Choosing between liability vs full-coverage car insurance hinges on your protection needs: while liability covers damages to others, full-coverage extends to your own vehicle, offering comprehensive protection on and off the road. Deciphering the benefits of each is essential for drivers seeking the right balance of coverage and cost.
- Auto liability insurance pays for damages you cause to others.
- Full coverage isn’t a single policy but includes liability, collision, and more.
- Liability insurance is often mandatory, while full coverage is needed if you have a car loan or lease.
- The coverage you need depends on your car’s value, if you have a loan, and your comfort with risk.
Liability vs Full-Coverage Car Insurance: Which Should You Choose?
|Liability Car Insurance
|Full-Coverage Car Insurance
|– Other driver’s bodily injuries
– Other people’s car or property damage you cause
|-Other driver’s bodily injuries
-Property damage you cause to others
-Damage to your car from collision and non-collision sources
|Meets minimum state -required coverage limits
|May have higher coverage limits for liability coverage
Collision and comprehensive limits based on the car’s actual value
|Average Cost (annual)
|In most states
|Only when financing or leasing a vehicle; some jobs may also require full-coverage car insurance
|-Deductible applies when filing a claim on collision or comprehensive.
-Ranges from $100 to $2,500.
-May be set by lender
|-If you have an auto loan
-If you want to avoid out-of-pocket repair costs
-If your car has high value
-If you’re prone to file damage claims
-If you desire extra coverage
When choosing between liability and full-coverage auto insurance, consider these five crucial factors:
Review both state and lender insurance mandates. While states mandate liability coverage, lenders typically require full coverage, often with set deductibles. However, once you’ve paid off your vehicle, the choice of full coverage and deductible levels depends on your personal circumstances and preferences. Keep in mind, collision and comprehensive are distinct coverages; you can opt for just one if both aren’t necessary.
Risks and Risk Tolerance
If you face a higher risk of accidents, diverse coverage becomes crucial. Assess your risks based on your:
- Past accident and claim records
- How often you drive
- Usual driving routes
- Risk of theft
- Threats from non-collision events like animals, falling branches, floods, or fires.
Do you prefer the comprehensive protection of full coverage or the upfront savings from liability-only? If you’ve filed comprehensive claims before, it might be wise to maintain that coverage.
Insurance premiums differ between liability vs full-coverage policies. On average, full coverage costs about twice as much monthly but offers enhanced protection against unforeseen damages. Premiums for full coverage tend to be higher for pricier cars, vehicles often targeted for theft, and those with higher repair costs.
You have the flexibility to select your liability limits. With full-coverage insurance, while you can opt for higher liability limits, the car’s actual value dictates the limits for comprehensive and collision coverage.
Consider your car’s worth. Assess if the insurance costs would make sense if your car was a total loss. Decide if you’d rather pay for damages yourself or replace the vehicle without insurance. Full coverage typically benefits newer, more expensive vehicles.
Liability Car Insurance
Liability car insurance covers expenses if you cause an accident that injures someone or damages their property.
What Is Covered
Liability insurance consists of two main coverages:
- Bodily Injury Liability: This covers medical expenses, loss of income, legal fees, and pain and suffering when you’re responsible for an accident that injures someone.
- Property Damage Liability: This covers repair or replacement costs of property you’ve damaged, such as another person’s car or mailbox. It also covers legal defense if you’re sued.
Insurance companies set specific limits for each coverage. If accident costs surpass these limits, you’ll need to pay the excess. In insurance terms, “indemnity” means your insurer commits to compensating for your losses in return for your premium payment.
What Is Not Covered
Your liability car insurance won’t cover:
- Medical expenses for you or passengers in your vehicle.
- Repairs to your car if you’re at fault in an accident.
- Damages from uninsured or underinsured drivers.
- Claims exceeding your policy’s liability limit.
The cost of liability car insurance varies based on factors like location, driving history, and age. As of 2020, the average monthly premium was around $52, as reported by the NAIC in 2023. While 48 U.S. states mandate some form of liability coverage, there are exceptions:
- New Hampshire doesn’t require coverage, but drivers must show they can meet financial responsibility standards.
- Virginia allows drivers to opt for a yearly $500 uninsured vehicle fee instead of minimum liability coverage.
Full-Coverage Car Insurance
“Full-coverage car insurance” typically means a policy that combines state-mandated coverages with comprehensive and collision insurance. However, its definition can vary among insurers and by state. It might also indicate higher than minimum coverage limits. Always clarify what’s included and understand any exclusions or limits when purchasing a policy.
What Is Covered
When taking out a car loan, lenders often mandate “full-coverage” car insurance. This doesn’t denote a specific policy but typically includes:
- Liability Coverage: Essential for legal driving in most states.
- Collision Coverage: Covers vehicle repairs or replacement if you’re in an accident, whether with another vehicle or an object like a light pole.
- Comprehensive Coverage: Pays for damage from non-collision events like natural disasters, theft, or animal collisions.
For a more robust policy, “full coverage” might also feature:
- Elevated Liability Limits: More than the state’s minimum requirement.
- Personal Injury Protection (PIP): Covers medical expenses from accidents.
- Uninsured/Underinsured Motorist Coverage: Protection against drivers without sufficient insurance or hit-and-run incidents.
Additionally, other optional coverages like towing, roadside assistance, pet coverage, rental car, and gap insurance can be added for a comprehensive package. Always clarify what’s included when considering “full coverage.”
What Is Not Covered
“Full-coverage” policies differ across insurance companies. Always inquire about inclusions and exclusions. There’s no one-size-fits-all policy that covers all scenarios. For instance, certain activities, like ride-sharing, might not be covered and could result in a claim denial.
Full-coverage car insurance costs vary, with the average yearly premium being $1,176 or $98 monthly, as per NAIC data. To secure the best rates, compare quotes from multiple insurers. While no state mandates full coverage, it might be required by:
- Lenders, until the car loan is fully paid.
- Leasing agencies, throughout the lease term.
- Certain employers, as a job prerequisite.
Should you need full coverage, clarify the specific coverages, deductibles, and amounts needed. There might also be a set maximum for deductibles, such as $1,000 or $2,500.
Liability vs Full Coverage Insurance: FAQs
Should I get liability or full coverage car insurance?
It’s generally recommended to opt for full coverage car insurance. While liability insurance covers damages to others when you’re at fault, it doesn’t protect your vehicle against theft, vandalism, or natural disasters. If you’re financing or leasing your car, full coverage might even be mandatory.
However, if your car isn’t highly valuable, considering liability-only coverage might make sense. To decide, compare your car’s value with the full coverage premium costs, ensuring the choice aligns with your financial situation.
When should I switch from full coverage to liability?
As your vehicle gets older and depreciates in value, maintaining full coverage insurance might not remain cost-effective. Typically, when a car hits the 10-year mark, it’s wise to evaluate whether switching to liability-only coverage makes sense. Yet, the decision should be based on your specific vehicle’s worth and condition.
What does liability-only coverage mean?
Liability-only car insurance covers the expenses for property damage and medical costs for others in an accident where you’re at fault. However, it doesn’t cover damages to your vehicle or medical expenses for you and your passengers.
Does liability insurance cover my car if someone hits me?
If another driver is at fault in an accident with your vehicle, your liability insurance won’t cover the damages. Instead, the responsible driver’s liability policy should handle the expenses for your property damage.
How much cheaper is liability vs. full coverage?
The price gap between liability and full coverage insurance varies by state. On average, upgrading from a liability-only plan to full coverage might boost your yearly premium by $400 to $800.
To ensure our readers receive unbiased and precise information, we’ve designed a thorough rating system to determine the best car insurance providers. We examined multiple auto insurance companies, assessing them on various factors to create a comprehensive ranking.
Here’s a breakdown of our evaluation criteria:
- Cost: We factored in auto insurance rate projections from Quadrant Information Services and potential discount offerings.
- Coverage: Companies offering diverse insurance coverage options were viewed more favorably.
- Reputation & Experience: We looked at market presence, industry expert reviews, and company longevity.
- Availability: Firms that are accessible in numerous states and have minimal eligibility criteria ranked higher.
- Customer Experience: Ratings were influenced by the NAIC complaint records and J.D. Power’s customer satisfaction ratings. Our personal evaluations of customer service responsiveness and efficiency also played a role.
Our goal is to provide a clear and comprehensive view of each insurer, with the top scorers leading our list.
When choosing between liability vs full coverage insurance, evaluate the level of protection you desire for yourself, your vehicle, and others. Liability insurance primarily covers damages to others, whereas full coverage ensures protection for you, your car, and all parties involved in an incident.