Full Coverage Auto Insurance: Do I Need It?

Full coverage auto insurance is a combination of liability, collision, and comprehensive insurance, along with any other coverage that a vehicle owner may want. The term full coverage doesn't refer to a specific auto insurance policy that covers everything but is instead a commonly used term among auto insurance buyers. The combination of policies and coverage offered will vary by state, and it's up to the buyer to determine the level of coverage they need.

Full coverage auto insurance typically includes liability insurance, which covers the policyholder's responsibility for injury to another driver or passenger and property damage. Collision coverage applies to damage that occurs to the policyholder's car if they collide with something. Comprehensive coverage pays for things that happen to the vehicle outside of a collision, such as fire, theft, storm damage, animal damage, or falling objects.

Liability insurance

Property Damage Coverage

Property damage coverage insures against damage to another person's property caused by your vehicle. This includes repairs to the other driver's vehicle, a rental vehicle while the other person's car is being repaired, and damage to buildings, fences, or other structures. It also covers damage to personal property, such as electronics or belongings inside a vehicle, and legal fees if you're sued for property damage.

Bodily Injury Coverage

Bodily injury coverage provides payment for others injured in an accident and covers legal fees if you are sued for injuries you caused. It is important to note that states may have different requirements for who can file a bodily injury claim against you.

The cost of liability insurance coverage depends on various factors, including the amount of coverage selected. Higher coverage limits may cost more. The coverage limits are usually expressed as three numbers, such as 25/50/10, indicating the coverage for bodily injury per person, bodily injury per accident, and property damage per accident, respectively.

It is important to understand the liability coverage limits and select the appropriate limits to ensure adequate protection in the event of an accident. Inadequate coverage could leave you personally responsible for repaying expenses beyond your coverage limits.

Collision insurance

The cost of collision insurance varies depending on factors such as the insurance company, the car's value, and the driver's age and driving record. On average, full-coverage car insurance, which includes collision insurance, costs around $1,895 per year or $158 per month. However, this can differ significantly between states and insurance providers.

While collision insurance is not legally mandated, it may be required by lenders if you are leasing or financing your vehicle. Even if you own your car outright, collision insurance can be a valuable addition to your basic policy, depending on your financial situation and the value of your vehicle.

Comprehensive insurance

Comprehensive coverage is a good idea if your car has a high cash value or you can't afford to repair or replace your vehicle out of pocket. It is usually required by lenders if you are leasing or financing your vehicle. If you own your vehicle outright, you can decide whether or not to add comprehensive coverage to your policy.

The cost of comprehensive coverage varies depending on the insurance company, where you live, and other factors. The average cost of full coverage car insurance, which includes comprehensive coverage, is $1,895 a year, or $158 a month. This is based on 100/300/100 insurance limits for liability ($100,000 per person and $300,000 per accident for bodily injury, and $100,000 per accident for property damage) with $500 deductibles.

You can add comprehensive coverage to classic car insurance and motorcycle insurance at any time. You may also be able to purchase comprehensive coverage for ATV insurance, golf cart insurance, snowmobile insurance, and other types of vehicles.

When to drop full coverage

Full coverage auto insurance is a combination of liability, collision, and comprehensive insurance. Liability insurance covers the costs that arise from accidents that you are responsible for, such as medical expenses and legal fees. Collision insurance covers the repair or replacement of your car if you are in an accident with another vehicle or a stationary object. Comprehensive insurance covers damage to your car from causes other than a collision, such as theft, vandalism, fire, and extreme weather.

You should consider dropping full coverage auto insurance when:

• Your car is old or has high mileage: The value of your car decreases as it gets older and accumulates more mileage. Therefore, an older car with high mileage may not be worth the cost of full coverage insurance. A good rule of thumb is to drop full coverage when your annual insurance payment equals 10% of your car's value.
• You have a large emergency fund: If you have sufficient savings, you may not need full coverage insurance to protect you from the cost of car repairs or replacement.
• You don't drive frequently: If you don't drive your car often, you are less likely to be involved in an accident and may not need full coverage insurance.
• The cost of insurance is high relative to the value of your car: If the cost of full coverage insurance is close to or exceeds the potential payout in the event of a covered event, it may not be worth keeping full coverage.
• You prefer to pay for repairs out-of-pocket: If you are willing and able to pay for car repairs or replacement out of your own pocket, you may not need full coverage insurance.
• You plan to replace your car: If you intend to replace your car soon or if it requires major repairs, you may not need to maintain full coverage insurance.

It is important to consider your specific situation, financial circumstances, and the requirements of your state when deciding whether to drop full coverage auto insurance.

What full coverage includes

The term "full coverage" is a general term used by insurance agents, lenders, and dealerships to refer to a collection of coverages that protect policyholders against various circumstances. While the precise definition of "full coverage" varies from place to place, it typically includes liability, comprehensive, and collision coverage, as well as any other coverages mandated by the state. Here's what each of these components covers:

Liability Coverage

Liability coverage is mandatory in almost all states. It covers damages or injuries you cause to another person or their vehicle, up to a certain limit. This includes bodily injury and property damage. For example, if you cause an accident, liability coverage will pay for the damage to the other driver's car and their medical expenses, up to your policy's limits.

Comprehensive Coverage

Comprehensive coverage protects your vehicle from events that are out of your control, such as theft, vandalism, fire, glass breakage, or weather-related issues. For instance, if your car is damaged in a storm or by vandalism, comprehensive coverage will pay to repair or replace your vehicle, minus any deductible.

Collision Coverage

Collision coverage is designed to protect your vehicle in the event of a collision with another vehicle or object, regardless of fault. It covers the cost of repairing or replacing your vehicle, minus your deductible. For example, if you crash into a pole or fence, collision coverage will kick in to help cover the expenses.

In addition to the above, full coverage may also include other optional coverages, such as 24-hour roadside assistance, rental car reimbursement, and gap insurance. These extra coverages are typically inexpensive and can provide valuable peace of mind.

It's important to note that no single policy can provide 100% coverage in all situations. The cost of full coverage auto insurance will depend on various factors, including your location, driving record, credit history, and the type of car you drive. It's always a good idea to shop around and compare quotes from different insurance companies to find the best coverage and price for your needs.

Frequently asked questions