The four types of coverage and what each one does
Car insurance policies contain separate coverages, and each one pays for different things. The two main categories are liability (which pays for damage you cause to someone else) and collision and comprehensive (which pay for damage to your own car). Most states require liability. Collision and comprehensive are optional but are usually required by lenders if you have a loan or lease on the vehicle.
Understanding what each coverage pays for matters because you will need to know which one applies when you file a claim. A fender bender, a tree falling on your car, theft, and hitting a deer all trigger different coverages — and some may not be covered at all depending on what you chose when you bought the policy.
Key Takeaways
- Liability coverage pays for injuries and property damage you cause to other people, but not damage to your own vehicle.
- Collision coverage pays for damage to your car from hitting another vehicle or object, regardless of who was at fault.
- Comprehensive coverage pays for damage from theft, weather, vandalism, and animal strikes, but not from collisions.
- Most policies have a deductible — the amount you pay out of pocket before insurance pays — and this applies separately to collision and comprehensive claims.
- What is not covered (exclusions) varies by policy, so reading your declarations page and policy document tells you exactly what your money is paying for.
Liability coverage: paying for damage you cause to others
Liability coverage has two parts: bodily injury liability and property damage liability. Bodily injury liability pays medical bills, lost wages, and pain-and-suffering damages if you injure someone in an at-fault accident. Property damage liability pays to repair or replace the other person's vehicle or property you damaged.
Every state sets a minimum liability limit you must carry. These minimums are written as three numbers — for example, 25/50/25 means $25,000 per person for bodily injury, $50,000 total per accident for bodily injury, and $25,000 for property damage. If you cause an accident that exceeds your limits, you are personally responsible for the rest. Liability does not pay for your own injuries or your own car damage.
Liability also covers you if you are driving someone else's car with permission, and it covers household members who drive your car with permission. It does not cover someone driving your car without permission, and it does not cover you if you are driving someone else's car without permission.
Collision coverage: paying for damage when you hit something
Collision coverage pays to repair or replace your car if you hit another vehicle, a telephone pole, a guardrail, a ditch, or any other object. It pays regardless of who was at fault. If you hit a parked car and drive away, your collision coverage pays for your damage (though you may face legal consequences for leaving the scene). If someone hits you and is uninsured, your collision coverage still pays for your car.
Collision claims are subject to a deductible, which is the amount you pay before insurance pays the rest. Common deductibles are $250, $500, $1,000, and $2,500. If you have a $500 deductible and your repair bill is $3,000, you pay $500 and insurance pays $2,500. If the repair bill is $400, you pay the full $400 because it is less than your deductible.
Collision coverage does not pay for wear and tear, maintenance, or mechanical breakdown. It also does not pay if you intentionally cause the damage, and it does not pay for damage from hitting an animal — that falls under comprehensive.
Comprehensive coverage: paying for theft, weather, and other non-collision damage
Comprehensive coverage pays for damage to your car from causes other than collision. This includes theft, vandalism, weather (hail, wind, flooding), falling objects (tree branches, debris), fire, and animal strikes. If a deer runs into your car, comprehensive pays. If a tree falls on your car during a storm, comprehensive pays. If your car is stolen or broken into, comprehensive pays.
Like collision, comprehensive claims have a deductible. You pay the deductible, and insurance pays the rest up to the actual cash value of your car. If your car is worth $8,000 and is totaled by hail, and you have a $500 deductible, insurance pays $7,500.
Comprehensive does not pay for collision damage, mechanical failure, or wear and tear. It also does not pay for damage caused by you intentionally, and it does not pay for damage from normal use or lack of maintenance.
What is not covered: common exclusions in every policy
Every car insurance policy has exclusions — things it will not pay for. Some exclusions are standard across all policies. Damage from normal wear and tear, mechanical breakdown, and maintenance are never covered. If your transmission fails or your brakes wear out, insurance does not pay.
Damage you cause intentionally is not covered. Damage from racing or speed contests is not covered. Damage from driving under the influence is usually not covered, though some states require insurers to cover it anyway. Damage from using your car for commercial purposes (like rideshare or delivery) may not be covered if you have a personal policy rather than a commercial one.
Damage from war, civil unrest, or nuclear hazard is not covered. Damage from driving in a way that violates the law is sometimes excluded. Damage to custom parts or aftermarket equipment may be limited or excluded. Read your policy's exclusions section to see what your specific policy does not cover.
Deductibles and how they work across multiple claims
A deductible applies to each claim separately. If you have a $500 deductible and file two collision claims in the same year, you pay $500 for each claim. The deductible does not reset after one claim — it applies to every claim you file under that coverage type.
Collision and comprehensive have separate deductibles. You might have a $500 deductible for collision and a $250 deductible for comprehensive. If you file a collision claim and a comprehensive claim in the same month, you pay both deductibles. Liability claims do not have a deductible.
Some policies offer a $0 deductible for comprehensive (often called "glass coverage" for windshield damage), while keeping a higher deductible for collision. Others offer accident forgiveness, which means your deductible does not increase after your first at-fault accident. These options cost more in monthly premiums but lower your out-of-pocket cost when you file a claim.
How to find out exactly what your policy covers
Your policy documents contain two key pages: the declarations page and the policy itself. The declarations page lists your coverage types, limits, and deductibles in a summary format. This is the fastest way to see what you bought. The full policy document explains what each coverage pays for, what it does not pay for, and the conditions under which the insurer will or will not pay.
If you are unsure whether something is covered, call your insurance company and ask. Describe the specific situation — "If I hit a parked car, does my collision coverage pay?" or "If my car is damaged by hail, what do I pay?" — and ask them to confirm in writing or note it in your file. Do not assume coverage exists; confirm it before you need it.
If you are shopping for a new policy, ask the insurer to explain what each coverage type covers and what it does not. Ask about deductibles, limits, and any discounts or options that might change what you pay or what is covered. The cheapest policy is not always the best one if it leaves you exposed to a large out-of-pocket cost when you file a claim.
Frequently Asked Questions
Does my insurance cover damage if I was at fault?
Collision and comprehensive cover damage to your car regardless of fault. Liability covers damage you cause to others. If you hit a parked car, your collision coverage pays for your damage, but your liability coverage pays for the other car's damage. You pay your collision deductible, not the other driver's.
What happens if I hit an animal?
Hitting a deer, raccoon, or other animal is covered by comprehensive, not collision. You pay your comprehensive deductible. If the animal causes you to swerve and you hit another car or object, that is collision damage and you pay your collision deductible. Some policies cover both under comprehensive.
Does insurance cover damage from weather like hail or flooding?
Yes, comprehensive covers hail, wind, flooding, and other weather damage. You pay your comprehensive deductible. Comprehensive also covers damage from falling tree branches or debris during storms. Damage from driving through standing water is sometimes treated as collision if you hit something, or as comprehensive if water alone damaged the car.
Will my insurance pay if someone else was driving my car?
Yes, if they had permission. Your liability, collision, and comprehensive coverage follow the car, not the driver. If someone you gave permission to drives your car and causes an accident, your insurance pays. If someone drives your car without permission, your insurance does not cover it.
What is the difference between actual cash value and replacement cost?
Actual cash value is what your car is worth today, minus depreciation. Replacement cost is what it would cost to buy a similar car new. Car insurance pays actual cash value, not replacement cost. If your five-year-old car is totaled, you receive what that car is worth used, not the price of a new one.