It’s important to know the differences between liability and full coverage before you buy car insurance. While liability is required by law in most states, it does not always provide enough coverage. In certain situations, full coverage may be more insurance than you need. Read on for more about liability vs. full-coverage car insurance.
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The differences between liability and full-coverage car insurance
Liability is one of the key components of any car insurance policy, while full coverage is a type of policy that also includes liability plus coverage for damage to your vehicle.
It helps to have a general idea of the type of coverage you need when you request car insurance quotes.
What does liability car insurance cover?
The liability coverage in your car insurance generally covers your financial responsibility for injuries and property damage that result from a car accident you cause.
Most states, including those with no-fault car insurance laws, require drivers to have carry car insurance with bodily injury and property damage liability coverage.
In about 20 states, bodily injury and property damage liability are the only coverages required by law. This is the main reason why “minimum-coverage” car insurance is sometimes called “liability-only” or “minimum-liability” car insurance.
The remaining states and the District of Columbia require motorists to carry uninsured motorist coverage and/or personal injury protection, in addition to liability coverage.
| Injury or damage type | Covered by liability? | Coverage options |
|---|---|---|
| Injuries you cause to others | Yes, bodily injury | Not applicable |
| Damage you cause to others’ vehicles or property | Yes, property damage | Not applicable |
| Injuries to you | No | Personal injury protection, medical payments |
| Injuries to your passengers | Yes, unless they are family or live with you | Personal injury protection or medical payments |
| Damage to your car | No | Collision or comprehensive |
| Injuries to you and your passengers caused by an uninsured or underinsured motorist | No | Uninsured/underinsured motorist bodily injury |
| Damage to your vehicle caused by an uninsured or underinsured motorist | No | Uninsured/underinsured motorist property damage |
What does full-coverage car insurance cover?
Full-coverage car insurance generally refers to an auto policy that includes collision coverage and comprehensive coverage, in addition to liability coverage.
Collision coverage pays to repair damage your car sustains in a collision with an object or other vehicle, or if the vehicle overturns. Collision primarily covers damage resulting from an accident you cause, but it can also cover hit-and-run or your share of repair costs if your state has partial-fault laws.
Comprehensive coverage is also known as other-than-collision coverage, because it covers damage to your vehicle from nearly any cause other than a collision. Fires, floods and falling objects are covered, as is theft of the vehicle, but not theft of items inside it.
Collision and comprehensive are not required by state laws. However, lenders typically require both for a car loan, and both are typically also required for a leased vehicle.
Collision and comprehensive coverage are each offered with a deductible, which is the amount you pay before insurance funds kick in. Insurance companies typically cap payments on collision and comprehensive claims at your car’s market value.
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What does full coverage not cover?
As you shop for insurance, it’s also important to know that the term full coverage is a bit of a misnomer. Even though a full-coverage policy covers your liability and damage to your vehicle, it only covers your injuries if your policy also includes medical payments coverage and/or personal injury protection (PIP).
| Injury or damage type | Included in full coverage? | Why? |
|---|---|---|
| Injuries to others in an accident you cause | Yes | Bodily injury liability is included in full coverage |
| Damage you cause to others’ vehicle or property | Yes | Property damage liability is included in full coverage |
| Damage to your own car in an accident you cause | Yes | Collision coverage is part of full coverage |
| Damage to your vehicle from fire, flood, vandalism or other non-collision | Yes | Comprehensive coverage is also part of full coverage |
| Theft of your vehicle | Yes | Included in comprehensive coverage |
| Theft of items from my car | No | Home or renters insurance usually covers your belongings |
| Injuries to you or your passengers | Only if you also have personal injury protection or medical payments | PIP or MedPay are required in a dozen states and optional in most others |
| Injuries to your and your passengers caused by an uninsured/underinsured driver | Only if you also have uninsured/underinsured bodily injury | Uninsured/underinsured motorist is required in more than 20 states and optional in most others |
| Damage to your vehicle from an uninsured/underinsured driver or hit-and-run | Only if you also have uninsured/underinsured motorist property damage | Collision also covers your vehicle in these situations |
What is the cost of liability car insurance vs. full coverage
The average cost of full-coverage car insurance nationwide is $1,949 a year, which is slightly more than double the rate of minimum-coverage or liability-only insurance, $968 a year.
| Type of insurance | Annual rate | Monthly rate |
|---|---|---|
| Liability-only/minimum coverage | $968 | $81 |
| Full coverage | $1,949 | $162 |
| Note: Average rates are based on non-binding estimates provided by Quadrant Information Services. Your rates may vary. | ||
When is full-coverage car insurance worth it?
Full-coverage car insurance is required for a loan or lease and generally also worth getting if the market value of your car is more than a few thousand dollars.
If you’re not sure of your vehicle’s market value, you can research it online. Kelley Blue Book and the National Auto Dealers Association are great places to begin.
Since insurance companies cap their collision and comprehensive payments at your car’s depreciated value, these coverages are rarely worth having for vehicles valued at less than $2,000.
For example, if you total a car valued at $1,500 and you have a $1.000 deductible, you’ll only get $500 from the insurance company.
When should I drop full coverage on my car?
The exact point to drop full coverage on a car after you pay off a loan depends largely on your financial situation and how frequently you drive the vehicle.
If you have enough money in the bank to replace the vehicle in the event of a total loss, you may not need full coverage, even if your car is valued at $3,000 or more.
On the other hand, if you don’t have funds readily accessible to replace your daily driver, it may be worth keeping full coverage on a car valued at $2,000 or less.
Raising your deductibles, particularly for collision coverage, is a good way to reduce the cost of car insurance. However, if the value of your vehicle depreciates to an amount that is less than you deductible, or even just slightly more, it’s definitely time to drop full coverage.
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