Car insurance typically pays for injuries and property damage you cause, but additional coverage options may be available.
Updated Mar 13, 2023 · 3 min read Written by Drew Gula Lead Writer Drew Gula
Lead Writer | Auto insurance
Drew Gula is a NerdWallet authority on auto insurance. He previously worked as the senior content editor at Soundstripe and as the senior writer in Liberty University's marketing department. Drew is also a published author. He is based in Nashville, Tenn.
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Assigning Editor | Auto insurance, home insurance, other insurance
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Most auto policies include several types of car insurance coverage, and each is designed to pay for different expenses that might come up after an accident. For example, one part of your policy covers repairs for your own vehicle, while another pays for damage you cause to another driver’s car.
Each type of coverage also has a limit, the maximum amount your policy will pay after an accident. While you can raise or lower coverage amounts for some insurance types on your policy, others are based on the value of your car.
Knowing what car insurance covers can help you pick the coverage you need and avoid paying for the stuff you don't.
Car insurance is financial protection for you after an accident. It can pay for things like medical bills, property damage and expenses that you could be held financially responsible for after a car crash. If you cause an accident, your insurance policy would cover the property damage and medical bills of other drivers involved, up to your policy limits; if you didn’t have car insurance, you’d be required to cover all these costs out of your own pocket.
Almost every state requires a minimum amount of auto insurance to drive legally in the state, and that requirement typically includes liability insurance. But most insurance companies offer additional coverage types that aren’t required but can help in a variety of situations. For example, comprehensive insurance is a type of coverage that pays out if your vehicle is totaled in a flood or wildfire, but it is typically optional to have.
Since auto insurance helps with the financial burden after an accident, having optional coverage types on your policy can decrease the amount you’re responsible to pay in the event of a crash. However, adding more coverage types means your policy will cost more. That’s why it’s valuable to understand what car insurance covers before you purchase a policy or submit a claim.
Here are some of the most common scenarios that each type of insurance will cover:
Required car insurance coverage . Each state has minimum car insurance requirements, so you’ll want to check what you need in your state. (However, drivers in New Hampshire and Virginia aren’t required to buy coverage.) Liability insurance , which pays for expenses due to an accident that you cause, is the minimum required coverage in every state. This covers medical expenses for the other driver, as well as property damage, but not your own vehicle.
Accidents that don’t involve another driver . It’s possible that you’ll need to submit an insurance claim for damage to your own car after a collision with something other than another vehicle. Collision insurance covers a wide variety of incidents, like hitting a fence or utility pole, as well as rolling your vehicle. Collision insurance also covers damage to your vehicle caused by hitting another car.
Natural disasters . Some things that can damage your vehicle are out of your control, and comprehensive insurance helps pay for those expenses. Comprehensive insurance covers damage caused by Mother Nature (hail, flooding, tornado, etc.) and her minions (hitting a deer, groundhog, bison, etc.). It also covers vandalism, theft and even falling objects.
Extended medical coverage . Medical payments coverage , or MedPay, covers your own medical expenses after an accident no matter who is at fault. You may also be required to buy personal injury protection , or PIP. This type of coverage pays for your own medical expenses after an accident, as well as lost wages or funeral expenses if they are needed.
Insufficient car insurance coverage from the other driver . Uninsured motorist coverage and underinsured motorist coverage both pay for damage caused by drivers without enough car insurance to pay for your medical or repair bills. Uninsured motorist coverage applies when the other driver has no insurance; underinsured motorist coverage helps when the other driver’s policy limits don’t completely cover the cost of the accident.
Money you still owe on your vehicle . Car costs and interest rates can make it hard to pay off your loan. So what happens if you damage or even total a vehicle you still owe money on? Gap insurance pays the difference between what your car is worth and the amount you owe on it. (You may also be required to buy gap insurance if you are leasing a vehicle.)
Keep track of the amount you owe on your vehicle and its current market value. Once you owe less than the vehicle is worth, NerdWallet recommends dropping gap insurance from your policy. You could even use that money to pay off your vehicle faster.
Your insurance provider is responsible for covering a claim, but every driver's situation is unique. That's why it's your responsibility to make sure you have the coverage you need.
After reading over the list in the previous section, you might have noticed there are a lot of situations where car insurance helps if you signed up for additional coverage only. Here are a few examples of more scenarios that your auto insurance might cover:
The cost of a rental car if your vehicle breaks down. Roadside assistance , including towing services. Driving for a rideshare service like Lyft or Uber. Damage to modified or custom parts you added to your vehicle. Using your vehicle for commercial use or business purposes.
There are a lot of things that your car insurance does cover, especially if you opt into a few of these additional coverage types. But even if you include every available coverage in your policy, there will still be certain things that won’t be covered by your insurance.
Here are a few things car insurance policies typically don't cover:
Exceeding your policy limits. In most cases, your insurance isn’t going to cover injuries or property damage you cause that exceeds your liability coverage limits.
General maintenance for your vehicle like oil changes and mechanical repairs usually aren't covered by auto insurance policies.
Personal items that are damaged in a wreck or stolen from your vehicle aren't covered by your car insurance.
If someone breaks into your car and steals a laptop, briefcase, backpack or purse, these items may be covered by your homeowners insurance or renters insurance . These policies would also cover personal items inside your car that were destroyed because of a wreck.
Damage from previous owners. If you purchase a used vehicle and discover that it needs some repairs, you’ll be responsible for covering those expenses.
Electrical wear and tear . Insurance policies might cover electrical repairs in some situations — mainly if they are caused by an accident. But that coverage typically excludes wear and tear.
Intentional damage . Your insurance won’t cover any damage you cause to property or people on purpose. However, a policy with comprehensive coverage may cover intentional vandalism done to your car by someone else.
Figuring out what your car insurance doesn’t cover should give you an idea of the situations where you will be solely responsible for bills. However, knowing what your car insurance covers can actually help you decide which types of auto insurance make sense for you.
And with that knowledge, you can compare car insurance rates between providers to make sure you’re getting the best possible deal for the coverage types you need.
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Drew Gula is a NerdWallet authority on auto insurance. He previously worked as the senior content editor at Soundstripe and as the senior writer in Liberty University's marketing department. Drew is also a published author. He is based in Nashville, Tenn. See full bio.
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