No insurance policy can cover you and your car in every circumstance. But a 'full coverage' policy covers you in most of them.
Insurance is meant to protect you from being sued, or left financially stranded by a totaled car, or ruined by an uninsured driver. That doesn't mean an accident won't leave you with expenses and hassles you wouldn't face otherwise.
Full coverage is shorthand for policies that cover not only your liability but damage to your car as well. Here's how to weigh liability vs. full coverage.
- What is full coverage?
- What does full coverage insurance cover?
- Do I need full coverage?
- How much does full coverage cost?
- When should I drop full coverage?
To most drivers, “full coverage” means you have bought not only liability insurance – which is mandatory virtually everywhere and pays for the damage you inflict on other people and property – but comprehensive and collision, too.
Ideally, full coverage means you have insurance in the types and amounts that are appropriate for your income, assets and risk profile. The point of all types of car insurance is to keep you from being financially ruined by an accident or incident.
Of course, you can buy a policy with every conceivable option:
- The highest available liability limits (usually $250,000 per person bodily injury, $500,000 per accident, $100,000 property damage)
- The lowest possible deductible on collision and comprehensive coverage. At some companies, it's $0, but $100 and $250 are common.
- Uninsured motorist coverage
- Uninsured/underinsured motorist bodily injury coverage with limits matching your liability coverage
- Uninsured motorist property damage (not available in all states)
- All available medical coverages in the highest amounts possible (personal injury protection in no-fault states and medical payments coverage in most others)
- Rental reimbursement coverage
- Towing and labor
- Preferred-customer add-ons such as new car replacement programs or vanishing deductibles
In reality, there is no policy that will cover you and your car in every situation, just most of them.
A typical full coverage policy (liability, comp and collision, uninsured motorist and medical coverage) should cover:
- The damage you do to others, up to your liability limits.
- Your car, up to its fair market value, minus your deductible, if you are at fault or the other driver does not have insurance or if it is destroyed by a natural disaster or stolen.
- Your injuries and those of your passengers, if you are at fault, up to the amount of your medical coverage.
- Your injuries and yours of your passengers, if you are hit by an uninsured motorist, up to the limits of your uninsured motorist policy.
Typical full coverage insurance won't pay for:
- Racing or other speed contests
- Off-road use
- Use in a car-sharing program
- Catastrophes such as war or nuclear contamination
- Destruction or confiscation by government or civil authorities
- Using your vehicle for livery or delivery purposes; business use
- Intentional damage
Typical comprehensive and collision policies won’t cover:
- Wear and tear
- Mechanical breakdown (often an optional coverage)
- Tire damage
- Items stolen from the car (those may be covered by your homeowners or renters policy, if you have one)
- A rental car while your own is being repaired (an optional coverage)
- Electronics that aren’t permanently attached
- Custom parts and equipment (some small amount may be specified in the policy, but you can usually add a rider for higher amounts)
Car insurance rates are very specific to the person who owns the car: Your age, driving record, credit history and location count as much as the kind of car you are driving. Rates also vary by hundreds of dollars from company to company. That's why we always suggest, as your first step to saving money, that you compare quotes.
Here's a comparison of the cost of full coverage for a 40-year-old driver in Vancouver, Washington, who owns a paid-off 2009 Ford Mustang:
Minimum liability only: Purchasing the Washington state minimum of $25,000 bodily injury liability per person, $50,000 per accident, and $10,000 in property damage, and declining uninsured motorist and personal injury protection. No comprehensive or collision. Quotes ranged from $636 a year to $1,260.
Typical full coverage: Purchasing $100,000/$300,000/$50,000 liability coverage, uninsured motorist in a matching amount, $10,000 in personal injury protection and comprehensive and collision coverage with a $500 deductible. Quotes ranged from $1,116 to $1,536 a year.
Premium full coverage: Purchasing $250,000/$500,000/$100,000 liability coverage, uninsured motorist in a matching amount, $10,000 in basic personal injury protection plus $25,000 additional, comprehensive and collision with a $250 deductible, rental reimbursement and emergency towing and labor. Quotes ranged from $1,416 to $2,340 a year.
Our data show that 40 percent of drivers who own 10-year-old model cars are buying comprehensive and collision coverage. Many consider dropping these optional coverages on a car nearing the end of its life. If you can manage such a loss -- that is, replace a stolen or totaled car without a payout from insurance -- do the math on the potential savings.
For example, a 25-year-old woman with a clean driving record living in Stirling, N.J., would pay about $1,302 a year for “full coverage” (50/100/50 liability, uninsured motorist, personal injury protection and comprehensive and collision coverage with a $500 deductible) on a 10-year-old Ford Focus ZX4. Dropping comprehensive and collision, she would pay about $806 a year – a savings of $496 a year.
Let's say her car is worth $4,450 as the “actual cash value” an insurance company would pay. If her car were totaled tomorrow and she still carried full coverage, she would get a check for $3,950 – the actual cash value of the car minus her $500 deductible. In other words, she is paying $496 a year to protect herself against a $3,950 loss.
Of course, the value of the car drops with each passing year, and so do the insurance premiums. At a certain point, most drivers would choose to accept the risk and bank the collision and comprehensive premiums because they would be unlikely to find a reliable replacement with the insurance payout.