Does auto insurance cover lost wages because of an accident?
Will auto insurance cover lost wages? Yes, your auto insurance will cover lost wages because of an accident as long as you're carrying a basic liability policy. You should because basic liability is required by law to drive in most states. Some auto insurance policies will exclude lost wage coverage, so read through auto insurance policy carefully to make sure it covers lost wages because of an accident. If it doesn't, consider switching providers. You can enter your ZIP code below to start shopping for auto insurance quotes for free.
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Laura Kuhl holds a Master’s Degree in Professional Writing from the University of North Carolina at Wilmington. Her career began in healthcare and wellness, creating lifestyle content for doctors, dentists, and other healthcare and holistic professionals. She curated news articles and insider interviews with investors and small business owners, leading to conversations with key players in the le...
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Updated February 2025
In certain cases, you may be entitled to receive loss of income coverage after a car accident. If you are eligible to receive loss of income coverage, then you will get compensation for any wages you were unable to earn due to injuries sustained in a car accident.
Today, we’re explaining everything you need to know about car insurance covering loss of wages, including how loss of income coverage works and whether or not you qualify for it.
Yes, Your Car Insurance Company May Cover your Lost Wages After an Accident
Basic liability car insurance may provide compensation for lost wages after an accident. Basic liability car insurance is the insurance you are required to have to legally drive. If your car is insured, then you have basic liability car insurance.
If you have been injured in a car accident, and that injury prevents you from going to work and earning money you would have ordinarily been able to earn, then you may be entitled to compensation.
Let’s say you are a carpenter who broke an arm in a collision. You are unable to work for six weeks. If your car insurance policy covers lost wages, then you should be entitled to six weeks’ work of compensation for lost wages.
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Do All Car Insurance Policies Provide Reimbursement for Lost Wages?
We learned that car insurance policies can cover lost wages. However, does your car insurance policy provide reimbursement for lost wages? Will your car insurance company cover your claim?
Typically, even basic liability plans will cover a lost wages claim – assuming the injury came as a direct result of the car accident.
Basic liability car insurance is the lowest minimum insurance required to legally drive. Even if you have the cheapest car insurance from the cheapest provider, you should still receive compensation for lost wages (unless there’s an exclusion on your policy, which we’ll talk about below).
On many insurance plans, lost wages claims fall under bodily injury liability coverage. However, different states have different rules for car insurance, and a lost wages claim can also fall under a different type of coverage. The types of insurance eligible for a lost wages claim include:
Bodily Injury Liability Coverage: Bodily injury liability coverage covers the medical expenses and loss of income and other people. If you were injured in a car accident caused by the negligence of another driver, then you may be able to submit a lost wages claim through the other driver’s bodily injury liability coverage.
Uninsured or Underinsured Motorist: 1 in 7 motorists in America is uninsured. If you are injured in an accident, and the other driver is uninsured or underinsured, then you may be able to file a lost wages claim through your uninsured or underinsured motorist coverage. This type of insurance is required in some states. Alternatively, you can sue the other driver for loss of income. However, many people who drive without insurance also have limited assets, which can make lawsuits pointless.
Personal Injury Protection (PIP) Coverage: Personal Injury Protection (PIP) is required in certain states and optional in others. It covers your medical expenses after an accident regardless of who was at fault. PIP allows you to collect lost wages even if you caused the accident, up to the limits of your policy.
Read more: Does my auto insurance cover my medical expenses after an accident?
Your Policy May Exclude Lost Wages Claims
If you have a car insurance policy from a cheap or disreputable insurance provider, then you may be unable to make a claim for lost wages. Some insurance companies sneak an exclusion into your policy.
Check your car insurance declarations page or insurance documents and look for something called, “Exclusion of Work Loss (Included)”. If you see this line on your policy, then your lost wages claim will not be covered by your insurance company.
Other insurance companies let you reduce your premium in exchange for dropping lost wages coverage. You may have reduced the premium on your Personal Injury Protection (PIP) policy in exchange for adding a loss of income exclusion.
At-Fault Versus No-Fault States
About a dozen states in America are no-fault states. The rest are at-fault states. Whether you live in an at-fault or no-fault state will play an important role in how your lost wages claim works.
In an at-fault state, you will file a lost income claim with the insurance company of the other driver, assuming the other driver is at-fault. If you were at-fault for the accident and you live in an at-fault state, then you will be unable to claim loss of income unless you have additional, optional policies like Personal Injury Protection (PIP), which is not required in at-fault states.
If you live in a no-fault state, then fault does not play a role in insurance claims. These states require you to have Personal Injury Protection (PIP) coverage. PIP allows you to file an insurance claim regardless of who was at-fault.
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How to Make a Lost Wages Claim
The goal of a lost wages claim is to compensate you for the amount of money you would have earned if you were able to work. If you make $20 per hour and you missed five full days of work because of injuries sustained in an accident, then you would receive $800: $20/hour x 8 hours a day x 5 days.
Read more: Can I get reimbursed for lost wages if I am unable to work due to injuries sustained in the accident
To make a lost wages claim, you typically need a letter from your doctor explaining your injuries, a letter from your employer verifying you are unable to work, tax information or tax return info, and a police report.
Conclusion
A lost wages claim allows you to receive compensation after an accident when you are unable to work. Most basic liability insurance policies provide lost wages coverage. Check your policy to make sure you’re covered. Or, consider hiring an attorney if your insurance company is refusing to pay out.
Frequently Asked Questions
Does auto insurance cover lost wages because of an accident?
Yes, your auto insurance will cover lost wages because of an accident as long as you’re carrying a basic liability policy. Some auto insurance policies may exclude lost wage coverage, so it’s important to read through your policy carefully to ensure it covers lost wages. If it doesn’t, you may consider switching providers.
Do all car insurance policies provide reimbursement for lost wages?
Typically, even basic liability car insurance policies will cover lost wages claims, assuming the injury came as a direct result of the car accident. However, it’s important to note that different states have different rules, and the coverage for lost wages can vary depending on the type of policy and coverage you have.
Can I make a lost wages claim if I have a car insurance policy from a cheap or disreputable provider?
Some insurance companies may include an exclusion for lost wages claims in their policies, especially those from cheaper or disreputable providers. It’s important to review your car insurance declarations page or policy documents to check if your policy includes or excludes lost wages coverage.
How does fault in an accident affect a lost wages claim?
Whether you live in an at-fault or no-fault state will determine how your lost wages claim works. In an at-fault state, you would typically file a lost income claim with the insurance company of the other driver if they are at fault. However, if you were at fault in an at-fault state, you may need additional optional coverage like Personal Injury Protection (PIP) to claim for lost wages. In a no-fault state, fault doesn’t play a role, and you can generally file a claim for lost wages through your PIP coverage.
What do I need to make a lost wages claim?
To make a lost wages claim, you typically need a letter from your doctor explaining your injuries, a letter from your employer verifying your inability to work, tax information or tax return info, and a police report. These documents help support your claim and provide evidence of your lost wages.
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