Liability Insurance and Full Coverage Car Insurance is probably terms you have heard since you’ve owned a car. They are in our lives every time because they deal with car insurance. As we all know, that not only is car insurance required in almost all the states, but it provides “peace of mind” just in case we ever need to use it when we come across an unfortunate time of events. We will review the advantages and disadvantages of liability vs full coverage car insurance.
When people decide to get a car, they always save another budget for the cost of its car insurance. Car insurance premiums have become a monthly expense in our lives for drivers. These expenses tend to be high when you are looking for cheap car insurance for young drivers especially.
The process can flow very smoothly when determining which coverage you want; however, if you haven’t made the right choices, you can suffer immense financial hardship when an accident.
There are different levels of cover required by every state, and you need to make sure you are reviewing the law, to get the best protection possible. Even if you’re thinking of buying only liability coverage, you need to know how to make the best decisions based on your state’s minimum requirements, and your financial situation. But you need to know that the cheapest liability car insurance is not necessarily the best. Liability car insurance covers the damages in the car and personal injuries if you cause an accident. There is usually a limit on the policy, and the excess amount should be paid by you. That is why you should always choose the most suitable insurance, giving you the best price and conditions. This way, you can ensure you don’t have to face thousands in out-of-pocket costs if you’re ever at fault in the accident.
What Is Liability Car Insurance
Liability car insurance is coverage that pays for vehicle damage, as well as hospital and medical bills for other parties and individuals in your vehicle if you are at-fault in an accident. Every state has a set of car insurance coverages that are required by law. In most states, you are only required to carry liability insurance. In stricter states, you may be required to carry Uninsured Motorist, Underinsured Motorist, Medical Payments, and Personal Injury Protection as well.
There are mainly 2 types of liability coverage. These are:
- Property damage liability coverage: This insurance covers the expenses for damage to other people’s property, caused by your car, an accident. This includes the cost of repairing and replacement of things, which are damaged by your car. If you have injured a person, and he files a lawsuit against you, this coverage will also provide you with the financial help to pay your legal fees. (Property can include a house, car, tree, fence, pole, mailbox, or pet.).
- Bodily injury liability coverage: This coverage will pay for lost wages and medical bills. If you have bodily injury anyone due to a car accident, he can file a lawsuit against you. In that case, with the help of this coverage, you can get legal defense. It also protects you from bills that include medical expenses, funeral expenses, compensation for income loss, etc. (Coverage will pay for an emergency and hospital care, medication, doctor’s visits, rehabilitation, lost wages, home-health care, and funeral costs.)
By acquiring liability coverage, you can ensure that all financial issues others suffer as a result of your accident are paid for without you having to come up with hundreds, thousands, or even tens of thousands of dollars on yours.
What Is Full Coverage Car Insurance
While the term full coverage is used quite often in the insurance world, a full coverage car insurance policy does not cover everything as you might assume. In fact, when you are comparing car insurance rates, it is the combination of coverage options that you choose that will determine whether you have a full coverage plan. You are retrieving car insurance quotes, the core coverage options that you select will make the plan a liability plan, or a full coverage plan. Here is your straightforward guide to understanding what coverages to select to build a full coverage plan:
The Basic Coverages Found in a Full Coverage Car Insurance Policy
The term full coverage can be interpreted differently by different agents and policyholders. Any full coverage policy will include the following options at a minimum:
- State Minimum Coverage and Limit Requirements - All full coverage plans will satisfy the state minimum requirements, and these plans typically carry higher limits than the minimums.
- Comprehensive Coverage - Full coverage includes physical damage coverage. Comprehensive is designed to pay to repair damage to your vehicle when it is damaged due to fire, theft, vandalism, glass breakage, natural disaster, or other non-moving incidents.
- Collision Coverage - A collision is also a form of physical damage coverage that will pay to repair or replace your vehicle up to its fair market value. Unlike comprehensive cover, the collision will pay when your car is involved in an accident with another vehicle or an object. When your vehicle is financed or leased, you must carry both comprehensive and collision cover to satisfy the lender’s requirements. If you fail to meet these “full coverage” requirements, you may have to pay high rates for forced placed insurance.
- Uninsured Motorist Property Damage - This cover will waive your collision deductible when you are the victim of a hit and run accident. Without this, you will pay your collision deductible for repairs. In many states, this protection is mandatory for car insurance.
To you, full coverage car insurance may also include another optional cover. You must build a plan with optional cover to receive the following benefits.
- Towing - Many companies offer towing coverage when a covered vehicle is disabled. Some policies offer a broader form of roadside assistance for lockout coverage, flat tire, and battery jump starts.
- Gap Insurance - If your vehicle is worth less than the amount it is financed for, you may want to add gap coverage to the vehicle if it qualifies. With this cover, the insurer will pay off the remaining balance of the loan if it is totaled.
- Rental Car - If you are involved in an at-fault accident, you must pay for a rental car to replace your vehicle while it is being repaired. If you have rental car coverage, you will receive a daily limit to pay for the car so that you do not have to pay out-of-pocket.
As you can see, there is a reason why drivers are confused by what a full coverage car insurance policy will cover. It is all up to you, and build your insurance policy to cover exactly what you see fit so that you have peace of mind on the road.
I Just Bought a Car, Should I Get Full Coverage?
A lot of people have the same question when they buy a car they don’t know what insurance they should get. Many people who don’t have an understanding of car insurance usually settle for anything that gives them a “cheap insurance price.” Well, this way is definitely not the way to go.
Whenever you want to compare car insurance companies and want to see which one is giving you the best value, you always want to compare your coverages apples to apples. Then you want to compare the price of the different insurance companies for those same coverages. That’s how you will know if you're getting the best value for the money that you will be paying.
You always want to make a smart decision in regard to carrying liability or full coverage on your car. As a good rule of thumb, We would recommend that you carry liability on your car if your car is 7 years or older. The only exception I could think of to carry full coverage on your car if the car is more than 7 years old is when you a bank lien, bank loan on the car. Your finance company will 99% require that you carry full coverage because you don’t own the car yet until you pay off the loan.
This also goes for cars that are brand or fairly new. Anytime, you are financing or leasing a vehicle, the bank will require that you carry full coverage. And if your car is newer than 7 years even with no loan, then you may want to be carrying full coverage to protect your car’s value because if you get into an accident while your car is still newer than 7 years, you know you haven’t paid more money for the car’s insurance in the long run compared to your car’s value so you definitely want to make sure that you are fully covered when your car is new.
Another instance where it may not hurt carrying full coverage for your car is if you live in a location where car insurance rates are cheap. In this case, if your full coverage car insurance is only costing you $500 for the whole year, you might as well carry it if you know paying for the insurance on the car over time won’t exceed the value of your car.
Just to recap, the following situations we recommend carrying Full Coverage Insurance:
- You have a car that is newer than 7 years from today’s date or a car worth less than $10,000
- You have a leased/finance vehicle
- The full coverage car insurance rates in your area are unlike to exceed the value of your car
Now that you have a general understanding of when to purchase liability vs full coverage when you purchase the car see if you fit into the criteria of when to purchase full insurance like the one we’ve set above. If you don’t meet the criteria, go with liability coverage only. Chances are, that if you don’t meet the criteria above, paying for full coverage on your insurance for your car, you will be likely to pay more for the cost of the insurance on your car in the long run rather than the value of the car itself.