Why are Lug nuts on car wheels designed to cover the whole bolt ?

These are actually both lug nuts. One is an acorn nut, which covers the end of the bolt, and the other is a standard open lug nut
Acorn nuts are typically used where they are exposed and standard nuts are used where there is a hub cap or cover over the center of the wheel.
There are two reasons for this.
One is that shiny rounded acorn nuts look more attractive than the end of a bolt.
The other is that covering the end of the bolt keeps water, dirt, and, in areas where there is winter weather, salt from getting into threads as much. Dirt and corrosion can make the nuts very hard to remove. I had an old car where the hub caps were missing, and I have broken wheel bolts clean off trying to change a flat.