How does full coverage differ from liability-only insurance?

When you’re in the market to buy a car insurance policy, it’s important that you understand the difference between a liability-only and a full coverage policy. Both policies have different coverage limits and cater to different needs. This guide breaks down the details of each type, their benefits, and how to determine which one suits your needs and budget. 

What is liability-only car insurance?

Liability-only car insurance is the most basic form of auto insurance. It provides coverage for damages you cause to other drivers, passengers or property in an accident where you’re at fault. This type of insurance typically includes the following:

• Bodily injury liability covers medical costs, rehabilitation and lost wages for people injured in an at-fault accident.
• Property damage liability pays for repairs to other people’s vehicles or property that you damaged during the accident.

Liability-only car insurance does not provide coverage for damage to your own car or your injuries. It’s a cost-effective option for drivers who don’t need extensive protection, but it may not provide adequate coverage in the event of an at-fault accident. 

What is full coverage auto insurance?

Full coverage car insurance, on the other hand, is a more comprehensive policy that combines different types of coverage. In addition to liability coverage, it typically includes:

• Collision coverage pays for repairs to your own vehicle if you are involved in an accident, regardless of who is at fault.
• Comprehensive insurance covers damage to your vehicle caused by incidents other than collisions, such as theft, vandalism, or natural disasters.
• Uninsured/underinsured motorist coverage protects you if you’re involved in an accident with someone who doesn’t have adequate insurance or any insurance at all.
• Personal injury protection (PIP) or medical payments coverage covers medical expenses for you and your passengers in case of an accident, regardless of who was at fault.

Lenders and leasing companies often require full coverage, as it provides extensive protection for the vehicle as well as the driver.

Key differences between full coverage and liability-only

Below, we compare full coverage and liability-only policies to help you decide which option best suits your needs.

Pros and cons of full coverage and liability-only car insurance

When deciding between full coverage and liability-only car insurance, it’s important to weigh the benefits and disadvantages of each option. Here’s a breakdown of the pros and cons to help you make an informed decision.

Pros of liability-only car insurance

• Liability insurance is usually cheaper since it offers minimal coverage.
• Most states require drivers to have at least liability coverage, making it a legal necessity for many.
• It is ideal for those with older cars or who want to save money on insurance.

Cons of liability-only car insurance

• If you’re in an accident, you’ll have to pay for car repairs and medical expenses out of pocket.
• Liability-only insurance may not provide adequate protection if you have a new or high-value car.

Pros of full coverage car insurance

• Full coverage provides financial protection for various situations, including accidents, theft and vandalism.
• It’s not required by law, but your lender will likely require it if you’re financing or leasing a car.

Cons of full coverage car insurance

• Due to the additional options, full coverage typically costs more than liability-only policies.
• If your car is older or not worth much, paying for full coverage may not be cost-effective.

How to decide which type of insurance policy is right for me

The choice between full coverage and liability-only insurance depends on various factors, including your budget, vehicle value and risk tolerance. Here are some factors to consider when buying a policy.

• Vehicle value: Full coverage is often a good choice if you own a new or high-value car. However, if your vehicle is older and has depreciated significantly, liability only might be sufficient.
• Budget: Liability-only insurance is much more affordable, which is ideal if you’re on a tight budget or looking to save money.
• Risk tolerance: Full coverage offers more protection but comes with higher premiums. But it is worth the investment if you can afford the extra cost and prefer peace of mind.
• State requirement: Check whether your state requires minimum coverage and what type of insurance is mandatory. Some states have specific insurance laws that may affect your decision.
• Loan or lease requirements: If you’re financing or leasing your car, the lender or leasing company usually requires full coverage to protect their financial interest.

Final thoughts

It’s important to choose the right car insurance policy to ensure adequate protection in case of an accident. While liability-only insurance may be sufficient for some drivers, full coverage offers more comprehensive protection, especially for those with newer cars. Make sure you take into account your needs, budget and vehicle value to determine the best policy for you.