Your auto insurance may not protect you as well as you think
Auto insurers failed to pay 45% of the liability and medical claims they resolved last year, up from about 35% a decade ago, according to a Wall Street Journal investigation.
Paying your car-insurance premium every month doesn't necessarily mean your insurer will pay when something goes wrong.
A Wall Street Journal investigation of thousands of regulatory filings found that auto insurers did not pay 45% of the liability and medical claims they resolved last year. A decade earlier, the nonpayment rate was about 35%.
The finding is particularly striking because nearly every state requires motorists to carry liability insurance before they can legally drive. In other words, consumers are required to buy the product — but increasingly cannot assume that having a policy means a claim will be covered.
The Journal said Americans were involved in more than six million traffic crashes last year, making the growing gap between insurance coverage and actual claim payments a potentially significant financial risk for millions of households.
James R. Hood
The fine print is becoming more important
Some claims are rejected for familiar reasons: the loss isn't covered, damages fall below the deductible, the policy has lapsed or investigators conclude that a claim is fraudulent.
But the Journal investigation also highlights a less obvious danger: insurers are increasingly relying on provisions involving who is permitted to drive the vehicle and who lives in the policyholder's household.
A driver who assumes that a spouse, teenager, roommate or relative is covered simply because that person occasionally drives the family car can discover after a crash that the insurer sees things differently.
Insurance companies commonly ask applicants to disclose household members and drivers when a policy is purchased. Depending on the state and the policy, failure to disclose a driver can become grounds for denying a claim or challenging coverage.
Some policies also specifically exclude named drivers. Progressive, for example, describes an excluded driver as a household member who has been expressly removed from coverage. If that person drives an insured vehicle, the policy generally won't cover the accident. Not every state permits these exclusions.
California's Department of Insurance similarly warns consumers to check their policies before allowing someone else to use the car because an excluded driver may have no coverage at all.
The rules vary sharply from state to state. New York, for example, generally requires standard auto liability policies to cover the named insured, a resident spouse and people driving the vehicle with the owner's permission, subject to the terms allowed under state law.
That variation makes it risky for consumers to rely on general assumptions about what "full coverage" or even ordinary liability insurance means.
Insurers say fraud is getting harder to fight
The insurance industry argues there is another side to the rising rejection rate.
Insurers told the Journal that fraud has become more sophisticated, including fraudulent accident and medical claims and increasingly convincing fake documentation aided by artificial intelligence. Companies also point to rising litigation and claim costs as reasons for conducting more aggressive investigations.
Those costs ultimately matter to consumers because fraudulent claims can raise premiums for everyone.
But consumer lawyers and advocates cited by the Journal contend that legitimate policyholders can get caught in the same increasingly restrictive claims process, particularly when insurers interpret application questions or policy exclusions in ways consumers did not anticipate.
The broader complaint data show that claims handling remains a major source of friction between insurers and their customers. Among insurance complaints reported for 2025, delays in claim handling, unsatisfactory settlements and claim denials were among the leading categories.
A household change can become an insurance problem
One practical lesson from the Journal investigation is that consumers shouldn't treat their auto policy as something they buy once and then forget.
Several ordinary life events can change an insurer's view of the risk:
- A teenager gets a driver's license.
- An adult child moves back home.
- A boyfriend, girlfriend or spouse moves in.
- A roommate begins occasionally using the car.
- A family member regularly borrows a vehicle.
- Someone previously excluded from the policy begins driving again.
- A vehicle begins being used for delivery, rideshare or another purpose not disclosed to the insurer.
Any of those changes should prompt a call to the insurer or agent.
Consumers should ask a very specific question: "Is every person who might drive this vehicle covered if there is an accident?"
Get the answer in writing if possible.
Don't assume "permission" guarantees coverage
Many motorists have grown up with the rule of thumb that car insurance "follows the car" — meaning anyone who borrows the vehicle with permission is insured.
Sometimes that's true. Sometimes it isn't.
State insurance laws, exclusions, household-driver requirements and individual policy language can all affect coverage.
The safest approach is to disclose household members and regular drivers when buying or renewing a policy and ask the insurer to identify anyone who would not be covered.
Consumers should also be especially cautious about accepting a cheaper premium obtained by excluding a household member. The savings can be substantial, but so can the financial consequences if that person later drives the vehicle and causes a serious crash.
If your insurer denies a claim
A denial isn't necessarily the end of the matter.
Ask the insurer for the denial in writing and request the precise section of the policy it is relying on. Compare that provision with the application you completed and any communications you had with the agent or insurer.
Keep copies of the policy, application, renewal notices, emails, text messages, photographs, repair estimates, medical bills and claim correspondence.
If the explanation doesn't make sense, ask for an internal review.
Consumers can also file a complaint with their state insurance department. The National Association of Insurance Commissioners maintains a directory linking consumers to their state regulator and specifically lists delays, denials and unsatisfactory settlements among common reasons for insurance complaints.
For a large claim — particularly one involving serious injuries or substantial liability — consulting an attorney may also be worthwhile before accepting a denial.
The bigger issue
Car insurance has already become considerably more expensive for many households as repair costs, vehicle prices, medical expenses and litigation costs have climbed. The Journal investigation points to another, less visible problem.
Consumers aren't merely paying more for insurance. They may also have less certainty that the policy they are paying for will actually respond when they need it.
That makes shopping for auto insurance increasingly about more than comparing premiums.
Consumers need to compare coverage — and exclusions — as carefully as price.
