insurance at all, MedPay can make getting accident-related medical attention significantly easier.
Learn more about what MedPay covers.
Collision insurance pays to repair or replace a covered vehicle after an accident. Whether the crash was with another car, a tree, a fence, or another stationary object, collision insurance can help to protect the policyholder’s finances.
While collision insurance is not mandatory in any state, dealerships and lenders may require you to purchase it for a leased or financed vehicle.
Learn more about collision insurance.
Comprehensive insurance pays for damage caused by something besides an accident, such as theft, vandalism, or a natural disaster. Comprehensive can also cover damage caused by hitting an animal.
Like collision insurance, comprehensive insurance is not required in any state. However, if you lease or finance your vehicle, your lender may require you to have it.
Learn more about comprehensive insurance.
Gap insurance is a type of coverage that pays for the “gap” between what a totaled or stolen car is worth and how much is still owed on the owner’s loan or lease. Gap insurance is generally available from traditional car insurance companies as well as lenders and dealerships. Without gap insurance, drivers could be stuck making payments on a car that they can no longer drive.
Learn more about what gap insurance covers.
New car replacement is an optional type of coverage that pays the cost of a comparable replacement if your vehicle is totaled. New car replacement is usually only available for relatively new cars with low mileage.
Without new car replacement, the most a driver can be reimbursed for after an accident is the totaled car’s actual cash value, which is typically not enough to purchase a similar replacement vehicle.
Learn more about new car replacement insurance.
Mechanical breakdown insurance is a type of optional coverage that deals with repairs to mechanical issues unrelated to an accident or other catastrophic event. Mechanical breakdown insurance handles issues with most of the major systems in your car, like the engine and transmission.
While mechanical breakdown insurance is similar to an extended warranty or manufacturer warranty, it usually covers more than warranties do and is significantly cheaper.
Learn more about mechanical breakdown insurance.
Roadside assistance is an optional type of coverage that pays for towing, flat-tire changes, battery jump starts, and fuel delivery. It can also cover locksmith services and deliver new batteries to stranded drivers. Most roadside assistance plans cost a flat monthly or annual fee, and many plans include special perks like hotel and rental discounts.
Learn more about roadside assistance coverage.
Rental reimbursement coverage helps to pay for a rental car while the policyholder’s vehicle is being repaired after a covered scenario. Some rental reimbursement plans also include coverage for transportation fees like taxi fare and public transit costs. Typically, rental reimbursement insurance can only be used following an accident, not if your car is having routine maintenance or if you need a rental car while traveling.
Learn more about rental reimbursement insurance.
Rideshare insurance is a type of car insurance policy that provides coverage for the policyholder when they drive for a rideshare company, such as Lyft or Uber. Since rideshare companies typically only provide liability insurance for their drivers, rideshare insurance can increase their coverage and lower their deductibles.
Learn more about rideshare insurance.
When shopping for car insurance, it is easy to become overwhelmed by all the coverage options. Just remember that you need to buy all the coverage required by your state, plus fulfill any requirements set by your lender or lessor. Then, you can weigh the benefit versus the cost of optional coverage types. Overall, it’s a good rule of thumb to buy as much coverage as you can comfortably afford.
Key Takeaways About What Car Insurance Covers
- Liability car insurance is required for drivers in nearly every state, to cover damage they cause to others.
- The minimum required car insurance never covers damage to the policyholder’s car, and in some states, it does not cover the policyholder’s injuries.
- Dealerships and financial institutions usually require drivers to purchase insurance that covers damage to a leased or financed car.
- Car insurance protects drivers financially since it keeps them from being held personally responsible for their own and others’ expenses.