Liability Only vs Full Coverage Car Insurance

Every vehicle owner needs at least Liability coverage (or make other arrangements to comply with financial responsibility laws in few states) to be able to drive legally but majority of them buys Collision and Comprehensive coverage to protect their own automobiles as well that makes their policies full coverage, which is a blanket name for combination of covers. These are the two most popular and distinctive auto insurance policy types. Although Collision and Comprehensive additions within full coverage are optional, lien-holders may contractually require them to be included so that the car leased or the asset underlying the loan is protected.

Liability only coverage with basic state required limits costs about 31% of the price of full coverage but it only compensates for damages and injuries you may cause to other people and other state required covers but doesn’t pay for physical damages to your own auto. Contrarily, full coverage includes liability as well as protecting your vehicle for most damages. Motorists would need to consider the value of their automobiles, their financial positions and types of drivers listed when making a choice.

A liability only policy typically comes with two distinct parts. Bodily Injury Liability Coverage pays for injuries caused to other people when the driver of the insured vehicle is found at fault for the accident. Property Damage coverage pays for other people’s property damages in the same situation but not the damages to the insured auto.

Depending on the state requirements, a liability policy may include Personal Injury Protection (mainly in no fault states) and Uninsured Motorist Coverage. Every state has minimum coverage requirements (or financial responsibility laws) and liability policies are bought to comply with them so it is required to be able to drive legally in almost all states. Where there are alternative options to comply with financial responsibility laws, buying a liability policy is still the easiest option.

Full coverage is a commonly used term referring to; a vehicle insurance policy that includes Liability as well as Collision and Comprehensive coverage. It may include more but these 3 components are enough to make it a full policy. So, full coverage isn’t in itself a cover but it is a name given to a type of policy, which includes the above components.

Full coverage doesn’t mean you are covered for everything. But it pays for injuries and damages to other people as well as damages to the policyholder’s own car. Collision pays for traffic accident-related losses regardless of fault. And Comprehensive coverage protects the insured auto against other perils except collisions like theft, vandalism, riots, storms, floods and accidental damage like falling icicles.

Comprehensive and Collision each comes with a separate deductible. After an insured damage, they will either pay for the repairs to your car or Actual Cash Value of it if it is totaled as it was beyond repair. Most full coverage car insurance policies come with higher liability limits than the minimum enforced.

The US average for a basic state required liability only vehicle insurance is $622 and the average for a full coverage policy is $2014. That makes the average premium difference to be $1,392 or 69%. However, the prices and differences change substantially depending on the state. For example, these figures for one of the cheapest states of Iowa are $223 and $1,315, making the difference $1,092 or 83%. And for one of the most expensive states of Florida are $1,128 and $3,185, making the difference $2,057 or 64%.

Every vehicle owner must buy a basic state required liability auto insurance before they can legally drive (except in few states where motorists have other options to comply with financial responsibility laws). On the other hand, full coverage isn’t mandated by states but is contractually required if there is a loan on the car or it is leased. So, it is used as a guarantee for the loan or lease, just in case something happens to the auto. If you own the auto outright, you still must have Liability coverage but it is up to you to add Collision, Comprehensive and other optional covers.

Here are the key differences between full coverage and liability only car insurance;

  1. Liability coverage is mainly bought to comply with state minimum coverage requirements and vehicle owners need it to be able to drive legally, although it may come with higher limits and can have optional extras. Full coverage components of Collision and Comprehensive is essentially optional but may contractually be required by lenders and lessers.
  2. Policyholders with a liability only policy are protected for claims made against them by third parties because they blame the driver of the insured car for the accident but they don’t get any physical protection for their own automobiles, which is provided by full coverage.
  3. On average liability only policies costs less that one third (1/3) of the price of full coverage policies.
  4. Full coverage includes Liability coverage too, as well as Collision and Comprehensive. Usually, you cannot add many other additional benefits like Accident Forgiveness, Rental Car Reimbursement, Roadside Recovery on to your policy unless you have full coverage.
  5. Liability coverage doesn’t have deductibles but Collision and Comprehensive comes with deductibles.

People choose Liability Only or Full Coverage auto insurance depending on their risk tolerance, value of their automobiles and budget.

Most people have decent automobiles with high enough values to make full coverage necessary. People make large investments on their cars and they would suffer financially if they lose it. That is why insuring them offers peace of mind.

This isn’t necessarily true for someone who has a 10-year-old vehicle, which is worth about $6,000 or less. Although they would pay less for full coverage due to its value, still it may not be low enough to keep insuring it. Generally, experts suggest to go with liability only car insurance when the value is under $6,000 or the additional premium for full coverage exceeds 10% of the car’s value.

Depending on your budget and preferences, you may have already made up your mind that you will buy a new car if something happens to your old car and like to save money on premiums. Another risk with an old automobile is that it may break down and require to be replaced before it suffers an insured loss. In that case, premium savings can come handy.

Listed drivers’ risk profiles can be influential in decision making as well. For example, if you have a teenage driver in your household you may have to pay thousands of dollars for car insurance and therefore go for the cheaper liability only policy, providing you have enough savings to replace the automobile if you need to.

Also, in some states the premium gap between liability only and full coverage can be narrow that makes it easier to choose the latter. For example, in Oregon the average premium gap is only $799 or 56%, which makes it easier to go for full coverage auto insurance.

At times, people may decide to increase deductibles, which may decrease the premium enough to avoid dropping full coverage. Yes, you cannot claim for small damages to your automobile due to higher deductibles. But at least you don’t totally give up full coverage thanks to premium savings and still can make a claim if it is a total loss. Older automobiles are likely to get written off even if they sustain minor damages anyway.

The good news is that you can get as many car insurance quotes as you want for free. So, you can check prices for both types of policies and decide.

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