In all U.S. states, drivers are required to keep up liability auto insurance or have some other proof of financial responsibility. Like many drivers, you may assume that full and liability coverage are the same, but nothing could be further from the truth. In most cases, liability coverage is the absolute minimum that you must have to drive legally. However, it often falls short of meeting drivers’ exact coverage needs.
Many drivers are better off with car insurance policies that also include other types of coverages. Often these types of car insurance policies are referred to as full coverage car insurance.
What Is Full Coverage?
The first thing you should know is that “full” coverage is a bit of a misnomer as there is no such thing as auto insurance that protects you under every possible circumstance. That being said, there isn’t an exact definition of what full coverage is. Generally speaking, full coverage car insurance includes liability insurance (which is required in almost every state) AND coverage that will help cover damages to your car.
Remember, liability insurance only covers damages of another person’s property or injuries suffered by others. It does not include your property damage or injuries.
What Does Full Coverage Include?
Again, there is no real definition of what full coverage is, but typically people consider full coverage to include at least:
An insurance policy can be made even “fuller” by adding these types of coverage:
Uninsured/underinsured motorist coverage.
This protects you financially if you incur damages during a crash with an uninsured or underinsured driver. It’s most commonly available for property damage but also available for bodily injury in some instances.
Personal Injury Protection.
Often abbreviated as PIP and sometimes known as First Party Benefits, personal injury protection is required in some states. It pays for things like medical expenses, funeral expenses, the cost to replace household services and loss of income.
Rental reimbursement coverage.
This covers the cost of renting a car while your car is in the shop or otherwise not available.
This provides many of the same benefits as auto clubs like AAA. It often covers the cost of towing and labor.
Minimums and Limits
For insurance coverage to be as complete as possible, limits for bodily injury and property damage should show your financial situation. Similarly, deductibles should be in line with what you can reasonably afford to pay. The highest liability limit available is typical $250,000 per person for bodily injury, $500,000 per accident and $100,000 for property damage. Remember: You will be responsible for any costs that aren’t covered by your policy. Make sure that your limits show this.
Do You Need Full Coverage?
Like some people, you may think that it’s better to be safe than sorry and opt to buy full insurance coverage to cover your bases. However, you could quickly end up paying for coverage that you don’t need.
At the very least, you are required to support liability coverage or to offer some proof of financial responsibility. Full insurance coverage makes sense if you have a new vehicle, a precious vehicle or a vehicle that you are still paying off. In the case of the latter, your lender will typically require you to keep up both collision and comprehensive coverage to protect their investment until you own the vehicle free and clear.
If you are at the point where you can afford to replace your vehicle without any help from insurance, you should be able to drop comprehensive and collision coverage safely. Once your car is paid off, you might also want to increase your deductibles to show your savings going forward