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Liability vs. “full coverage” car insurance

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The term “full coverage” is often used in the auto insurance industry, but it’s important to note that it’s not actually a type of insurance product. For the purposes of this article, we use the term to mean a policy that includes, at minimum:

  • Bodily injury liability
  • Property damage liability
  • Collision
  • Comprehensive

What’s the difference between liability and “full coverage” insurance?

Liability insurance can help cover injuries and damage you cause to other people’s vehicles. “Full coverage” car insurance policies include additional, optional coverages—typically collision and comprehensive coverages—that can help protect your own property.

What is liability-only car insurance?

Liability-only car insurance includes two areas of coverage: bodily injury liability and property damage liability.

Bodily injury liability

Bodily injury liability can help cover another party’s medical expenses in a covered accident you cause, whether they’re another motorist, a passenger, or a pedestrian. 

Due to the costs of healthcare, bodily injury claims tend to be more expensive than property damage claims. Since each vehicle can hold at least one passenger, insurance companies provide two coverage limits: per-person and per-accident coverage.

Insurance providers list their coverage limits in this format: 25/50/25. These numbers represent thousands of dollars (so, “25” means $25,000). Here’s what each number indicates:

  • The first number refers to the amount of per-person bodily injury liability coverage.
  • The second number refers to the amount of per-accident bodily injury liability coverage.
  • The third number refers to the amount of property damage liability coverage, which we address below.

Let’s say you have 25/350/25 liability insurance. If you’re at fault in a car accident and there is one person injured, your insurance would cover up to $25,000 for their bodily injury. If multiple people are injured, your coverage would be capped at a total of $350,000 for bodily injury in the entire accident. Additionally, your insurance would cover up to $25,000 for property damage resulting from the accident.

If the total costs for bodily injury and property damage exceed these coverage limits, you may be personally responsible for the remaining expenses.

Property damage liability

Property damage liability is always structured on a per-accident basis and only covers damage you cause to another person’s property.

Using the hypothetical 25/350/25 policy above, if you cause an accident that results in $50,000 worth of damage to someone else’s property, your property damage liability insurance could help cover up to $25,000 of those damages, but you would be liable for the other $25,000.

So what happens if someone else is at fault in an accident and they damage your property? Since most states require all motorists to carry liability insurance—both bodily injury and property damage—the other person’s property damage liability coverage will help pay for the damage they caused to your property. Your own liability coverage doesn’t apply in this scenario.

State-required insurance

Auto insurance can help protect you from financial loss due to an accident you cause, but there’s more to it than that. In most states, liability insurance is actually legally required for all drivers.

Each state has its own requirements for car insurance—both the coverages they require and the mandatory minimum limits drivers need to carry. Be sure you’re familiar with your state’s car insurance requirements, but keep in mind the cost of an accident can quickly surpass your state’s minimum coverages.

What’s covered under liability insurance?

Liability insurance covers many of the costs that may arise out of an accident you cause. Your policy’s coverage limit is the maximum dollar amount the policy will pay out for an accident, which means you’re legally responsible for any costs that exceed your coverage.

Your bodily injury liability coverage helps pay for injury-related expenses following an accident you cause. This may include:

  • Hospital bills and medicine
  • Loss of income due to the injury
  • Pain and suffering payments

Your property damage liability insurance can help repair or replace damaged property if you’re at-fault in the accident that damaged it. Types of covered property may include:

  • Vehicles
  • Storefronts
  • Trees
  • Public property like bridges and road signs 

What’s not covered under liability insurance?

The biggest distinction between liability and “full coverage” insurance is that liability doesn’t cover damage to your own property. For example, if you hit a patch of ice while driving and rear-end another vehicle, your liability insurance would only help pay for damage to the other vehicle—not your own.

Another important exception to liability insurance is it doesn’t help protect your car from incidents like vandalism or theft.

What happens if my car is totaled and I only have liability insurance?

If your car is totaled in an accident somebody else is at fault for, you should file a claim with their insurance provider. The at-fault person’s insurer—not yours—is responsible for paying for the vehicle damage.

If your car is totaled in an accident you’re at fault for, you’ll have to pay out-of-pocket to replace it. That’s one important consideration to carrying “full coverage” insurance (which includes collision coverage)—it helps pay for damage to your own vehicle, regardless of who’s at fault in the accident.

What’s covered by “full coverage” car insurance?

Remember, there isn’t a policy available that protects you from every possible loss. When people use that term, they typically mean a policy that includes collision and comprehensive in addition to bodily injury liability and property damage liability.

Collision coverage

True to its name, collision coverage helps you pay for damages due to collisions—including accidents you’re at fault for or the at fault driver doesn’t have the coverage to pay to fix your vehicle.

Comprehensive coverage

Comprehensive insurance covers damage caused by non-collisions—that’s why some car insurance companies call comprehensive coverage “other than collision” coverage. This includes theft, vandalism, fire, and falling objects like hail. Just like collision coverage, your state doesn’t require comprehensive coverage, but if you finance or lease your car, your lender might require it.

What’s not covered by “full coverage” insurance?

Like we noted above, the term “full coverage” isn’t actually a type of car insurance coverage. “Full coverage” doesn’t mean everything under the sun is covered. For example, “full coverage” typically may not cover damages arising from:

  • Illegal activities like street racing
  • Intentional damage
  • Catastrophes, such as flooding or war

A “full coverage” policy might not cover damages caused by an uninsured motorist. That’s why most insurance companies sell uninsured motorist (UM) and underinsured motorist (UIM) coverages. Some states require these coverages, and others will automatically add them to your policy and only remove them if you specifically reject them in writing.

“Full coverage” insurance also doesn’t cover expenses: 

  • Below your deductible 
  • Above your coverage limit

Is liability cheaper than “full coverage” insurance?

Whether or not “full coverage” is cheaper than liability-only insurance depends on how you measure cost. If you’re thinking in terms of premiums alone, liability-only will nearly always be cheaper than “full coverage” insurance because “full coverage” includes more coverages.

So, while you hope to never need it, “full coverage” insurance can potentially save you a significant amount of money if you’re ever involved in an accident where your vehicle is damaged.

Is it possible to switch from “full coverage” to liability only insurance?

You can make changes to your policy any time you want. This includes switching from liability-only to “full coverage” insurance, as well as switching back.

Liability only vs. “full coverage” insurance: Which is best for me?

Ultimately, the decision between liability and “full coverage” depends on your individual needs and budget. If you have a newer or more expensive vehicle, “full coverage” may provide the peace of mind you need. However, if you have an older vehicle that’s paid off and you’re looking to save money, liability insurance may be a good option.

A good way to put your coverage needs into perspective is to calculate your net worth, including all the property you own, money in the bank, stocks, bonds, etc. That’s how much you stand to lose in an accident, and your insurance budget should reflect that. 

Try to purchase the best—and most—car insurance you can afford. If possible, that could mean exceeding your state’s minimum liability limits and buying additional coverages like collision and comprehensive insurance. 

At the end of the day, the coverage that’s best for you is the coverage that best fits your budget and your situation.

Hitting a deer is a good example of a scenario where having “full coverage” can help protect you from costly repair bills.

For drivers new to the United States, this guide outlines key factors to consider—such as your citizenship status and state requirements—before hitting the road.

The general information in this blog is for informational or entertainment purposes only. View our blog disclaimer.

*Data accuracy is subject to this article’s publication date.

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